Can LLP use for Financing?
Key Points
- Limited Liability Structure
- An LLP is a partnership
- Although both LLPs and Sdn Bhd are Limited by Liability, LLPs have no shares, and profit/ownership distribution relies on the Partnership Agreement
- No Share Dilution
- LLPs have no shares to dilute
- Financing typically involves partners investing and joining the LLP
- Since shares cannot be registered for each partner, share transfer is not possible
- Accounting and Audit Concerns
- LLPs are not required to have audits
- Financial statements are not verified by an auditor, making profits and company value more easily questioned
Summary
- An LLP can be used for financing, but the above three points must be considered
- Before financing, evaluate whether the company structure is still suitable as an LLP