One of the most preferred legal business structures in Malaysia is the Private Limited Company (Sdn. Bhd.). This business structure can be started by both local as well as foreigners in Malaysia.

If you have plans to expand your business in Malaysia but do not wish to relocate, setting up a private limited Company (Sdn. Bhd.) is the best option. One major advantage is that foreigners can be the sole owner as long as they have the local residential address.

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Note: One of the services Paul Hype Page & Co. provides is the annual subscription of local residential address at an economical price.

Recently, Malaysia was nominated as the 12th easiest and friendliest place to do business by The World Bank with a score of 81.5%. It has also become one of the prime destinations in Asia for company registration. It offers many advantages as an investment destination, favourable tax regime as well as strong government support.

Private Limited Company (Sdn. Bhd.) is governed by Companies Commission of Malaysia – Suruhanjaya Syarikat Malaysia (SSM). In order to register a private limited Company (Sdn. Bhd.), there are two options available:

  • Register yourself at any available SSM counter
  • Appoint a local certified Company Secretary to register online
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Note: Once incorporation is done, a Company is given 30 days to appoint a certified Company Secretary within the Company. A Company Secretary must be a different person from the appointed Director and has valid practicing certificate.

Advantages of a Private Limited Company (Sdn. Bhd.)

There are a lot of different entities available in Malaysia for a person to start a business. However, the range of advantages Private Limited Company (Sdn. Bhd.) offers topple the others:

  • 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 under going 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 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
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Disadvantages of a Private Limited Company (Sdn. Bhd.)

Every entity has its advantages and disadvantages, including incorporating a Private Limited Company (Sdn. Bhd.):

  • Divided ownership

    Setting up a private limited Company (Sdn. Bhd.) as a sole owner (director and shareholder) may be easy initially. However, as time goes by and the business grows, more people may be involved with the decision making.

    Even though the Company is exempted from annual general meetings, any decisions made by the appointed board of directors must still be written in circular resolutions which in turn will need the shareholder’s votes to conclude the matter. This can be a problem if there is conflict amongst the stakeholders.

  • Unable to appoint more than 50 shareholders at one time

    Having investors within a Company is crucial to ensure the operation planning can be done in the long run. Funds injected by shareholders not only contribute to the daily operations, but also in adding the assets owned by the Company that generate revenue for the year.

    If the Company wishes to expand its business activities which might need more funds or investors, maintaining as a private limited Company (Sdn. Bhd.) may not be beneficial at this stage. As a private limited Company (Sdn. Bhd.), it is only allowed to appoint maximum of 50 shareholders at one time.

  • Unable to raise funds from the public

    Another drawback by incorporating a private limited Company (Sdn. Bhd.) is that the Company is not able to sell its shares to the public as an alternative way to raise funds. Their options remain by signing for loans from the bank, funds from their existing investors or selling off their existing assets.

  • Restricted share transfer options

    It is well known that a private limited Company (Sdn. Bhd.) is formed by a close group of individuals such as business partners or family members. This also means that any decision to appoint an outsider to become one of the shareholders might be restricted.

    Any newly issued shares issued shares must always be offered to the existing shareholders first before any outsiders can invest in them. The appointed board of directors will also have a say in this. They can decide whether the decision to transfer the shares to a new investor is beneficial to the Company or not.

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NOTE: The advantages and disadvantages of incorporating a Private Limited Company (Sdn. Bhd.) is consistent, be it the owner to be a local citizen or a foreigner.

Things to consider before incorporating a Private Limited Company (Sdn. Bhd.)

Now that you are aware that incorporating a private limited Company (Sdn. Bhd.) has more pro than cons, it is time to consider some crucial points before proceeding with your plan:

  • Business plan – What is the business activities that the Company will be carrying, where will the operation takes place, how many employees the Company plans to hire, who is the target market and potential suppliers and most importantly, why must the business run in Malaysia

  • Registration and annual compliance recurring cost – The registration fee via an appointed Company Secretary can be around MYR 2,500 and the annual compliance recurring cost can be in between MYR 4,500 to MYR 6,000 (this includes Company Secretarial service, accounting, tax filing etc.)

  • Business licenses – Which industry will the business be involved with? A specific industry such as manufacturing will need to apply manufacturing license before they can proceed to operate. Even a consultation business which will be renting an office will also need a general license from the town city hall which is renewable each year.

  • Will the Company hire foreign expatriates – If the Company has plans to employ foreign expatriates, the paid-up capital requirement may vary from MYR 250,000 for 100% local owned to MYR 500,000 for 100% foreign owned.

  • Key position within the Company – There are positions to be filled by third party such as Company Secretary, auditor, and tax agent. Whether the Company is owned locally or by foreigner, it can venture into all type of business activities. Difference is only on paid-up capital requirements

  • Tax structure within the country – While most countries practice double taxation, Malaysia tax system is territorial. Both residents and non-residents alike are taxed based on their Malaysian-sourced income while foreign-sourced income are not taxable even though the Company is local.
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Insights: There is not many distinguished differences between a 100% local owned Company versus those who are 100% foreign owned. By law, both owners are permissible to incorporate a Private Limited Company (Sdn. Bhd.) as long as they have a local residential address. They are also allowed to venture into almost all types of businesses available in Malaysia. In terms of applying for licenses, the steps are almost similar except for the paid-up capital requirements where a foreign owned Company will need a higher paid-up capital from MYR 500,000 to MYR 1,000,000 compared to local owned Company.

