How to incorporate your business
How to register your business in Malaysia
How to register your business in Malaysia
Setting up businesses is a road well-taken by those who aspire to achieve financial freedom without being tied to an employer.
If this is you, you will realise that when your business plan is ready for action, the business registration process sits at the top of your to-do list. This is because a business must be registered within 30 days from its date of commencement. Fret not, as this process is a relatively simple one for SMEs.
Business registration is done with the Companies Commission of Malaysia (SSM), the statutory body that regulates companies and business affairs in Malaysia. The SSM also provides company and business information to the public. There are three types of businesses that are common for SMEs. As a business owner, you would need to identify which entity structure suits your business best.
A sole proprietorship is a business wholly owned by a single individual using his personal name (as per MyKad) or trade name (name created for commercial purposes). This is the simplest legal business structure in Malaysia, and it is only available to Malaysian citizens or permanent residents. Sole proprietorship has the lowest annual cost, and It is mandatory for sole proprietorships to renew their business license annually. Although sole proprietorships have less formal business requirements, the business owner faces unlimited liability. This means that the business owner's personal assets are at risk of being liquidated when business debt obligations are not met. This business structure is suitable for new start-ups to test out their business strategy, and can be changed to a partnership structure if additional partners join the business in the future.
A partnership is identical to sole proprietorship, except that it has more than 1 owner (but not exceeding 20 owners). A key difference is that this business structure can only be registered with a trade name. Similar to sole proprietorship, a partnership is only available to Malaysian citizens or permanent residents, and also bears unlimited liability in the form of risk shared among partners. In a partnership, business profit is distributed based on capital, labour and agreements between partners, while losses are likewise shared among them.
Private Limited (Sdn. Bhd.)
A private limited company is regulated under Companies Act 2016, where the business ownership is shared between 2 to 50 people. This business structure is considered as a separate legal entity; it can own assets, bind contracts, sue or be sued, and has perpetual succession until the company is dissolved by directors and shareholders. This also means that the business has limited liability, where the shareholders will not be held liable for the debts of the business. Other benefits of registering a private limited company is the better access to funding and ease in transfer of ownership. A private limited company also enjoys corporate tax advantages such as tax breaks, rates and relief. However, this business structure has more legal compliance to adhere to, such as hiring a licensed company secretary. Furthermore, the accounts of a private limited company have to be audited and submitted to the SSM annually.
Check out the table below for a comparison between these three business types and the registration fees required for each entity.
|Sole Proprietorship||Partnership||Private Limited|
|Number of Owners||1 person||Min. 2 and
max. 20 partners allowed
and 1 shareholder
|Income Tax||Personal tax||Personal tax||Company tax|
|Requirements||Only the owner can apply. The person must be a Malaysian Citizen or Permanent Resident and aged 18 years and above.||Only the owner can apply. The person must be a Malaysian Citizen or Permanent Resident and aged 18 years and above.||Only the owner (director) can apply. The person must be a Malaysian Citizen or Permanent Resident and aged 18 years and above. Must have 1 company secretary.|
|Duration of registration||1 hour||1 hour||Min. 24 hours|
|Registration Fees||RM30 for using own name,
RM60 for using trade name.
|RM60||From RM1,000 to RM70,000 (determined by the amount of share capital).|
|Branch||RM5 per year
|RM5 per year
|Business Information||RM10||RM10||Not stated|
Registration can be done at an SSM branch or through their online portal. You will need a photocopy of your (and your partners', where applicable) identification card (MyKad), as well as your suggested business name. There are also two general registration forms to be completed for sole proprietorship and partnership: Business Name Approval Form (Form PNA.42) and Business Registration Form (Form A). You can download the forms from the SSM website.
Take note that Form PNA.42 is only required for those who choose to use a trade name, and a copy of the partnership agreement (signed) is required for partnership registration. Once the application is approved, a business registration certificate will be issued within an hour. Do remember to renew your business license timely, as businesses that are expired for more than 12 months have to be registered again.
If you are registering a private limited company, you can refer to the SSM guidelines for information on the documents required. All the best!
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