First off, let’s start with Types of Business Entities. There are three (3) different types of business entities to choose from:
Sole Proprietor (or Sole Trader)
This is a type of business in Malaysia under a single individual. The liabilities of the business associate the person’s bank account, and it is the simplest type of company in Malaysia. You will gain a lot of freedom with a sole proprietorship, but at the same time, it is a business type with the most risk. Sole proprietorships in Malaysia don’t need to submit audits or do annual fillings. Only a yearly fee is required to be paid to the companies commission Malaysia (SSM).
As its name suggests, different partners come together to form the business. In Malaysia, the concept of partnership is pretty simple, it is similar to a sole proprietorship, only that multiple people are running the business. Anyway, in a partnership, every individual has rights to the business according to the agreement and investment contribution. There can be two to twenty partners contributing to business in Malaysia.
Private Limited Company In Malaysia, the term Sendirian Berhad (SDN BHD Company Malaysia) is used to denote a private limited company. A private limited company can exist as a separate legal entity, and it is necessary there be shareholders and board of directors. This is a “company’ in general terms, meaning that there are employees, offices, contracts, going into debts, dissolving, and other office concepts.
Understanding different types of business entities available in Malaysia for:
Foreigners (non-Malaysian residents) are allowed to register a private limited company in Malaysia, so long as TWO (2) of the company’s directors are permanent (principal place of residence) residents in Malaysia.
Foreign companies are companies ALREADY incorporated (formed) outside of Malaysia but set up its business premises and operations in Malaysia. There are two ways to go about being a ‘foreign company’ in Malaysia:
- Register a branch in Malaysia, or; - Incorporate a local company (see “Requirements” below) Requirements The registration process and documents to be filled in (with payable fees) are as common: * A certified copy of the certificate of incorporation OR registration from its country of registration. - A certified copy of the company’s memorandum and articles of association, charter, statute defining its constitution. - A list of all directors in the company (foreign and local) and list of their powers. - A memorandum of appointment or power of attorney under the seal of the foreign company wanting to incorporate in Malaysia to authorize a Malaysian resident to accept on behalf of the company its service of processed and noticed required to be served on the company. - A statutory declaration made by the agent of a company (you can get an authorized local Malaysian company secretary here) Registration fees.
Limited Liability Partnership (LLP) – Coming soon
The Limited Liability Partnership (LLP) business entity was proposed in 2003, but have yet to be fully implemented by the Companies Commission of Malaysia (“CCM” in English or “SSM” in Malay). Want to find out more about LLP? Read the official document here. Contact us now to receive a free consultation on business entities in Malaysia.