Types of Corporate Identities
Business Entity Options in Malaysia
There are many different types of business structure in Malaysia. Each corporate identities are governed by different requirements, benefits, and limitation.
Types of Corporate Identities in Malaysia
- Sole Proprietorship
A sole proprietorship is a business structure wherein an individual assumes all risks and liabilities and operates the business. While it offers simplicity and low costs, the owner is personally responsible for debts and losses, with unlimited liability.
Only Malaysian citizens and permanent residents may register this entity. The business has no annual declaration or filing requirements. However, the business owner must make a personal tax filing.
- Partnership
A partnership is a business structure where two or more individuals or entities share ownership and responsibility for the business. Partners contribute resources, share profits and losses, and have joint decision-making authority, but they also have unlimited personal liability for the business's obligations and debts.
Only Malaysian citizens and permanent residents may register this entity. Partnership is obligated to comply with the annual declaration by submitting Form P, notwithstanding that no tax payment is necessary. Any income or loss generated by the partnership will be subject to individual partner taxation.
- Private Limited Company (Sdn. Bhd.)
A Sendirian Berhad (Sdn. Bhd.) is a type of private limited company in Malaysia. It is commonly used for small and medium-sized businesses offering limited liability to its shareholders, separate legal entity status, and the ability to raise capital through the issuance of shares. Foreign investors looking to invest in Malaysia may opt for this type of corporate identities.
The minimum requirement of a Sendirian Berhad (Sdn. Bhd.) is one (1) Director who is 18 years old and above, lives permanently in Malaysia and not a bankruptcy; which is also known as Local Director. Shares of a company could be held by an individual, corporate or foreigner investors as well. Foreigner investors are allowed to own 100% shares in Sendirian Berhad (Sdn. Bhd.).
A Sdn. Bhd. is required to comply with annual submission of Annual Returns, Audited Reports and Tax Returns to relevant governing authorities.
- Public Limited Company (Bhd)
A Berhad is a type of public limited company in Malaysia, with its business structure that allows for the public issuance of shares, enabling the company to raise capital from a wide range of investors. It have limited liability and are considered separate legal entities. Investors who have more than 50 members, may opt to incorporate a Berhad company.
The minimum requirement of a Berhad is two (2) Local Directors, who is 18 years old and above, lives permanently in Malaysia and not a bankruptcy. Berhad is also required to comply with annual compliances similarly to Sdn Bhd, but in a more timely manner and also make company information available to investors.
There are two types of limited companies in Malaysia: limited by shares and limited by guarantee.
In a
company limited by shares, a member's liability is limited to the amount they have contributed on their unpaid shares. This means that if the company goes into debt or liquidation, members are not obligated to pay for the company's losses.
In a
company limited by guarantee is mostly used for non-profit organizations, like charities, clubs, or societies. In such companies, profits gained by the company are reinvested instead of being distributed to members. If you establish a charitable organization with more than 20 people, you must register it with the SSM.
- Limited Liability Partnership (LLP)
An LLP structure in Malaysia consists of partnership and Sdn Bhd elements, providing partners with limited personal liability, management controlling power and taxation flexibility. This business structure is common among Professionals, such as lawyers and accountants, who uses LLPs to combine liability protection with partnership advantages. LLPs has lesser compliance requirements which makes it more affordable, yet it is less preferred by financial institutions due to its scepticism towards this type of corporate identities.
With requirements of a minimum one (1) compliance officer who is 18 years old and above, lives permanently in Malaysia and not a bankruptcy ; a minimum of two (2) partners who could be an individual or a body corporate.
For foreign investors looking to incorporate a company in Malaysia, the most advisable corporate identities is a Private Limited Company (Sdn. Bhd.), bearing in mind some entities above (eg: sole proprietorship, partnership) are only available to Malaysians, while the other available options are also open to foreign investors.
I AM READY TO INCORPORATE MY BUSINESS IN MALAYSIA. WHAT ARE THE NEXT STEPS?
With StanleyCo’s established practices and expertise, foreign investors can be assured of receiving professional consultancy and services towards a successful incorporation of their business in Malaysia. The scope of our services also extends beyond incorporation to facilitate the smooth operations of your business so that you focus on letting your business flourish, while leaving the procedural matters into our hands. Thus, post-incorporation, we continue to render you our professional services ranging from corporate secretarial, business advisory, accounting services, and tax compliance services.