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8 Types of Business You Can Register With SSM

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A business entity must be registered with the Companies Commission of Malaysia or Suruhanjaya Syarikat Malaysia (SSM) to run a business legally in Malaysia. Business entity registration is divided into 3 categories: Registration of Business (ROB), Registration of Company (ROC) and Limited Liability of Partnership (LLP). Each category is regulated by different laws and totals to 8 business entities to choose from. 

Table: Business entity registration categories difference

Business entity registration categoryLawBusiness entityLiabilityCapital contributionTaxes
Registration of Business (ROB)

Registration of Business Act 1956

(only applicable for West Malaysia)

– Sole Proprietorship

– Partnership

Not a separate legal entity, unlimited liabilities at personal capacity of business owners.Own / partner contributionPersonal income tax
Registration of Company (ROC)Companies Act 2016

– Private Limited Company (Sdn Bhd)

– Company Limited by Guarantee (CLG)

– Unlimited Company (Sdn)

– Public Limited Company (Bhd)

– Foreign Company

A separate legal entity with the company’s liabilities separated from the directors’ and shareholders’.

(except for Sdn and CLG)

Share capital

(except for CLG)

Corporate tax

(except for CLG)

Limited Liability of Partnership (LLP)Limited Liability Partnerships Act 2012– Limited Liability Partnership (LLP)A combination of partnership and private limited company.Partner contributionCorporate tax

1. Sole Proprietorship

A Sole Proprietorship is the simplest business entity to get started with if you are running your business alone at a small scale. 

You only need RM30 to register a Sole Proprietorship using your personal name or RM60 to register using a trade name. You can head over to SSM to register yourself as a sole proprietor or even online on EzBiz.

The registration process must be done without a third party. 

As sole business owner, you bear all liabilities of the business in your personal capacity. Taxes must also come through your personal income. 

The trade name must be available and approved at SSM. The contributed capital of the company is through your own contribution.

Who should register their business as a Sole Proprietorship?

Malaysian small business owners or permanent residents of Malaysia who have a business alone.

Advantages of a Sole Proprietorship

  • Cheaper to register.
  • Simpler registration process.
  • Simpler compliance to follow.

 

Disadvantages of a Sole Proprietorship

  • Has to be renewed annually.
  • You are responsible for all liabilities towards the business in your personal capacity.
  • Your personal income tax might be more expensive.
  • It is difficult to scale as it is harder to get investments.

2. Partnership

A Partnership is a business entity that consists of at least 2 partners, with a limit of 20 partners maximum. 

Similar to a sole proprietorship, partners of the business share the liabilities of the business and pay taxes through personal income taxes. 

If your Partnership is sued by a customer, you and your partner(s) will be personally liable to any damages awarded by the court. 

This is a common business entity for professionals such as lawyers, accountants, company secretaries, doctors, etc. 

Similar to sole proprietorship, the trade name has to be available and approved at SSM and the contributed capital is through the partner’s contribution.

It has a minimum of 2 to a maximum of 20 partners. Registration can also be done online. 

Who should register their business as a Partnership?

Malaysian or permanent residents of Malaysia who are small business owners with partners.

 Advantages of a Partnership

  • Cheap to register.
  • Simpler registration process.
  • Simpler compliance to follow.
  • Liabilities can be shared with business partners.

 

Disadvantages of a Partnership

  • Registration must be renewed annually.
  • Personal income tax can be expensive.
  • Harder to scale as it is harder to get investments.

Table: Business entities comparison under ROB

Business entityNo. of business ownerPersonal liabilitiesTaxes
Sole Proprietorship1Not a separate legal entity, unlimited liabilities at personal capacity of business owners.Personal income tax
Partnership

2 – 20

(except for Partnership in professional practice)

Not a separate legal entity, unlimited liabilities at personal capacity shared among all the partners.Personal income tax, shared among the partners

3. Sendirian Berhad (Sdn Bhd) / Private Limited Company

A Sdn Bhd company is a private company limited by shares. 

Registering a business as a Private Limited Company separates you (owner/shareholders) with your business. 

Your business is considered a “legal person” and can own assets, bind a contract and sue other entities in court under its own name. 

Your finances and assets are separated from your business. Owners/ shareholders are only liable towards the Company’s debts up to the amount they have invested for the business. 

This business structure is beneficial for a company to have investment without risking stakeholder personal wealth.

Since the updates of the Companies Act 2016 came into effect, you can incorporate a Sdn Bhd as the only director and shareholder of the company without other business partners.

Sdn Bhd also prohibits the invitation of the public to its shares. Your company name must end with Sdn Bhd.

The contributed capital is through shares. Requires a qualified company secretary.

For Sdn Bhd, shares are essential to ensure the survival of the company. 

Who should incorporate their company as a Sdn Bhd?

Anyone who wants to run a SME business in Malaysia. The only restriction is, at least 1 director has to reside in the country.

Advantages of a Sdn Bhd

  • Relatively cheap to register.
  • Relatively simple compliance to follow.
  • Separates your personal liabilities from the company itself.
  • Can scale by increasing paid-up capital and issuing shares to investors.
  • It can be 100% foreign-owned.

Disadvantages of a Sdn Bhd

  • You can not expand beyond 50 shareholders.
  • Unable to raise funds from the public.
  • The transfer of shares is restricted.

 

4. Company Limited by Guarantee (CLG)

A Company Limited by Guarantee is a public company without share capital for non-profit purposes. 

There are no shareholders, only members who act as guarantors to run the operation. 

You and other members do not contribute capital to the company but are responsible to pay debts if it closes down, according to the amount of guarantee as promised. 

Hence, it is unable to use its profits for purposes other than those stated as objectives in the constitution.

