Choosing from the several Malaysian company entities is a crucial step in the formation process. Before you can formally start your business, you must first decide on the type of organization that is best suited to your goals.
This thorough overview of Malaysian company entities allows you to choose the best business structure for your investment.
Sole proprietorship
A single proprietorship is one of the most straightforward business structures to establish.
Only one owner is required for a single proprietorship, and his or her liability is unrestricted. If the firm is declared bankrupt or in debt, the owner’s income or assets are not protected.
This entity can only be registered by Malaysian citizens and permanent residents.
To keep the business renewed, you must pay an annual fee to the Malaysian Companies Commission (Suruhanjaya Syarikat Malaysia (SSM)). This type of business does not have to submit audits or file yearly reports.
Partnership
A partnership consists of two or more owners, with a maximum of 20.
These partners pool their resources to conduct business to make a profit. Professional firms such as accountants and lawyers can benefit from partnerships.
Partnerships can only be registered by Malaysian citizens and permanent residents.
Each partner’s responsibilities and liabilities are outlined in the partnership agreement. The revenues and liabilities of the company are shared among the partners. Although the partnership is exempt from paying taxes, the partners will be taxed as individuals and must disclose their profits and losses.
The liability of the partners is unlimited, just like with sole proprietorships.
Private limited company (Sdn Bhd)
A private limited company (Sendirian Berhad or Sdn Bhd) is a legal entity distinct from its owners, with the ability to acquire and sell property, engage in legal contracts, and sue or be sued in court.
The owners are only accountable for the money they donated to the firm, and their assets or fortune will be unaffected if the company fails.
For foreign investors, the private limited company is the most prevalent type of entity. Foreigners are allowed to possess the entire corporation. Some industries, however, will require 50 percent Malaysian ownership. Agriculture, banking, education, and oil and gas are among these industries.
A minimum of one member and a maximum of 50 members are required to form a private limited company. Individuals or corporate organizations are issued shares in this form of entity.
Public limited company (Bhd)
A public limited company is similar to a private limited corporation, except that its shares can be sold to the general public. The Securities Commission of Malaysia regulates public limited corporations that are listed on the stock exchange.
The minimum number of shareholders is two, while the number of members is unlimited. Annual general meetings and financial statement reports are required of public limited companies.
In Malaysia, there are two types of limited companies:
- limited by shares
- limited by guarantee
Companies limited by shares vs companies limited by guarantee
The members of this entity are only liable for the amount they contributed to their unpaid shares. Members are not obligated to pay for the company if it falls into liquidation or is in debt.
Non-profit organizations such as charities, clubs, and society commonly employ a company limited by guarantee. Profits earned by the company will not be dispersed to its shareholders. Profits, on the other hand, will be re-invested in the business. If you start a charitable organization with more than 20 members, you must register with the SSM.
Unlimited company (Sdn)
The members and shareholders of an unlimited company have infinite responsibility. If the company suffers a loss or goes into debt, the members and shareholders will be held personally liable.
If an unlimited company passes a special resolution and files a notice of conversion with the SSM, it can convert to a limited company.
Limited liability partnership
A limited liability partnership is a hybrid of a partnership and a company. It is a different legal entity from its partners because it is a body corporate.
If the company falls bankrupt or into debt, the partners’ assets are protected by a limited liability partnership. It also has fewer regulatory obligations and is less expensive than other business entities.
This entity is ideal for small businesses and startups.