Procedure for incorporating a Private Limited Company (Sdn. Bhd.)

At Paul Hype Page & Co., we submit all incorporation applications electronically to Companies Commission of Malaysia – Suruhanjaya Syarikat Malaysia (SSM) by our certified Company Secretary.

The standard timeline needed are an estimation of:

  • Name reservation – 1 to 3 working days
  • Company incorporation – 3 to 7 working days

Preliminary Works

  • Client must complete the Know Your Client (KYC) on 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 (Directors must be at least 18 years old and above)
  • Proposed name must have a definition

    Examples:

    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
  • 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
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Note: A registered address is not the same as a business address. The registered address is where the Company corporate documentations are kept which is normally the appointed Company Secretary address. A business address is where the Company will officially operate its business. A tenancy agreement is needed to confirm the legitimacy of the address.

Post-incorporation of a Private Limited Company (Sdn. Bhd.)

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

The documents above are crucial for the Company to initiate:

  • Bank account opening
  • Application of general license with local town hall
  • Registration of Employees Provident Fund (EPF) profile (required to register within 7 days from when Company first hire an employee)
  • Registration of Social Security Organisation (SOCSO) profile (required to register within 30 days from when Company first hire an employee)
  • Registration with Inland Revenue Board – Lembaga Hasil Dalam Negeri (LHDN)

Bank account opening

We have a special package to introduce a banker to our clients in order to initiate the Company bank account opening. The banks vary from OCBC, AmBank, UOB and HSBC. The minimum deposit amount is normally around MYR 50,000 to MYR 80,000 depending on which bank you prefer.

These bankers will guide you from filling up the forms, checking to ensure all information are accurate and confirming the directors can proceed to sign the forms. Once signed, you will need to mail the original signed forms to us, the Company Secretary for Certified True Copy (CTC) procedure.

Our team will then send the CTCed documents to banker for them to proceed with the bank account opening. All these can be done remotely, and you do not have to be physically present in Malaysia. All communications will be done via email, WhatsApp and even Google Meet for KYC purpose (depending on your preference).

Application of license

Before a business can legally start operating, they are liable to comply with some form of licensing which can be a general license, an industry/ sector specific license or activity specific license. The business license is required by legislation and administered by various government agencies, statutory bodies, and local authorities.

Commonly, once a Company has engaged to rent out an office, they are required to apply for business premise license and signboard license from the respective state authorities.

For example, the Company decided to operate in Wisma UOA, Kuala Lumpur, the license can be obtained with The Kuala Lumpur City Hall – Dewan Bandaraya Kuala Lumpur (DBKL). The cost depends on the square feet of the office rented. A floor plan information is needed to submit for the City Hall to assess the fee based on the size. A starting cost from MYR 100 to MYR 1,000, depending on the finalisation of City Hall assessment.

Registration of EPF and SOCSO

The Employees Provident Fund (EPF) and Social Security Organisation (SOCSO) profiles must be registered over the counter. Normally, once a Company begin hiring employees, they may also appoint an internal Human Resource team or a third party. As mentioned above, the Company will need to register these profiles within 7 to 30 days upon hiring employees.

Registration with Inland Revenue Board (LHDN)

This profile is crucial for a Company to complete its annual tax filing as well as submission of monthly tax deduction for employees. This profile can be submitted online by a director, appointed tax agent or appointed Company secretary.

This profile is normally the last to be created because it will need the information below:

  • Number of employees (including director)
  • Number of employees with annual income less than MYR 30,000
  • Number of employees with annual income more than MYR 30,000
  • Company SOCSO registration number
  • Company EPF registration number
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TIP: All the registration mentioned above can be done by the Paul Hype Page & Co. team. This is to ease our clients and ensure the Company has done what is required by the authority for a smooth business operation.

Looking to set up your Sdn Bhd Company in Malaysia? We’re ready to incorporate your company whenever you are!

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FAQs

What names may not be chosen for a Company based in Malaysia?2020-04-27T14:32:54+08:00

In Malaysia, certain names may not be used for the purposes of naming a company. These names include names related to royalty; names related to state, federal, or foreign governments or international organizations; names related to political parties, associations, or trade unions; misleading, blasphemous, or offensive names; names which are translations of or too similar to an existing registered company name; or names including certain banned words. 

In which situations is starting a Sole Proprietorship or Partnership preferable to starting a Sdn Bhd Company?2020-04-27T14:32:14+08:00

There are certain instances in which it is more advisable for a prospective business owner to start a sole proprietorship or partnership. The primary examples of such scenarios involve entrepreneurs who are planning to start a small or medium-sized enterprise (SME) as a start-up. However, this may only be done by locals; foreigners may set up neither a sole proprietorship nor a partnership.

How has Malaysia’s ranking with regard to ease of doing business changed over the years?2020-04-27T14:31:18+08:00

Ever since the introduction of the Ease of Doing Business rankings in 2006, Malaysia’s ranking has not changed much. In almost every year of the rankings, Malaysia has been ranked between 12th and 25th. The exception was in 2014, when its ranking peaked at sixth. 

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