Southeast Asia has proven to be the perfect place to set up startups and businesses thanks to its untapped potential. Malaysia, specifically, is a promising country with a stable economy and plenty of opportunities to establish a business entity. Whether you’re an aspiring local entrepreneur or a foreign venture capitalist seeking to tap into SEA’s potential, here’s what you should know about how to register and set up a company in Malaysia.
Why you should set up a business in Malaysia
Like mentioned before, Malaysia is filled with untapped potential that if utilized properly, it could drive the economy even further. In 2020, Malaysia ranked 27th out of 63 countries when it comes to having a competitive economy. This ranking created by the Institute for Management Development places the country in the same league as the United Kingdom, South Korea, Belgium, Iceland, and New Zealand.
Some of the benefits of starting a company or a business in Malaysia are the low corporate income task, flexible banking system, supportive government bodies, and a diverse workforce. Malaysia is quite welcoming in letting foreign entities set up a business in Malaysia while prioritizing local, small businesses as well.
Types of business entity registration
There are 8 main types of companies in Malaysia that you can register for and they are divided into 3 types of business entities in Malaysia: Registration of Business (ROB), Registration of Company (ROC), and Limited Liability of Partnership (LLP).
Registration of Business
Registration of Business, or ROB, suits best for those starting their own small businesses online. It does not have separate legal entities and it has unlimited liabilities at the personal capacity of the owners. Taxes charged for a ROB will fall under the personal income tax. There are two types of business entities under ROB and they are Sole Proprietorship and Partnership.
Registration of Company
Registration of Company, or ROC, applies to bigger corporations with separate legal entities. The types of companies under this registration are Private Limited Company (Sdn Bhd), Company Limited by Guarantee (CLG), Unlimited Company (Sdn), Public Limited Company (Bhd), and Foreign Companies. All liabilities are separated from the board of directors and the stakeholders, with the exception of Sdn and CLG. Taxes charged will fall under corporate tax except for CLG.
Limited Liability of Partnership
Last but not least, a Limited Liability of Partnership (LLP) combines the policies applicable to both partnership and private limited company. This type of business entity is perfect for those keen on starting a small business along with other business partners. The type of tax that an LLP company needs to fulfill falls under the corporate tax, despite being a privately-owned company.
Types of company in Malaysia
So, in total, the 8 types of companies in Malaysia that you can register are:
- Sole proprietorship
- Private Limited Company (Sdn Bhd)
- Company Limited by Guarantee (CLG)
- Unlimited Company (Sdn)
- Public Limited Company (Bhd)
- Foreign Company
- Limited Liability Partnership (LLP)
For locals who want to set up a small business in Malaysia as a side hustle or to pursue their entrepreneurial dream, they can start with a sole proprietorship business entity. This type of company is the easiest to register as you are the sole business owner without any partners or a separate legal entity. It only requires RM30-60 to register your business name and the registration process is quite simple. However, you need to renew your business every year and all liabilities need to be borne by the business owner.
While sole proprietorship gives ownership only to one person, a partnership allows 2 to 20 partners to have ownership over a company. All liabilities faced by the company will be shared by all the partners equally. It is as cheap as registering a Sole Proprietorship and it must be renewed annually as well. A downside to this type of business entity is that your tax can be quite expensive as it has to be filed under your personal income tax.
Private Limited Company (Sdn Bhd)
A Private Limited Company, also known as Sendirian Berhad (Sdn Bhd), is one of the most common types of companies in Malaysia. It is limited by shares and has a separate legal entity that will take on the liabilities away from the company itself. Having an Sdn Bhd company has many advantages, including the ability to separate liability, scale through selling shares to investors, and it can be foreign-owned as long as there’s at least one director residing in Malaysia. The only downside of an Sdn Bhd is that it can’t receive funding from the public.
Company Limited by Guarantee
A Company Limited by Guarantee, or a CLG, is a type of public company created for non-profit goals. Instead of stakeholders, there are guarantors who oversee the operation. A CLG is suitable for non-profit organizations that promote charity, science, arts, and other beneficial purposes. Registering a CLG is more difficult as it has more guidelines and limitations. For instance, all profits made by a CLG must be for the purpose of the company e.g. giving donations, funding for underprivileged children, etc.
