Well, if you are a business owner or a sole investor who is clearly seeking for opportunities to open up his or her own business company in Malaysia then here is an article that might come in handy for you. To start up with your business plans in Malaysia it is important to establish your own business company in the state. It is considered a must to do for the sole business owners and investors to know and understand about the different limitations, litigations, benefits, obligations and policies each of the business company in Malaysia brings in.
This knowledge will eventually help the investors and the business owners to select the best business company suitable for their business and business nature. Well is not so difficult to understand the basics of setting up a business in Malaysia.
Different types of company in Malaysia
Let us first start with the Types of Business Entities that can be established in Malaysia. One can choose from the 3 different types of company in Malaysia is available:
- Sole Proprietorship company (also known as Sole (SINGLE) Trader}
- Partnership company
- Limited Company (also called locally as SDN. BHD. or Sendirian Berhad or BHD. or Berhad)
Sole Proprietor (or Sole Trader)
Like in many other countries around the world the sole proprietorship company in Malaysia is owned solely by one individual or can be said that it has only one business owner, whose liability is unlimited. The Sole Proprietorship in Malaysia is the simplest and cheapest form of Business Company compared to other types.
For the license, renewal purposes related to business permits such companies need to pay a single annual fee to the Companies Commission of Malaysia per year. Well, one of the biggest advantages that the Sole Proprietorship Business Company of Malaysia gains is that they do not require audits or do annual fillings for their business.
What does unlimited liability means: Well when a business or a business company fails or is stated as bankrupt then the fellow creditors are able to sue the sole business owner of the company for all debts owed to respective merchants. This eventually means that the personal assets, income, money and employment income are all considered as liable.
Advantages of a Sole Proprietorship Business Entity
- Registration is easy, fast and fewer documents are required.
- Company formation is cheaper and no requirement of annual audits by the Malaysian government.
- Disclosing of financial statements to the public are never required.
- Easy to convert into limited company (SDN BHD)
The “Partnership” business entity is similar to that of the Sole Proprietor Business Firm. The fact that differentiate the two business entities from each other is that the partnership company in Malaysia is said to be a joint-entity holder company where two or more authorized persons carry out a legal business in Malaysia. The partnership entities in Malaysia MUST comprise of at least two (2) members and a maximum twenty (20) members as per the Companies Commission of Malaysia. The Partners or Company Owners in a partnership business company of Malaysia are bounded by unlimited liability.
Differences between the Sole Proprietorship & Partnership in Malaysia:
Sole Proprietorship & Partnership business entity are almost similar to each other in most ways the two companies come across. Some of the differences that stands out the two companies from each other are given below:
- Own partnership agreements are to be made that is governed by Malaysia’s Partnership Act 1961.
- A Single Owner owns the Sole Proprietor business company whereas TWO (2) or more owns the Partnerships.
Read Also: How to register a partnership in Malaysia?
Limited Company (SDN BHD or BHD)
Sendirian Berhad (SDN BHD) is a private limited company, and such company prohibits any invitation to the public or resident of Malaysia to subscribe to any of the company shares or to deposit money with the company for future investment or subscription. A private limited company must consume minimum of TWO (2) and maximum of FIFTY (50) members in the company.
Berhad (BHD) is a public limited company in Malaysia where the company shares are offered to the public or the resident of Malaysia for a fixed period and any other forms of subscription. This Public Limited Company must have are TWO (2) and maximum of unlimited amount of members or shareholders.
There are 3 types of limited company in Malaysia
Now, let us look into the types of limited company that will be registered in Malaysia:
- Limited by Shares
- Limited by Guarantee
- Unlimited company with/without share capital
COMPANIES LIMITED BY SHARES:
In this type of company, the Contribution of members’ liability is limited to the amount specified to the members’ unpaid shares. Well, the good part for the members is that even if the company becomes insolvent or goes into liquidation the members are not bound to pay off the company’s debts.
Until or unless one of the board members or directors gives a personal guarantee to pay off by their own will. This type of business entity is said to be the most common one in Malaysia.
COMPANIES LIMITED BY GUARANTEE:
Here the authorized board members and company directors play a major role in the company policy. Such a company usually necessitates the liability of the members to go limited, which the members have taken responsibility or liability to contribute. Business firms like Charity organizations, NGOs and other Non-Profit Professional Organizations prefer such a business firm.
Unlimited company with/without share capital:
The Unlimited Business Company in Malaysia is similar to that of the Sole Proprietorship and Partnership type business firms. The one and only fact that differentiates this business policy from the other two is that they maintain a special Articles of Association and are capable to return capital to the members of the company.
Foreign Company registration Malaysia
Foreigners or the non-Malaysian residents who are interested to set up their own business firm in Malaysia are allowed to register a private limited company in Malaysia, but yet TWO (2) of the company’s directors should be permanent residents in Malaysia.
Foreign business companies are already incorporated outside of Malaysia in a different nation but wants to set up their business premises and operations in Malaysia. There are two ways to look into for being counted as a foreign company:
- Register a company branch in Malaysia
- Incorporate a local company
Requirements for forming a foreign company in Malaysia:
The registration process and documents to be filled in with payable fees for forming a foreign company in Malaysia is shown below:
- Authorized copy of the certificate of incorporation from the principal country of registration.
- Legal and authorized documents of the company’s MoM and AoA, charter and statute defining the company’s constitution.
- A List with valid information of the company directors, both foreign and local, along with a list of their powers over the company.
- A power of attorney issued, under the seal of the foreign company that want to incorporate in Malaysia, to an appointed Malaysian Resident who will be able to accept and take action on behalf of the company when required.
- A statutory declaration made by any agent of a company.
- Registration fees.
Foreign Company’s Local Agent
All business companies in Malaysia are mainly governed by Malaysia’s Companies Act of 1965. The company agent’s duties and responsibilities are to ensure that the business company is performing all corrective acts & requirements initiated by the Companies Commission of Malaysia also known locally as SSM or CCM.
Limited Liability Partnership (LLP)
This type of business company is introducing very recently in Malaysia and its world of Business. It is known that The Limited Liability Partnership (LLP) business entity was first initiated in the year of 2003. The company policies, limitations, and obligations are yet to be fully implemented by the Companies Commission of Malaysia or the Malaysian Government.
There are many Business Advisory Firms such as S & F Consulting Firm Limited, established all over Malaysia who are there to help the foreign investors and business owners to start with their business in Malaysia. Such companies are can the investors with all their queries and issues that they might not understand or come in face to face while living up to their dream of forming a company in Malaysia.