The current census of Malaysia lists that the country has over 900000 businesses listed as SMEs. Of which, these contribute to 36.6% of the country’s $354.348 billion valued GDP. As such, the SME sector is invaluable to the growth of the Malaysian economy. As such, the entrepreneurial climate in Malaysia is thriving. Leading more and more SMEs to form. This is also heavily endorsed by the Malaysian economy, as they want to ensure the growth curve remains on an upward trend. But before we proceed, we may need to clarify what an SME.
An SME or a small and medium enterprise is a business that has certain limitations. Usually in terms of turnover and employees. These limitations and criteria defer from country to country. However, in Malaysia an SME has the following criteria:
A small sized enterprise in the manufacturing sector in Malaysia has to:
- Have between 5 and 75 employees or
- Have an annual turnover of between RM 300,000 and RM 15 million.
A small sized enterprise in the service sector and other sectors in Malaysia has to:
- Have between 5 and 30 employees or
- Have an annual turnover of between RM 300,000 and RM 3 million.
A medium sized enterprise in the manufacturing sector in Malaysia has to:
- Have between 75 and 200 employees or
- Have an annual turnover of between RM 15 million and RM 50 million.
A medium sized enterprise in the service sector and other sectors in Malaysia has to:
- Have between 30 and 75 employees or
- Have an annual turnover of between RM 3 million and RM 20 million.
In these cases, manufacturing is defined as a business that converts materials and/or components into consumer/new products. And in turn, a service is defined as a business that has no physical good or product being sold to the public e.g. banking services. The remaining industries are categorized as ‘others’ and are mainly agriculture, mining and construction.
All SMEs are registered and regulated by the Companies Commission of Malaysia (SSM) and follow the Companies Act 2016. To register for an SME in Malaysia, one has to first think of what legal structure their business is to take. Currently, the following legal structures are available for new businesses in Malaysia:
- The Sole proprietorship
- The Partnership
- The Limited Liability Partnership (The LLP)
- The Public Limited Company (The Berhad or Bhd)
- The Private Limited Company (The Sendirian Berhad or Sdn Bhd)
Currently, the most common legal structure SMEs in Malaysia takes is the private limited company (sdn bhd).
So, who can register for an SME in Malaysia? This largely depends on the legal structure one chooses. In all cases, both Malaysian and foreign citizens have equal chances for registration. However, in the case of sole proprietorships and partnerships, one has to either be a Malaysian citizen or hold permanent residency in the country.
However, once those formalities are cleared, the registration process is very simple. Below are the steps one must follow in order to register their SME in Malaysia. Fortunately, as the services are now available online, registration is easier than ever.
Read Also: How to register a company in Malaysia online?
Steps for SME registration in Malaysia
Step 1- Choose your legal structure
In this step, you will have to choose the legal structure your business will take. You may choose any of the structures listed earlier in this article. However, do note that some structures require more formalities than the others.
Step 2- Choose your business name
Once you have selected your business structure, you will need to fill in form PNA.42 to register your business name. For this, you will need to give the SSM at least three potential names and they must be listed in the order of priority. The only exception to this rule is in the case of a sole proprietorship. In this case, one can use the name listed on their identity cards for their business name.
Once your business name is approved, you will receive notice of it.
Step 3- Filing the application form
The application form, which is titled Form A, needs to be filled in for this step. You will need to list the following details in this form:
- Business name
- Full names of all owners
- Official business address in Malaysia
- Details of the shareholders/directors and secretary
Along with this, you will also need to attach clear copies of the identification documents of all individuals listed.
Step 4- Paying fees
Now, you will have to pay the relevant registration fees incurred. These fees will largely depend on the legal structure you choose. They can be as low as RM 60, for sole proprietorships and can reach up to RM 1000 for a private limited company.
Once you pay the fees, you will also have to submit a proof of payment in the form of a receipt.
Step 5- Receiving certificate of registration
Once you have paid, if your registration is successful, you will receive the certificate of registration very shortly. In most cases you may begin business activities at this point.
Step 6- Obtaining relevant permits and licenses
In the case of some industries (e.g. medical, educational etc.) you may require additional permits or licenses to begin business activities. These do not fall under the SSM and you are required to obtain them through the relevant bodies.
As seen from the above, registration of an SME can be very simple. Even as a foreigner, the process does not require too many formalities. However, it should be noted, as mentioned prior, some legal structures require permanent residency in Malaysia. Moreover, any individual registering their business in Malaysia must also ensure that they are above the age of 18.
It should be noted, that as decreed by the Companies Act 2016, business owners who fail to register their business within the stipulated time may receive penalties. These penalties can either be monetary i.e. a fine of up to RM 50000. Or they can be in the form of prison time, with a sentence of up to 2 years.
Read Also: How to register a company by SSM online?