Unlimited Company (Sdn)
Unlimited Company, known as Sendirian (Sdn), has flexible ownership of its shares. Typically, an Sdn is registered to create mutual funds instead of to carry out the business itself. The liability will then be shared among all of its stakeholders, as there are no limits on how many shares can be owned. An Sdn company can either be a private or a public company, but it has strict guidelines and stakeholders must bear the cost of debt even after the company shuts down.
Public Limited Company
A Public Limited Company is also known as Berhad or Bhd. While it has similar regulations as Sdn Bhd, shares from a Bhd can be bought by the public. This way, it’s much easier for the company to raise funds as it targets both the private and public sectors. However, just like an Sdn and CLG, it has strict guidelines that must be fulfilled and it is quite expensive to be registered. This type of company is suitable for those with experience as well as extensive models and funds.
This type of business entity is suitable for any non-Malaysian citizen who wants to establish a company in the country. Ideally, you should already have an established company outside of Malaysia so the office will only be for operational purposes. Unlike an Sdn Bhd business entity, you’re not required to have a director residing in Malaysia. However, the regulations for registering a Foreign Company are considerably more difficult and complicated to follow.
Limited Liability Partnership (LLP)
Last but not least, a Limited Liability Partnership is a relatively new type of business entity in Malaysia. Established in 2012, it’s a combination between a Partnership and an Sdn Bhd company. You must have at least 2 partners and it has a separate legal entity so liabilities are not borne by the stakeholders. An LLP is not able to receive funding from the public and regulations can be quite confusing as it is a newly-introduced governing body.
How to register a company in Malaysia
Now that you’re familiar with all the different types of business entities in Malaysia, the next thing to know is the steps of setting up your own company in the country. Setting up a business in Malaysia requires registration in Suruhanjaya Syarikat Malaysia (SSM), also known as Companies Commission of Malaysia. They are the governing body that oversees businesses and corporations in Malaysia. You can either register your company offline or online.
What you need to set up a company in Malaysia
- A name for your business. This can either be a personal one, named after the owner of the business, or a trade name. Keep in mind that SSM will ask for 2 to 3 business names in case your first choice is rejected.
- An application form from SSM titled “Pendaftaran Perniagaan” (Form A) and “Permohonan Nama Perniagaan” (Form PNA 42) if you’re registering a trade name.
How to register a company in Malaysia offline
The offline registration pathway is the most common method of registering your business entity. First, you need up to 3 names to be registered with SSM. Once you’ve come up with three names, head on over to www.ssm-einfo.my to see if the names you’ve chosen are available. If there are no search results under your chosen company name, it means it’s available for registration. If there are search results, then that name has already been taken.
After you’ve settled on your list of business names, fill out both Form A and Form PNA 42 if applicable. On Form PNA 42, you must list down the type of product or service offered by the business you’re registering. When ball forms are filled out properly, head over to the SSM headquarters with your identity card or passport ready, as well as money for the registration fee.
How to register a company in Malaysia online
You can also set up a business in Malaysia through the official online portal from SSM. Go to ezbiz.ssm.com.my and sign up for a new account. Fill out your details as accurately as possible, including your IC number. Keep in mind that for this sign-up process, you still need to visit an SSM office to have your thumbprint documented and to activate your account.
Once your account is activated, you can continue registering your business on EzBiz.
- Go to My Business Service and click on New Business Registration.
- Under the Main Information section, fill out your business information including your business name, type, start date, and business address.
- For the Branches section, it’s applicable if your business already has operating branches.
- Next, the Business Code section requires you to fill in the applicable business code. There will be a table containing the code on the page for your reference.
- Afterward, the Owners section is where you fill out your personal information.
- Lastly, the Fees and Declaration section is where you make your payment for the registration.
SSM registration fee by type
|Sole Proprietorship/Partnership||Trade Name – RM60 annuallyPersonal Name – RM30 annuallyBranch – RM5 annually for each branch|
|Sendirian Berhad (Sdn Bhd)||RM1,000|
|Company Limited by Guarantee (CLG)||RM3,000|