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guide to labuan limited partnerships and labuan limited liability partnerships

The Complete Guide To Labuan Partnerships

Those looking to operate in Labuan but cannot incorporate a Labuan Company may instead opt for a Labuan Limited Partnership or Labuan Limited Liability Partnership under the Labuan Limited Partnerships and Labuan Limited Liability Partnerships Act 2010.

From here on out, we’ll refer to them as Labuan LP and Labuan LLP. and this post aims to help readers decide which of the two structures better suits their needs.

Here’s how we’ll break it down:

  • Similarities between the two partnership structures
  • Key differences
  • Registration requirements, and
  • What the approval process looks like

🔑 Key Takeaways:

  • Both Labuan LPs and LLPs are taxed 3% of audited annual profits.
  • Both structures have a registration fee and annual fee of USD300 each.
  • Labuan LPs lack separate legal status, affecting decision-making and liability.
  • Labuan LPs have General Partners with management rights and unlimited liability, and Limited Partners with no management rights and limited liability.
  • Labuan LLPs are separate legal entities that grant limited liability to all partners.
  • Labuan LLP partners share earnings based on ownership and pay self-employment taxes.
  • Labuan Partnership applications can technically be approved in 24 hours but require some pre-application assessment and planning – let us help you!

Let’s begin.

Labuan LP vs Labuan LLP

Though similar in some ways, Labuan Limited Partnerships and Limited Liability Partnerships have several key differences resulting from their legal status. 

Similarities

Both structures have similar requirements for minimum number of partners, tax treatments, and government fees. 

Minimum number of partners

Both require a minimum of two partners that may consist of corporate bodies.

This is with the exception of professional practices (such as a law firm) which must consist of only natural persons and have a professional indemnity insurance plan by an LFSA-approved insurance provider.

Tax treatment

As per the Labuan Offshore Business Activities Tax Act 1990, both partnership structures are subject to a tax rate of 3% on audited net profits.

Additionally, any profits or income distributed among its partners are not subject to tax. 

Registration and annual fees

Both partnership structures have a USD 300 registration fee as well as a USD 300 annual renewal fee.

Key difference: Separate legal entity status

A Labuan Limited Liability Partnership is considered a separate legal entity while a Labuan Limited Partnership is not, which has a key impact on partner decision making, liability, and profit-sharing.

Labuan LP

A Labuan LP must have at least one of two types of partners.

  1. General Partners: Has management rights and bears unlimited liability. 
  2. Limited Partners: Has no management rights and bears limited liability.

Although the General Partner decides on day-to-day operations, they cannot unilaterally make decisions that significantly affect the firm such as admitting / removing partners.

Meanwhile, a Limited Partner still has full access to firm accounts and can transact through it but cannot participate in day-to-day management or they become a General Partner and  assume unlimited liability. 

When it comes to receiving their portion of business earnings, General Partners have higher priority over Limited Partners, though they owe self-employment taxes on the income while Limited Partners do not.

Labuan LLP

As a Labuan LLP is considered a separate legal entity, all partners have the same rights to liability from debts and obligations suffered by the Partnership. 

When it comes to receiving their portion of business earnings, all Partners receive an equitable share of proceeds based on degree of ownership, and all Partners must pay self-employment taxes on the income.

Registration requirements

Businesses looking to set up Labuan LPs and LLPs have similar registration requirements:

Appoint a Labuan Trust Company 

A Labuan Trust Company is a licensed entity that helps businesses incorporate Labuan entities in full compliance with LFSA requirements, and all applications and documents submitted to LFSA must be filed through a Labuan Trust Company.

When engaged, they conduct due diligence on you and walk you through the Partnership setup. 

Follow naming conventions

A Labuan LP must have “Limited Partnership”, “Ltd.P.”, “LP” or “L.P” as part of its name.

Naturally, a Labuan LLP must have “Labuan Limited Liability Partnership”, “(Labuan) L.L.P.” or “Labuan LLP” as part of its name.

Additionally, the name may be:

  • abbreviations connoting a LP / LLP (subject to case-by-case approval)
  • in foreign characters, alphabets, or languages provided an accurate and certified English version of the name is included on all documents

For examples of approved names, scroll to the bottom of the IBFC Partnership page.

Submit required documents and registration fee

Your Labuan Trust Company will help with the required documents, so this is mainly for your knowledge!

For Labuan LLP: 

  • Form 10 “Application for Registration of a Labuan Limited Liability Partnership”; and
  • Certified copy of the Partnership Agreement.

For Labuan LP:

  • Form 1 “Application for Registration of a Labuan Limited Partnership”; and
  • Certified copy of the Partnership Agreement.

The registration fee for both Labuan LP and LLP is USD 300, with a further USD 15 to receive a Certificate of Registration.

Approval process 

Once the required documents have been filed and fees are paid, there will be a due diligence check by LFSA.

If all is well, the Labuan LP or LPP can be approved for registration within 24 hours.

sample form 15 completed registration of labuan limited liability partnership
Sample form.

If there is a high number of other applications or a need to clarify enquiries from LFSA, it can take longer, so do be patient!

Let MISHU help register your Labuan Partnership

MISHU’s team can help businesses swiftly incorporate their Labuan company. We would be happy to sit down over a virtual cup of coffee and understand your needs, including for specific business licenses and employment passes – get in touch today!

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