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Advantages of a Sdn Bhd Company in Malaysia

12 min read|Last Updated: August 31, 2022|
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Those who are interested in starting a business in Malaysia have several types of business entities available for them to choose from. The top three (3) choices of business vehicles chosen by start-up are sole proprietorship, partnership, or private limited Company (Sdn. Bhd.).

What is a private limited Company (Sdn. Bhd.)?

Private Limited Company otherwise known as “Sendirian Berhad” or “Sdn. Bhd.” can be said as one of the most preferred legal business structures in Malaysia. This business structure can be started by both locals as well as foreigners in Malaysia.

This business structure is typically a small or medium sized enterprises. The registration process is also straightforward with a cost of MYR 1,060.

Comparison between a private limited Company (Sdn. Bhd.) to Sole Proprietorship and Partnership

There are often varying reasons for business owners to decide setting up one of the options. One of the common reasons known is because it can be set up solely by a local or foreigners alike.

The advantages for setting up a private limited Company (Sdn. Bhd.) in Malaysia are aplenty, resulting in many swinging in favour of this entity type over others like sole proprietorship and partnerships.

  • Separate Legal Entity

    • A private limited Company (Sdn. Bhd.) is considered as “legal person” which can purchase assets under its own name, bind a contract as well as sue another entity in court
    • Stakeholders’ personal wealth are safe guarded and not personally liable towards debts accumulated by business
  • Owning Property

    • As a “legal person”, a private limited Company (Sdn. Bhd.) can purchase assets such as building, land, vehicles, and many more under its name
    • Stakeholders have no rights to claim upon an asset owned by the Company as long as the Company is undergoing concern basis
  • Ease in transfer of ownership

    • The shareholders are at liberty to purchase, sell or transfer their shares to other existing shareholders or potential investors
    • There will be no direct impact towards Company’s daily operation if occur changes of shareholders
  • Uninterrupted Existence

    • The private limited Company (Sdn. Bhd.) has a perpetual succession which means it will only cease to exist once it is legally dissolved
    • If any stakeholder departs or ceased, it will not affect the Company existence
  • Better access to funding

    • As a “legal person”, the private limited Company (Sdn. Bhd.) can initiate a corporate bank account opening and opt for the loan packages banker has to offer under its own name
    • The Company may also encourage third party investors to fund the business by offering their shares and plan the dividend pay-out
  • Great corporate tax advantages

    • Tax incentives such as pioneer status, investment tax allowance and SME Digitalisation Grant Scheme and Automation Grant are normally offered to private limited Company (Sdn. Bhd.)
    • The business will only be taxed based on the profit before tax with first MYR 600,000 at 17% and a further of 24% on subsequent balance
  • Manageable annual compliance

    • The Company Act 2016 has eased most of the annual compliance requirement such as the introduction of single member/director in the Company, abolition of the requirement to hold annual general meeting for private limited Company (Sdn. Bhd.) and the exemption to submit audited financial statement unless it meets the criteria
    • The Company will be automatically operating under the Company Act 2016 framework instead of a Memorandum of Association (MoA) or Article of Association (AoA) unless stated otherwise by the shareholders

Starting a sole proprietorship or partnership may come with simple and cheap registration as well as simple annual compliance procedure, however the drawbacks of such business entities include:

  • Not separate legal entity – Owner is liable towards all the debts accumulated by the business and have the possibility to end up with bankruptcy if business go south

  • Owners can be sued – If the owner filed for bankruptcy, the creditors could easily sue the owners to claim the debt owed

  • Limited funding options – Commonly, owners are advised to take up personal loan instead of business loan. This can also lead to added liabilities towards the owner as an individual. Third party investors are also not easy to encourage to invest in the business as they are normally sceptical with such businesses


Converting a Private Limited Company (Sdn. Bhd.) to a Public Limited Company (Berhad)

Another reason for a businessman to opt for a private limited Company (Sdn. Bhd.) compared to other business vehicle is because it can be converted into a Public Limited Company (Berhad) as one of the expansion options.

