Sole Proprietorship
Sole proprietorship is owned by a sole business owner.
Advantages
1. Simple registration process.
2. Simple compliance requirements (e.g. audit and submission of accounts to Suruhanjaya Syarikat Malaysia (“SSM”) not required).
3. Lower personal tax rate when chargeable income lesser than RM70k (13% and below ~ lower than company tax rate of 17%).
Disadvantages
1. Unlimited liability in personal capacity of business owner.
2. Tiered rate for personal tax up to 30%.
3. Periodic renewal of business certificate required.
4. Not able to scale via issuance of shares.
Private Limited Company (Sdn Bhd)
– Requires at least 1 director to reside in Malaysia
– May adopt Company Constitution
– Appointment of Company secretary and auditor is required
Advantages
1. Separate legal entity to earn income, signing contracts, owning assets and limited in liability for shareholders.
2. Relatively simple compliance requirements.
3. Scalable via issuance of shares (maximum 50 shareholders).
4. Lower tax rate when paid up capital lesser than RM2.5m at 17% on first RM600,000.
Disadvantages
1. Restriction on raising funds from the public.
2. 2. Restriction on transfer of shares.
3. Scalable via issuance of shares (maximum 50 shareholders).
4. Lower tax rate when paid up capital lesser than RM2.5m at 17% on first RM600,000.
Partnership
At least 2 partners up to 20 partners
Advantages
1. Simple registration process.
2. Simple compliance requirements (e.g. audit and submission of accounts to SSM not required).
3. Share of liability with partners.
4. Lower personal tax rate when chargeable income lesser than RM70k (13% and below ~ lower than company tax rate of 17%).
Disadvantages
1. Unlimited liability in personal capacity of the partners.
2. Tiered rate for personal tax up to 30%.
3. Periodic renewal of business certificate required.
4. Legal costs for partnership agreement.
Limited Liability Partnership (LLP)
– At least 2 partners
– Similar tax treatment as Company
Advantages
1. Separate legal entity to earn income, signing contracts, owning assets and limited in liability for partners.
2. No restriction on number of partners.
3. Simple registration process.
4. Simple compliance requirements (e.g. audit not required, however tax returns must be based on financial statements).
Disadvantages
1. Restriction on raising funds from the public.
2. Legal costs for partnership agreement.
3. Cannot convert to Sdn Bhd.
4. Remuneration to partners not allowable for deduction if not provided in LLP agreement.
Unlimited Company (Sdn)
– For mutual funds, holding assets for investment purposes
– Appointment of secretary and auditor required
Advantages
1. Flexible ownership of shares.
2. Can be a private / public company.
Disadvantages
1. Costly and difficult to register.
2. Strict compliance requirements.
3. Shareholders have full liability on company’s debts (including the period up to 1 year after they have left the company).
Public Limited Company (Bhd)
– At least 2 directors reside in Malaysia
Advantages
1. Easy access to funds including from the public, via issuance of shares/ debts.
2. Flexible ownership of shares.
Disadvantages
1. Costly and difficult to register.
2. Strict compliance requirements.
Foreign Company
Advantages
Foreigners can run businesses in Malaysia without having a director that resides in Malaysia.
Disadvantages
1. Costly and difficult to register.
2. Strict compliance requirements.
3. Restriction on raising funds from the public.
Company Limited by Guarantee
– Public company without share capital, no shareholders
– For non-profit purposes
– Appointment of auditor required
Advantages
1. No upfront capital contribution required.
2. The only business form that can promote art, science, religion, charity etc.
3. Can apply for corporate tax exemption.
Disadvantages
1. Costly and difficult to register.
2. Strict compliance requirements.
3. Restricted to prescribed list of purposes for incorporation.
4. Required to have Constitution.
5. Cannot convert to other business forms.
6. Cannot own properties
