7 Alternatives: Types of Companies in Malaysia

Malaysia is a country that is rich in culture, history, and economic opportunities. It is a hub of business activity in Southeast Asia, making it an ideal destination for entrepreneurs and investors looking to establish a company or expand their business in the region. In this article, we will explore the different types of companies in Malaysia, the process of incorporating a Malaysian type of company, corporate governance, financing, employment laws and regulations, intellectual property rights protection, taxation, and more. 

Types of Companies in Malaysia 

Here, you can take a look at the 7 types of companies available in Malaysia.

1. Private Limited Company (Sdn Bhd) 

A private limited company is the most common type of business entity in Malaysia, favored for its flexibility and distinct legal status. As a separate legal entity, it possesses its own legal identity, allowing it to own assets and incur liabilities independently of its shareholders. A private limited company requires a minimum of one shareholder with limited liability. The directors and shareholders of the company can be either foreigners or locals, providing significant flexibility in terms of ownership and management.

Additionally, the company is required to have one director who is a resident of Malaysia for local presence. This type of business structure is particularly attractive due to its ability to raise capital through the issuance of shares and its compliance with regulatory requirements, which can enhance the company’s credibility and growth potential.

2. Public Limited Company (Berhad)

In Malaysia, a public limited company is a business entity with its shares listed on the stock exchange, enabling public trading and capital raising from a broad investor base. It requires a minimum of two directors and two shareholders, with shareholders’ liability limited to their shareholdings. This provides asset protection and encourages investment. Public limited companies face stringent regulations, including detailed financial reporting and compliance with the Malaysian Companies Act 2016 and Bursa Malaysia’s listing requirements, ensuring transparency and investor protection.

Public limited companies must maintain high standards of corporate governance, often involving various oversight committees to manage operations effectively. The ability to attract public investment allows these companies to undertake significant projects and expand their market presence, contributing to economic growth. However, they must consistently maintain investor confidence through transparent operations and effective stakeholder communication.

3. Sole Proprietorship 

A sole proprietorship is a business entity owned and operated by a single individual, making it the simplest and most straightforward form of business entity in Malaysia. This structure grants the owner complete control over all business decisions, operations, and profits. It is particularly appealing to entrepreneurs who want direct oversight and management of their business. The ease of setup and minimal regulatory requirements make it a popular choice for small business owners and freelancers.

However, the owner is personally liable for all the debts and liabilities of the business. This means that if the business faces financial difficulties or legal issues, the owner’s personal assets, such as their home or savings, may be at risk to cover business debts. Despite this risk, many find the benefits of simplicity and full control to outweigh the potential downsides. Understanding these aspects is crucial for anyone considering this type of business structure in Malaysia, ensuring informed decision-making and better preparedness for managing potential challenges.

4. Partnership 

A partnership is a business entity that is owned and operated by two or more individuals who share the profits and responsibilities of the business. The liability of partners is unlimited, meaning they are personally liable for all the debts and liabilities incurred by the business. This structure necessitates a high level of trust and cooperation among partners, as each individual’s personal assets can be used to satisfy the business’s financial obligations.

Furthermore, a partnership is not a separate legal entity, which distinguishes it from corporations and limited liability companies. This lack of legal separation means that the partners are personally liable for the business’s obligations, making it crucial for partners to have a clear, legally binding partnership agreement in place. This agreement outlines each partner’s roles, responsibilities, and share of the profits, ensuring smooth operation and conflict resolution within the business.

5. Unlimited Company (Sdn)

An unlimited company imposes unlimited liability on its members and shareholders, making them personally responsible for any losses or debts incurred by the company. However, if the company wishes to limit this liability and protect its members, it can convert to a limited company by passing a special resolution and lodging a notice of conversion with the SSM. This process helps ensure that the personal assets of members and shareholders are safeguarded.

6. Foreign Company

Foreign companies can set up a representative office in Malaysia to study the market and coordinate regional activities without engaging in profit-generating business activities, as it lacks independent legal standing and its parent company assumes all liabilities. Alternatively, a foreign branch office, acting as an extension of the parent company and sharing its liabilities, can conduct the same business activities as the parent company, suitable for short-term business expansion, with the requirement to register with the SSM and have at least one resident authorized agent.

7. Limited Liability Partnership

Finally, a limited liability partnership (LLP) merges partnership and corporate features, operating as a distinct legal entity from its partners. It shields partners’ assets in case of bankruptcy or debt while offering simplified compliance and cost-effectiveness, making it ideal for small businesses and startups.

Incorporation Process for a Company in Malaysia

The process of incorporating a Malaysia type of company involves several steps, including choosing a company name, preparing the necessary documents, registering the company with the Companies Commission of Malaysia (SSM), obtaining business licenses and permits, and registering for taxes. 

Step 1: Choose a company name and get approval 

The first step in incorporating a Malaysia type of company is to choose a company name and get approval from the SSM. The company name must not be similar to the name of an existing company, and it must not contain any words that are offensive or misleading. 

Step 2: Prepare the necessary documents 

The next step is to prepare the necessary documents 

Step 3: Register the company with the Companies Commission of Malaysia (SSM) 

Once the necessary documents have been prepared, the company can be registered with the SSM. The registration process can be done online or in person at the SSM office. 

Step 4: Obtain business licenses and permits 

Depending on the nature of the business, the company may be required to obtain business licenses and permits from the relevant authorities. 

Step 5: Register for taxes 

Once the company has been registered with the SSM, it must register for taxes with the Inland Revenue Board (IRB) 

Corporate Governance 

Corporate governance refers to the set of rules, practices, and processes that are used to direct and control a company. In Malaysia, corporate governance is regulated by the Malaysian Code on Corporate Governance, which is aimed at ensuring that companies are managed in a transparent, accountable, and responsible manner. 

Financing 

There are several sources of financing available to companies in Malaysia, including bank loans, venture capital, private equity, and crowdfunding. The availability and terms of financing will depend on factors such as the size and stage of the company, the industry, and the business plan. 

Employment Laws and Regulations 

Companies in Malaysia are subject to several laws and regulations related to employment, including the Employment Act, the Industrial Relations Act, and the Minimum Wages Order. These laws and regulations govern issues such as minimum wage, working hours, leave entitlements, termination, and disputes between employers and employees. 

Intellectual Property Rights Protection 

Intellectual property rights protection is an important consideration for companies in Malaysia. The Malaysian government has established several laws and regulations aimed at protecting intellectual property, including the Copyright Act, the Patents Act, and the Trade Marks Act. 

Taxation 

Companies in Malaysia are subject to several taxes, including corporate income tax, sales and service tax, and goods and services tax. The rate and applicability of these taxes will depend on factors such as the type of company, the industry, and the income or revenue generated. 

Conclusion 

Establishing a Malaysia type of company involves several steps and considerations, including choosing the right type of company, incorporating the company, complying with corporate governance regulations, obtaining financing, navigating employment laws and regulations, protecting intellectual property rights, and managing taxes. However, with the right preparation and guidance, establishing a Malaysia type of company can be a rewarding and lucrative business venture. 

Premia TNC’s Incorporation Services

At Premia TNC, we strive to provide comprehensive assistance tailored to your incorporation needs in Malaysia. If you are considering establishing your presence or are a multinational corporation seeking expansion, we offer expert guidance on company registration, compliance with local regulations, tax structuring, and more. Our dedicated team is committed to streamlining the incorporation process, ensuring a smooth transition into the Malaysian market. Let us be your trusted partner in navigating the complexities of company incorporation, allowing you to focus on achieving your business objectives with confidence.