Ready to transform your brilliant business idea into reality? Here’s how to formally start your Sdn Bhd company in Malaysia.

If you’re planning to do business in Malaysia, one of the first steps is choosing the right legal structure.

There are several common types of business entities here:

  • Sole Proprietorship (also known as Enterprise) for individuals
  • Limited Liability Partnership (LLP) for 2 to 20 partners
  • A locally incorporated company or a foreign company registered as Sendirian Berhad (Sdn Bhd) under the Companies Act 1965

What Are The Differences Between Sole Proprietorship (Enterprise), Limited Liability Partnership (LLP), and Private Limited Company (Sdn Bhd)?

Let’s take a look at the key differences between these three business types.

  • Limited Liability Partnership (LLP): Partners.
  • Private Limited Company (Sdn Bhd): Board of Directors.

Entity name appearances

  • Sole Proprietorship: Choice of Trade Name subjected to registration of business approval.
  • Limited Liability Partnership (LLP): Company name ended with the word “Perkongsian Liability Terhad (PLT)”.
  • Private Limited Company (Sdn Bhd): Company name ended with the word “Sendirian Berhad (Sdn Bhd)” or “Berhad (Bhd)”.

Capital contribution

  • Sole Proprietorship: Own contribution
  • Limited Liability Partnership (LLP): Partners contribution
  • Private Limited Company (Sdn Bhd): Share capital

Owner(s) of the business

  • Sole Proprietorship: Sole proprietor.
  • Limited Liability Partnership (LLP): Partners have a share in the capital and profits of the LLP.
  • Private Limited Company (Sdn Bhd): Members/shareholders own ‘shares’ in the company that give them certain rights in relation to the Company
  • Sole Proprietorship: Not a separate legal entity.
  • Limited Liability Partnership (LLP): Separate legal entity.
  • Private Limited Company (Sdn Bhd): Separate legal entity.

Party that is liable for debts of the business

  • Sole Proprietorship: Sole proprietor.
  • Limited Liability Partnership (LLP): LLP.
  • Private Limited Company (Sdn Bhd): Company.

Responsibility for management of business

  • Sole Proprietorship: Sole proprietor.
  • Limited Liability Partnership (LLP): Partners.
  • Private Limited Company (Sdn Bhd): Board of Directors.

Personal liability

  • Sole Proprietorship: Unlimited liability which can extend to personal assets of the sole proprietor.
  • Limited Liability Partnership (LLP): No personal liability of partner, except for own wrongful act or omission or without authority. Liabilities borne by the partners are jointly and severally with the LLP to the extent of unpaid share capital only.
  • Private Limited Company (Sdn Bhd): No personal liability of individual director or shareholder. Liabilities borne by the directors or shareholders are to the extent of unpaid shares only.

Number of shareholders or partners

  • Sole Proprietorship: Sole proprietor only.
  • Limited Liability Partnership (LLP): Minimum 2 and no maximum limit.
  • Private Limited Company (Sdn Bhd): Minimum 1 and maximum 50 in private company.

Company secretary / Compliance officer

  • Sole Proprietorship: Not applicable.
  • Limited Liability Partnership (LLP): Compliance Officer or partner of the LLP.
  • Private Limited Company (Sdn Bhd): Qualified Company Secretary.

Statutory audit requirement

  • Sole Proprietorship: No audit required.
  • Limited Liability Partnership (LLP): Not compulsory unless it is provided in the partnership agreement.
  • Private Limited Company (Sdn Bhd): Required to be audited.

Annual submission to Suruhanjaya Syarikat Malaysia (SSM)

  • Sole Proprietorship: Must annually file Form B before 30 June.
  • Limited Liability Partnership (LLP): Must lodge an annual declaration and solvency statement with SSM (the first within 18 months from the date of registration and thereafter, 90 days from the end of the financial year).
  • Private Limited Company (Sdn Bhd): Must file annual return and financial statements every calendar year.

SSM annual registration fee

  • Sole Proprietorship: Trade Name RM60 per year if business is registered under a trade name, and RM30 per year if business is registered under a personal name.
  • Limited Liability Partnership (LLP): RM200.
  • Private Limited Company (Sdn Bhd): RM200.

