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Labuan Limited Partnership and
Limited Liability Partnership

YOUR BUSINESS AND LABUAN: THE PERFECT PARTNERSHIP

The island of Labuan in Malaysia provides a business-friendly blend of regulation with a range of tax advantages. In 2010, the Labuan Limited Partnership and Labuan Limited Liability Partnership Act was introduced, adding even more options for corporate offshore growth.

In January 2010 the Labuan Limited Partnerships and Limited Liability Partnerships Act was introduced, enabling the creation of two beneficial forms of commercial partnership.

The new law makes it possible to create Limited Partnerships (LP) and Limited Liability Partnerships (LLP) that allocate risk where appropriate and deliver multiple tax benefits to those locating their operations in the Labuan jurisdiction

The different partnerships come with their own benefits, and requirements for establishment. Whichever one is right for you, make sure you speak with us as we will advise you on the precise formation so that you and your assets are protected.

LABUAN LIMITED PARTNERSHIPS (LP)

An LP can be formed with a minimum of two partners – a General Partner and a Limited Partner. Responsibility for running the operation lies with the General Partner and his personal liability is unlimited. He assumes liability for the actions of the other partners and his assets may be surrendered to creditors if the business defaults on its loans.

The Limited Partner does not have an active role in the daily running of the business, and as the title suggests, has his risk mitigated by limited liability. In other words, his assets are not placed at risk and at worst he can only lose the capital that he has invested. This protection is introduced in Section 19 of the Act states that a Limited Partner shall not be liable for the debts or obligations of the Labuan Limited Partnership.

The benefit of this model is clear – managing partners can attract investment to support growth and maintain operations without interference, and investors have the protection of limited liability, which encourages them to provide finance.

The flexibility of the model means that a Limited Partner can leave or be replaced without the limited partnership needing to be dissolved.

Another advantage of the LP structure is that partners can allocate profits, gains and losses as they wish, irrespective of any specific partner's equity proportion (subject to tax law compliance).

The maximum number of partners permitted in an LP is 50.

LABUAN LIMITED LIABILITY PARTNERSHIPS (LLP)

An LLP differs significantly from an LP in that it essentially combines the features of a partnership and a corporation. LLP has the business flexibility and tax benefits of a partnership but resembles a private company in other respects.

It is comprised of Members, each of whom benefit from limited liability; members of an LLP are protected from many potential negative consequences of the actions of other partners.

Limited liability protects members of an LLP from personal liability for business debts, employee claims and public liability claims.

Other features and advantages of an LLP:

  • profit sharing plans and other arrangements can be agreed flexibly between partners and changed as required
  • the partnership makes an annual return but members retain self-employed status and report their share of profit on their personal tax return
  • perpetual succession applies, an important factor for the stable ongoing development of the business
  • as a separate legal entity, the LLP can enter into contracts and sue (or be sued) without the need for partners to be exposed personally.

As a result, LLPs offer an appealing option for many looking to structure a business operation in a tax efficient manner with minimal personal risk.

Section 34 of the Act allows a LP to be converted into an LLP, while Section 35 allows a Labuan Company to transition to an LLP.

There is no limit to the number of partners in an LLP.

FORMING AN LP OR LLP: TAX BENEFITS AND FINANCIAL SECURITY

The benefits of forming an LP or LLP on Labuan can be summarised as follows:

  • Reduced tax burden for the business: The members of the partnership are defined as self-employed, which means that the only tax to pay is income tax as normal on their share of the profits. There is no corporation tax or capital gains to consider.
  • Asset protection and estate planning tool: assets cannot be touched by creditors or any other claimant, and costly inheritance tax can be avoided through the use of a partnership model.
  • Effective vehicle for professional practices, joint ventures, special purpose projects and more.

As with all other financial products offered by the Labuan IBFC, with the formation of either type of partnership you benefit from low operating costs and a highly skilled and multilingual workforce.

WHY WE ARE THE RIGHT PEOPLE TO HELP YOU FORM OR CONVERT TO A LABUAN LP OR LLP

We are a fully licensed trust company with a team of experienced professionals who can help you plan, establish and structure a Labuan Limited Partnership or Limited Liability Partnership.

We offer bespoke solutions, competitively priced services and have extensive knowledge and practical know-how gained from over 50 years’ combined experience in offshore financial services.

If you would like to take advantage of this latest offering from the Labuan IBFC, why not get in touch with us to find out more about a Labuan Limited Partnership or Limited Liability Partnership and how they could benefit you? Contact us on our live support or email us at info@labuanborneotrustees.com.