There are various types of Business Company in Malaysia you can choose from depending on your business model and capital outlay to begin with. You can set up a sole proprietorship business, a partnership, a limited liability partnership or LLP, a Sendirian Berhad or private limited company, a Berhad or public limited company, a company limited by guarantee and finally a foreign company.
Among the new Small Medium Enterprise (SME) owners in Malaysia, the sole proprietorship and partnership are the most popular options by far. If your business is totally owned by a single person who uses his or her personal name according to his or her identity card or trade name, it will be classified as a sole proprietorship business.
In the case of partnership, the business company in Malaysia can be owned by two or more individuals but cannot exceed twenty persons. Additionally, in a partnership you cannot use the identity card name as a business name.
The limited liability partnership (LLP) combines the pertinent features of a partnership business company in Malaysia and a limited company. For this type of partnership, its business entity is separate from the partners.
The LLP is required by law to be comprised of at least two partners and is entitled to purchase property in its own trade name. A corporate body or a person can be a partner in this type of partnership.
This type of partnership business falls under the jurisdiction of the Limited Liability Partnerships Act of 2012. A LLP is quite popular in Malaysia because partners find it quite convenient and flexible to set up and run such a business while they get the platform to compete in the domestic and international markets as well.
Sendirian Berhad or private limited company is a company limited by shares. Therefore, the nominal value of the shares a person holds will define his or her personal liability in such a company.
It must have a minimum of two subscribers to the shares of the company and a minimum of two directors by law. The provisions of the Companies Act 1965 deal exclusively with the prerequisites for registering a company limited by shares in Malaysia.
It is obligatory to employ a company secretary and that person must be approved by the Companies Commission of Malaysia or SSM. A member of a professional body can also be your company secretary if only the body is approved by the Minister of Domestic Trade Cooperative and Consumerism. In a private limited company, the general public is not permitted to own the shares of the company.
Difference between BHD and others
The largest business company in Malaysia are usually the Berhad or public limited company and they are identified by the suffix BHD or Bhd. A public limited company is required by law to have at least two shareholders but there is no bar to the maximum number of shareholders.
In comparison to the private limited company, a BHD company must abide by more stringent financial reporting standard since it must disclose its financial records to the public.
A BHD company can go for public equity as well as debt financing for funding purposes. This type of company can list its shares and trade at the stock market if it wants to.
The major liability of the members of a company limited by guarantee (CLBG) is restricted by the constitution to the amount members agree to provide for the assets in case the company faces termination.
As a public company, a CLBG needs a license from the Ministry of Domestic Trade, Cooperatives and Consumerism to own land or property in Malaysia. The purpose of establishing a CLBG is clearly defined by the Companies Act 2016.
The purpose of a CLBG will be to promote science, or art, or religion, charity, commerce or industry, pension programs or any activity beneficial for the country in the context of health, education, environment, research, sports or society as a whole. The CLBG can also offer amusement or recreation and for clarification, the objectives mentioned above cannot be accomplished by any other type of company.
Establishing a RE or RO
A foreign company can also run a business company in Malaysia by establishing a Representative Office (“RE”) or Regional Office (“RO”).
This office provides the opportunity to evaluate business prospects in the country before committing into a permanent investment in Malaysia. The RE or RO can only stand for its head office to perform its duties and cannot engage in any commercial activities on its own.
It can carry out the activities to enhance bilateral trade relations and encourage
The office will be financed from outside the country and its sphere of influence will be limited to the region it would function in.
In order to operate its business in Malaysia, a foreign company can establish a branch office in the country. It is considered as an extension of the parent company and cannot exist as a separate business entity.