Most of the regulations in private limited Company (Sdn. Bhd.) applies to a public limited Company (Berhad) except:

  • The Company shares can be sold to the public as an alternative to raise fund
  • Strict compliance such as holding annual general meeting and filing audited report are compulsory
  • A more complex administration that can also lead to a slow decision-making process

However, despite the differences, there are advantages once a private limited Company (Sdn. Bhd.) wishes to expand their business and convert to public limited Company (Berhad):

  • Institutional investment – It is easier for public listed companies to attract institutional investment without having to go through hassle negotiations

  • Enhanced corporate profile and improved valuation – Listed companies can greatly elevate the Company profile which automatically enhance and increase business opportunities as there are elements of trust and credibility

  • Employees’ shareholding scheme – This type of scheme is able to boost the employee morale, retain long-serving and loyal employees as well as attract top employees

  • Profitable exit strategy – Making the Company public will provide a mechanism for owners to nurture and expand the business, working towards improving the entity’s share price performance and selling it prior to an exit, as it offers potential high pay-out

Requirements and Procedure to Set Up a Private Limited Company (Sdn. Bhd.)

There are certain requirements to be met in order to setup of a Sdn Bhd company in Malaysia:

  • The Company shares can be sold to the public as an alternative to raise fund
  • Strict compliance such as holding annual general meeting and filing audited report are compulsory

  • A more complex administration that can also lead to a slow decision-making process

However, despite the differences, there are advantages once a private limited Company (Sdn. Bhd.) wishes to expand their business and convert to public limited Company (Berhad):

  • Must have at least one director with legitimate residential address in Malaysia
  • Director must be at least 18 years old
  • Minimum paid up capital is MYR 1

Once requirements above are met, a businessmen have two options to incorporate a Private Limited Company (Sdn. Bhd.):

  • Register yourself at any available SSM counter
  • Appoint a local certified Company Secretary to register online

By engaging Paul Hype Page & Co., the standard timeline needed to incorporate a private limited Company (Sdn. Bhd.) are estimated below:

  • Name reservation – 1 to 3 working days

  • Company incorporation – 3 to 7 working days

Preliminary Works

  • Client must complete the Know Your Client (KYC) in our patented platform

  • Our team will check and confirm if the name proposed is available within 24 hours

Name reservation

  • Directors NRIC / Passports are needed for our team to proceed with the name reservation application
  • Proposed name must have a definition


    1. ABC Ice Cream Sdn. Bhd. – A – Apple, B – Banana, C – Cherry Ice Cream Sdn. Bhd.
    2. Oishii Sushi Sdn. Bhd. – Oishii means delicious in Japanese
    3. Ramu Pharma Sdn. Bhd. – Ramu is the name of the director in the Company (a consent letter will be required for this type of proposed name)
    4. Paul Hype Page Sdn. Bhd. – Paul Hype Page is similar name to sister Company in Singapore (a consent letter will be required for this type of proposed name)
    5. Petronas Sdn. Bhd. – Petronas is a trademark name (a consent letter from owner is needed for this type of proposed name)
  • Nature of business in general

  • Cost to submit name reservation is MYR 50

Signing of Incorporation Documents

  • Once proposed name is approved, a Company has 30 days to complete the incorporation procedure

  • Our team will prepare the documents and generate them via our platform for stakeholders of Company to read and sign off

  • All signing will be done online, hence there is no need for our clients (local or foreign) to be physically present

Risk assessments

  • Once signatures are completed, our team will proceed with the risk assessment task
  • This step is part of the risk and compliance assurance to ensure all stakeholders within the Company have clean background

Incorporating the Company

  • Once our team confirms stakeholders are clear, we may proceed with the final step, which is submission of incorporation application
  • Client must choose business activity code (maximum 3 at one time) and explain in general the business description of the business activities
  • One of the appointed directors must have a local residential address if all stakeholders are foreigners
  • If the Company already has a business address, kindly let our team know for us to include it during the initial stage
  • A minimum of MYR 1 as initial paid-up capital (Our suggestion is to at least put in MYR 1,000 as the initial paid-up capital)

  • Cost to submit incorporation application is MYR 1,010

Once the Company is successfully incorporated, the Company Secretary should furnish you the documents below:

  • Section 14 – Superform [Application for registration of a Company]
  • Section 15 – Notice of Registration [Certificate issued by SSM to confirm the Company is successfully incorporated]
  • Section 17 – Certificate of Incorporation
  • Section 46 – Particular of registered address

  • Section 58 – Particular of directors

  • Section 58 & 236 (2) – Appointment of first Company Secretary
  • Section 78 – Particular of shareholders and shares


Come down to our office or get in touch virtually for an incorporation assessment.

Contact us now >


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