Key Concerns as a Foreigner to Start a Business
- What is your business nature and is it eligible for foreign ownership?
- Which would be the best suggested tax structure for your business nature? Is it a private limited company or a Labuan International company?
- Getting the right trade licenses for your business or whether your business need it at all.
- What type of set-up do you need to readily comply prior to your application of licenses and work visa?
- What are criteria and compliance for the renewal of trade license, work visa and etc?
- What is the compliance you need to meet in order to maintain the company status?
- What is the compliance to becoming an employer hiring local Malaysians and expatriates?
Once you have identified these key concerns, the next thing you will need to put your attention on is the type of business entities that exist in Malaysia. This is because you are going to have to register your business under one of them and different business entities might suit different stages of your business or serve different type of business needs.
By knowing them all and understanding how they are different from one another will help you be conscious about how other business function while looking at your own business idea in a different light.
The Different Business Entities in Malaysia
Broadly, there are few different types of business entities in Malaysia, namely:
- Sole proprietorship
- Limited Liability Partnership
- Private Limited / Sendirian Berhad (Sdn Bhd)
- Labuan International Company (LIC)
- Representative/Regional office
Although there are various types of business entities, as a foreigner you will need to identify which are the business types permitted for foreigners to set up in Malaysia.
Types of Business Entities Allowed for Foreigners
As a foreigner looking to set up a company in Malaysia, you have the option of selecting from these 3 types of business entity:
- Private Limited company (Sdn Bhd Company)
- Labuan International Company (LIC)
- Representative/Regional Office
Private Limited Company / Sendirian Berhad (Sdn Bhd)
A private limited company by shareholding is known as Sendirian Berhad (Sdn Bhd) Company. This type of company is a separate legal entity from its owners, which means this company is considered as a legal ‘person’ that can buy or sell property, present into legal contracts, sue or get sued in courts of law.
Choosing this type of entity allows an entrepreneur to keep their finances and assets separately from the business. This means that the people who have invested in the business, namely the shareholders, are only responsible for any company debts up to the amount that they have invested and no more. Hence, this type of entity is a good way for a company to get investment without risk to a personal wealth.
While a private limited company is a viable option for most businesses, this one of the most common type of business recommended for foreign owners. Foreigners are allowed to register a Sendirian Berhad (Sdn Bhd) here with 100% foreign ownership, but some industries will need to have 50% Malaysian ownership and these industries include oil and gas, education, tourism, agriculture and banking. If your business falls outside of these industries, then you are eligible to be a 100% foreign owned Sdn Bhd.
As the Malaysian government is fuelling the need to encourage export growth, knowledge-transfer and employment opportunities in the country, your trade licence will only be approved if your business can promise that it is beneficial to the Malaysian economy. The government also encourages all business owners to employ local citizens.
All private limited companies that are registered in Malaysia are under the purview of the Malaysian Companies Act 1965. Like all business types, a Sdn Bhd comes with stringent requirements whereby the company is required to have a minimum of 2 shareholders and 2 directors. Two of the company directors must be permanent residents in Malaysia and the private limited company should have at least 2 to 50 members.
Upon successful registration, once can expect to reap benefits from this lifelong investment. It is, therefore, important to take note of the benefits and advantages of having a private limited company before you decide to set up one.