Who should register their company as a CLG?

Non-profit organisations.

 

Advantages of a CLG

  • Requires no upfront capital contribution from members.
  • The only business entity that can promote art, science, religion, charity and pension schemes.
  • Can apply to get exempted from paying corporate taxes.

Disadvantages of a CLG

  • Costly and difficult to register.
  • Strict compliance to follow.
  • All profits are for the purpose of the organisation only.
  • It is not allowed to release or own any property rights.
  • Inability to convert to other business entities.
  • Members are still liable towards company debt if the company closes down within one year after they have left the company.

 

5. Sendirian (Sdn) / Unlimited Company

A Sdn company has unlimited liability among its shareholders, unlike every other type of company.  

A Sdn company can be registered to form a mutual fund that holds assets for investment purposes, rather than to carry out business. 

Since it has unlimited liability among its shareholders, it is similar to a Partnership. 

There is more flexibility in the ownership of shares where shareholders are free to sell their shares back to the company.

Who should register their company as a Sdn?

Mutual funds.

Advantages of a Sdn

  • Flexible ownership of shares.
  • Can be a private or public company.

 

Disadvantages of a Sdn

  • Costly and difficult to register.
  • Strict compliance to follow.
  • Shareholders have full liability towards the company debts.
  • Shareholders are still liable towards company debt if the company closes down within one year after they have left the company.

 

6. Berhad (Bhd) / Public Limited Company

Similar to a Sdn Bhd company, a Bhd is a company limited by shares with a few differences. 

Bhd company can offer shares to the public without limit on the number of shareholders, requires at least 2 directors and is governed by Bursa Malaysia Securities Berhad and the Security Commission of Malaysia

Registration of this business entity can be time-consuming and expensive due to strict compliance requirements. 

However, funding for the company would be easier to obtain since it is publicly listed on the market.

A Bhd company’s shares are showcased and offered to the public for a fixed period of time or through subscription. Berhad companies are usually for large scaled businesses.

Company name must end with Bhd and the contributed capital is through shares. 

Bhd company has a minimum of 1 to an unlimited maximum number of shareholders.

Who should register their company as a Bhd?

Entrepreneurs with large business models.

Advantages of a Bhd

  • Easier to raise funds as the company is listed.
  • Can raise funds from the public by issuing shares.
  • Flexible ownership of shares.

 

Disadvantages of a Bhd

  • Costly and difficult to register.
  • Strict compliance to follow.

 

7. Foreign Company

A Foreign Company is for non-Malaysians who have established businesses in other countries and want to set up a company branch in Malaysia for operation or customer service purposes. 

Foreigners can run businesses in Malaysia without having a director that resides in the country. 

Non-Malaysians who are not permanent residents have limited options in registering a business entity in Malaysia. 

You can only opt for either a Sdn Bhd company or a Foreign Company.

Who should register their company as a Foreign Company?

Foreigners with established businesses in other countries who want to start a branch in Malaysia.

Advantages of a Foreign Company

Non-Malaysians can operate a business in Malaysia without a local director.

Disadvantages of a Foreign Company

  • Costly and difficult to register.
  • Strict compliance to follow.
  • Unable to raise funds from the public.

Table Comparison of business entities under ROC

Business entityNo. of business ownerPersonal liabilities
Sdn Bhd (Private Limited Company)1 – 50 shareholdersCompany’s liabilities separated from the directors’ and shareholders’.
Company Limited by Guarantee (CLG)Only membersMembers are liable according to the amount of guarantee as promised.
Sdn (Unlimited Company)1 – 50 shareholdersShareholders have unlimited liabilities at personal capactiy.
Bhd (Public Limited Company)Unlimited shareholdersCompany’s liabilities separated from the directors’ and shareholders’.
Foreign Company1 – 50 shareholdersCompany’s liabilities separated from the directors’ and shareholders’.

8. Perkongsian Liabiliti Terhad (PLT) / Limited Liability Partnership (LLP)

An LLP is governed under the Limited Liability Partnerships Act 2012 which was newly introduced in Malaysia in 2012, unlike other business entities.

It is a combination of a Sdn Bhd company and a Partnership with some differences such as there must be at least 2 partners, with no maximum number of partners you can have in the business. 

Because LLP is still relatively new, it is not commonly registered in Malaysia.

Company name requires to be ended with PLT and the contributed capital is through the partner’s contribution.

It has a minimum of 2 to an unlimited number of partners/shareholders.

Who should register their company as a LLP?

Malaysians or permanent residents of Malaysia who want to start a small business with business partners.

Advantages of a LLP

  • No maximum limit on the number of partners.
  • Relatively cheap to set up.
  • Flexible agreement among partners.

Disadvantages of a LLP

  • Unable to raise funds from the public.
  • Governed by a relatively new law, which could be confusing.

Table Comparison of LLP and partnership

Business entityNo. of business ownerPersonal liabilitiesTaxes
LLPMinimum 2, with no maximum limitA separate legal entity, with company’s liabilities separated from the directors’ and shareholders’.Corporate tax
Partnership

2 – 20 partners

(except for Partnership in professional practice)

Not a separate legal entity, unlimited liabilities at personal capacity among all the partners.Personal income tax, shared among the partners

Registering your business as its most suitable entity is vital when starting a business legally in Malaysia. 

Even with financial security when running your business as a company, all companies incorporated are required to fulfil mandatory obligations, such as getting a company secretary (in place of a company secretary, an agent for Foreign Companies and a compliance officer for PLT companies), lodging annual returns, and filing taxes. 

Weighing the pros and cons of each business entity in advance is crucial for the process of your business. 

Masta can ease your company’s registration process. 

Book a consultation now

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