According to the Malaysian Business Act, three types of companies can be registered in Malaysia:
1) Private Limited Company
2) Limited partnership
3) Sole proprietorship/partnership
Private Limited Company (Sendirian Berhad or Sdn Bhd):
- The most common business type in Malaysia, owned by 1 to 50 people.
- The company and shareholders have separate legal responsibilities, and the shareholder's responsibility is limited to the amount they invested
- A private limited company has its own identity, allowing it to loan money, make purchases, rent, sign contracts, own property and real estate, all without involving the shareholders' names.
- Private limited companies are considered more reliable and reputable compared to sole proprietorships or partnerships, and dissolving a private company is more challenging.
Limited Liability Partnership (LLP):
- Requires a minimum of two owners, with no maximum limit.
- LLP stands out by providing partners with limited liability without needing to follow accounting standards.
- Unlike private limited companies, LLPs can do business without worrying about personal assets, personal debts, and strict conditions.
- Limited liability partnerships are generally suitable for small to medium-sized enterprises, especially in the service industry or fields requiring professional expertise.
Sole Proprietorship / Partnership:
- Businesses owned under an individual's name, with the owner being the sole proprietor.
- Sole proprietorships don't require annual reports, and Malaysian business laws don't specify auditing for sole proprietors.
- For entrepreneurs, starting as a sole proprietor is an option as it involves fewer legal requirements. If you are both the boss and employee, you can consider converting the sole proprietorship into a private limited company (Sendirian Berhad) or a limited liability partnership (LLP) later.
- Partnerships are similar to sole proprietorships but involve 2 to 20 owners. Partnerships generally bring more funding to help the business expand, with partners holding equal or different shares in the company.
Before starting a business in Malaysia, it's essential to know how to register a company. According to Malaysia's business registration laws, anyone or any company that operates continuously in Malaysia for 30 days, whether through traditional methods, with or without a physical store, or by opening an online store, must register their business with the Companies Commission of Malaysia (SSM).
The 3 major types of company registration in Malaysia