Can Foreigner Set Up a Sole Proprietorship in Malaysia

Foreigners cannot start unlimited companies, enterprises, sole proprietorship companies or limited liability companies. Sole proprietorship, especially, is reserved only for Malaysian citizens. A foreign investor can only start a partnership or sole proprietorship business entity if they have a permanent residence status in Malaysia.  

Foreigners are eligible for Private Limited Companies or Sdn Bhd business entities. Foreigners are also eligible for the Labuan International Company (LIC) entity. The LIC has special benefits and fewer prerequisites. It can also be 100% foreign owned, has the lowest paid up capital and involves minimum hassle. 

Want to Start business in Singapore
Want to Start business in Singapore

Why Choose Private Limited Companies in Malaysia?

Private Limited Companies are the most popular entity because it is a separate legal entity from its shareholders. Liability of losses and debts is limited with this option. There are also benefits in terms of tax incentives, special government grants and exemptions. There is also better growth potential, and this entity allows investors to go public to publicly raise funds if needed. Investors will be required to fulfil the annual statutory audit requirement, and maintain ongoing compliance with SSM.  

A foreigner company can also be awarded with an MSC Malaysia status. If the company is involved in developing or using multimedia technology to enhance or produce their products, services and process development, they are eligible for MSC Malaysia status. There are certain benefits which come with this status:  


  • 100% tax free eligibility on taxable statutory income (refers to corporate tax). This incentive is for a period of up to 10 years for activities which are MSC status approved only.  
  • Investment tax allowance, where you are eligible for 100% deductions on capital qualifying expenditure.  
  • Duty free import and sales tax exemption (terms and conditions apply with this one). 


If you are a foreigner, you should decide what business entity will be most suitable prior to starting a business in Malaysia.Getting to know the local market culture is one way of familiarising yourself with the possible opportunities that may be available. When you have decided on your entity, you must check with the relevant authorities to see if it is permissible. You will also need to acquire relevant permission, and secure the right types of licenses before you commence business.  

How to Fund Your Business in Malaysia

It is also important to examine your available funding sources. Do you intend to self-fund your business in Malaysia? Or seek debt financing? You must have the necessary funds to not just cover the cost of incorporation, but other miscellaneous costs involved too. This includes the cost of licensing, permits, rent, refurbishments (if any), utilities, and salary packages for employees among other things. The cost of your visa must also be considered. If needed, there are grants and funding available in Malaysia for certain sectors. The financing grants and schemes are designed specifically to help entrepreneurs and SMEs in Malaysia. Government agencies which provide grants include:  


  • The Ministry of Finance (MOF) 
  • The Ministry of Communications and Multimedia (KKMM)  
  • The Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) 
  • Cradle Investment Program Catalyst (CIP 500) 
  • Cradle Seed Ventures Fund (CSVF1)