To run a business legally in the country, entrepreneurs and business owners need to register a business entity with the SSM or Companies Commission of Malaysia. They can choose from the various available business structures according to their needs. Here are the types of entities common in Malaysia.
Sole Proprietorship is a simple business entity perfect for business owners (Malaysian or permanent residents) who run their business alone or on a small scale. They can register their company with their name at a small fee of RM30 or under a trading name with a registration fee of RM60.
The registration process of sole proprietorship needs to be completed without the engagement of a third-party. Therefore, business owners need to perform every registration process personally. They have to bear all liabilities towards their business and pay taxes via their personal income tax.
The benefits of registering a sole proprietorship include:
However, business owners with a sole proprietorship need to renew their registration every year. Since they need to carry every liability in their capacity, their personal income tax can be costly. This business structure is also hard to scale since the business owners cannot issue shares for investments.
This business form comprises a minimum of two partners, with a limit of twenty partners. Its partners share the liabilities towards the company and have to pay taxes via their personal income taxes. If a customer sues the partnership, the partners will be liable for any damages the court awarded.
A partnership is a popular choice amongst professionals, including accountants, lawyers, doctors and company secretaries. Similar to a sole proprietorship, it has easy registration and compliance and cheaper to register. Business owners also need to renew it annually.
Private Limited Company
A private limited company, also known as Sendirian Berhad or Sdn Bhd, is the most typical business entity. It is a separate legal establishment with the power to own properties, earn revenues, sign contracts, sue another entity, and sue on its name.
Any individual intending to run an SME business in Malaysia can register for this business entity. It only requires a minimum of one director that lives in the country. The Companies Act 2016 allows business owners to register a private limited company as the company’s sole director and shareholder without having other business partners.
Unlike sole proprietorship and partnership, business owners can scale a private limited company by increasing the paid-up capital and issuing shares to get investment. The company can also be 100% foreign-owned.
Company Limited by Guarantee
This business entity is a public company that does not require any shareholders and runs by the members who serve as guarantors. Although the members are not liable for contributing capital, they are obligated to pay debts if the company closes down, depending on the promised guarantee amount. Therefore, the company cannot utilise its earnings for purposes other than those declared as objectives in the constitution.
The benefits of a company limited by guarantee or CLG includes:
Business owners can register a private or public limited company. Since unlimited company or sendirian (Sdn) has unlimited liability amongst its shareholders, business owners registering this entity can form a mutual fund that carries assets for investment purposes, instead of carrying out a business. It has more flexibility than a partnership in terms of share ownership, wherein each shareholder is free to sell his or her shares back to the company.
Nevertheless, its registration can be quite costly and difficult. It also has many stringent compliance requirements. The shareholders will still be liable for the company’s debt if it winds up within one year after leaving.
Public Limited Company
A public limited company or Berhad (Bhd) is a company limited by share with several distinctions from a private limited company; It can provide shares to the public without limitation to the shareholder numbers and requires a minimum of two directors. This entity is governed by the Security Commission of Malaysia and Bursa Malaysia Securities Berhad.
Its registration process can be costly and time-consuming because of its strict compliance requirements. Nevertheless, its funding is easier to get as it is publicly listed on the market.
Non-Malaysians who have started businesses in other nations and want to establish a company branch in the country for customer service or operation purposes can register for a foreign company. This business entity enables foreigners to operate their businesses in Malaysia without having a local director residing in the country.
Getting Help from a Professional Malaysia Company Registration Service Provider
Professional Malaysia company registration services help streamline the process of setting up a company in Malaysia and ensure it stays compliant with the current statutory requirements.