Income tax rate

  • Sole Proprietorship: Ranges from 0% to 26%.
  • Limited Liability Partnership (LLP): Ranges from 15% to 24%.
  • Private Limited Company (Sdn Bhd): 20% on the first RM500,000, 25% for everything above that.

Rules and regulations

  • Sole Proprietorship: Registration of Businesses Act 1956.
  • Limited Liability Partnership (LLP): Limited Liability partnership Act 2012 (LLP), Limited Liability Partnership Regulations 2012.
  • Private Limited Company (Sdn Bhd): Company Act 1965.

What Is The Most Popular Business Entity?

Among the various business entities available, the Sendirian Berhad (Sdn Bhd) is the most popular choice for many formal businesses, mid-sized enterprises, and foreign companies.

Sdn Bhd is the most popular business entity and here are three reasons why.

1. Credibility

A Sdn Bhd may be perceived as more credible and professional. Customers and partners tend to have more confidence in dealing with Sdn Bhds, and it is also easier for Sdn Bhds to obtain bank loans, should they be required.

2. Greater Tax Incentives

Tax incentives like Reinvestment Allowance (RA) and Pioneer Status (PS) are only available to Sdn Bhds or public listed companies in Malaysia.

What To Consider Before Starting A Sdn Bhd?

Here are three things to consider before you proceed to start your Sdn Bhd company.

1. Company Name

When choosing a company name, it’s crucial to adhere to the rules set by the Companies Commission of Malaysia (SSM):

  • Avoid misleading, offensive, or blasphemous names.
  • Ensure the name doesn’t imply association with the Royal families or government authorities.
  • Don’t misrepresent the nature of your business.

Remember, your company name greatly impacts your brand and success, so take the time to select a good one and provide all necessary details in the incorporation form.

2. Nature Of The Business

When registering your company in Malaysia, you’ll need to specify its business type using the MSIC code.

If you’re unsure, seek guidance from company registration service providers to ensure accurate registration

3. Company Directors & Shareholders

When registering a Sdn Bhd in Malaysia, ensure shareholders and directors meet legal eligibility.

Directors must:

  • Be at least 18 years old
  • Reside in Malaysia
  • Comply with Companies Act 2016

Sdn Bhd companies can have up to 50 shareholders, each declaring their share value during registration, transferring funds accordingly post-registration.

How To Register Sendirian Berhad (Sdn Bhd) Company In Malaysia

After all things considered, you are now ready to transform your brilliant business idea into reality.

Here’s how to register Sendirian Berhad (Sdn Bhd) company in Malaysia.

The process involves several steps and requires accurate and expansive documentation of company details. Be prepared; it can be a time-consuming and resource-intensive process, particularly for the inexperienced.

Let’s simplify it into three manageable steps.

1. Company Name Search and Reservation

Start by selecting a distinctive name for your Sdn Bhd company that follows the rules of Malaysia’s Companies Commission (SSM). You can confirm name availability by searching on SSM’s website or in person at their office. When you discover an unused name, you can reserve it for a fee, and this reservation is good for 30 days. Use this time to complete the registration process.

2. Preparation of Company Documents

After successfully reserving your company name, you need to prepare the necessary documents for company incorporation. This is the most crucial and tedious step.

This includes:

– Statutory Declaration by the company secretary or a director.

– Declaration of Compliance with the requirements for company registration.

– A copy of your identity card or passport (for foreign directors and shareholders).

– A copy of your business premise’s rental agreement (if applicable).

– Other documents as required by SSM.

3. Company Registration with SSM

Send your company registration paperwork to the Malaysia Companies Commission (SSM). You can do this online or in person at an SSM office. Make sure to pay the required registration fees. Once your application is accepted, you’ll get a Certificate of Incorporation and a Business Registration Certificate, signifying the official creation of your Sdn Bhd company.

Disclaimer:

Please note that this is a simplified overview of the initial steps to start a Sendirian Berhad (Sdn Bhd) company in Malaysia.

The process involves compliance with various legal and regulatory requirements, and it is advisable to seek legal and professional assistance to ensure that you meet all the necessary obligations and to guide you through the more complex aspects of company registration in Malaysia. Additionally, consider the specific requirements and regulations that apply to your industry or business activities.

If you are facing issues in preparing the required documents or need professional help, you can rely on the services provided by corporate consultants in Malaysia that also include company registration.