Those who are interested in starting a business in Malaysia may select one of several business entities which may be used. Prospective business owners may utilize a sole proprietorship, partnership, or private limited company (also known as a Sendirian Berhad or Sdn Bhd company). For most people who conduct business operations in Malaysia, the Sdn Bhd company is the preferred choice because it has numerous advantages with regard to legal matters as well as the raising of financial capital.
A Sdn Bhd company is a private company which is limited by shareholding. This type of company is a separate legal entity from its owners. This means that the company is considered a legal ‘person’ that may buy or sell property, enter into legal contracts, and sue or be sued in courts of law.
One of the primary advantages of a Sdn Bhd company is that of personal wealth protection. Due to the fact that a Sdn Bhd company is a limited liability entity, the owners’ liabilities do not extend beyond those of any other shareholders. They are not responsible for the company’s debts, which means that the owner’s wealth as a shareholder is protected. The owner’s assets cannot be used to pay for the Sdn Bhd company’s debts unless the owner has made a personal guarantee for the debt. This fact sets Sdn Bhd companies apart from sole proprietorships or partnerships in which owners are responsible for the debts of the company.
Sdn Bhd companies also have continuous existence because they are legal entities which are able to buy and sell property. Therefore, a Sdn Bhd may constantly expand its assets and business portfolio even if its owners change. Private companies exist until they are dissolved, which allows owners to achieve their long–term business vision. Conversely, a sole proprietorship or partnership dissolves upon the departure of one or more of the owners.
The ownership of a Sdn Bhd company is transferable and held among several shareholders. These shareholders can transfer shares among one another or sell them to outsiders who subsequently become owners of the business. Owners may transfer ownership to other people or entities without changing the ownership structure of the company. Therefore, business operations are not affected by changes in ownership; such is not true of a sole proprietorship or partnership.
A Sdn Bhd company may raise capital by issuing more shares or bonds which buyers may use to shield themselves against debt. A Sdn Bhd company can also access more capital through the stock exchange by issuing an initial public offering (IPO). These options are unavailable to sole proprietorships or partnerships because such business entities require owners to personally raise funds at a risk to their assets.