The types of companies in Malaysia are seven business structures you can register, though only some of them are companies in law. The seven are the sole proprietorship (often called an enterprise), the partnership, the limited liability partnership (LLP), the private company limited by shares (Sdn Bhd), the public company (Berhad), the company limited by guarantee and the unlimited company. The Companies Commission of Malaysia (SSM) registers all seven, except a sole proprietorship or partnership in Sabah or Sarawak.
Most founders starting a business in Malaysia choose between four main types of companies: the sole proprietorship, the partnership, the LLP and the Sdn Bhd. The choice depends on how far you’re personally liable for the business’s debts, who may own the business, how its profit is taxed and what it costs you every year.
To skip to an answer, use the checklist in the section headed “Which Structure Is Right for You: A Checklist”. It asks a few short questions and shows which structure your answers point to.
Key Takeaways
- A sole proprietorship or partnership, commonly called an enterprise, is not a separate legal entity. The owner or partners carry unlimited liability, which can reach their personal assets.
- An LLP or a Sdn Bhd is a separate legal entity with limited liability. A director who personally guarantees a Sdn Bhd’s bank borrowing stays liable under that guarantee.
- Only a Malaysian citizen or permanent resident aged 18 or above may register a sole proprietorship or partnership. A foreigner can own a Sdn Bhd outright in most sectors.
- Before reliefs and before taking a company’s profit out, the small company rates charge less tax than the personal scale for the years of assessment 2023 to 2025 only once chargeable income passes RM157,500.
- A Sdn Bhd must have a qualified company secretary and usually pays an auditor every year. A sole proprietorship or partnership needs no company secretary and no statutory audit.
- If you plan to take investment, or a client, funder or tender requires a company, start with a Sdn Bhd. A sole proprietorship or partnership cannot convert into one later.
What the Names Mean: Business, Enterprise, Company, Sdn Bhd and PLT
“Business”, “enterprise” and “company” mean one thing in conversation and another in law. In conversation, people use all three words interchangeably, for any business at all. In law, each word is narrower. Sdn Bhd and PLT are narrower still, because each is a Malay ending that goes on a name and marks one structure. This article uses “business” in its everyday sense, whatever the structure, and uses the other names as follows:
- Sole proprietorship and enterprise: people commonly call a registered sole proprietorship or partnership an enterprise. Many owners put “Enterprise” in their trade name, but unlike Sdn Bhd and PLT, it is not a legal ending. An enterprise in this sense is not a company, and it is not a separate legal entity from the people who own it. From here on, this article calls it a sole proprietorship or a partnership, whichever it is.
- Business, enterprise and company: in conversation, any of the three words can describe a business of any structure, a sole proprietorship as readily as a Sdn Bhd. The word “enterprise” in small and medium enterprise (SME) keeps that broad sense, because an SME can be a company. In law, a company is one registered under the Companies Act 2016. In conversation, people can call a business a company even when it is not a company in law.
- Sdn Bhd: short for Sendirian Berhad, which is Malay for “private limited”. Sdn Bhd ends the names of private companies limited by shares, also called private limited companies. A name that ends in Berhad (Bhd), without Sendirian, belongs to a public company instead.
- PLT: short for Perkongsian Liabiliti Terhad, which is Malay for limited liability partnership (LLP). Every LLP’s name must end in PLT, or in Perkongsian Liabiliti Terhad written in full. Unlike a partnership, an LLP is a separate legal entity, but it is not a company.
Types of Companies in Malaysia: The Business Structures You Can Register
You can register seven business structures in Malaysia, each under one of three laws. The Companies Act 2016 recognises only three kinds of company: companies limited by shares, companies limited by guarantee and unlimited companies. It splits companies limited by shares into private limited companies and public limited companies. Add the sole proprietorship, the partnership and the LLP, and these seven make up the complete list:
- Sole proprietorship: one owner’s business, registered under the Registration of Businesses Act 1956.
- Partnership: two to twenty business partners, also registered under the Registration of Businesses Act 1956.
- Limited liability partnership (LLP): two or more partners in a body corporate of its own. It is registered under the Limited Liability Partnerships Act 2012.
- Private company limited by shares (Sdn Bhd): a company of one to fifty shareholders, registered under the Companies Act 2016.
- Public company limited by shares (Berhad): a company that may offer its shares to the public, registered under the Companies Act 2016.
- Company limited by guarantee: a company with no share capital, registered under the Companies Act 2016, and always a public company.
- Unlimited company: a company whose members’ liability has no limit, registered under the Companies Act 2016 as either a private or a public company.
A business entity is the legal form a business takes.
The seven structures above make up the various types of business entities in Malaysia you can register.
The form of business entity you choose decides who may own the business, and whether the business is a legal person separate from its owners. It decides who pays the business’s debts if the business cannot. It also decides how the profit is taxed and what the business must file every year.
Registering a business and registering a company sound alike, but they do different things.
Registering a sole proprietorship or partnership records the business with SSM, under the owner’s own name or a trade name. In law, the owner and the business stay the same person.
Registering a company creates a new legal person, separate from its members.
The company owes its own debts.
A foreign company has two ways to carry on business in Malaysia, under SSM’s Guidelines for Registration of Foreign Company. It can register a local company of its own, such as a Sdn Bhd, or register itself here as a foreign company, which is the branch route.
Under the Companies Act 2016, a foreign company may not itself carry on business in Malaysia unless it is registered as a foreign company.
With the Government’s approval, foreign companies can also open a representative or regional office in Malaysia.
A representative or regional office may not trade, so it is not a way of doing business in Malaysia.
The Labuan Financial Services Authority sets out a further route, the Labuan company. The section on the structures open to a foreigner and to foreign companies covers the local company and the branch.
You can tell which structure an existing business is from the end of its name.
The Companies Act 2016 requires a private limited company’s name to end in Sendirian Berhad (Sdn Bhd), a public company’s in Berhad (Bhd) and an unlimited company’s in Sendirian (Sdn). A company limited by guarantee, though, may apply to the Minister to drop “Berhad”.
An LLP’s name must end in Perkongsian Liabiliti Terhad (PLT). A sole proprietorship or partnership has no legal ending.
SSM’s own examples of trade names include “Lucky Star Catering” and “ABS Unggul Enterprise”. The word “Enterprise” is simply one an owner may choose for a trade name.
To confirm which type of entity a business is, you can check SSM’s e-Search, one of the free e-Services in the MySSM app.
Sabah and Sarawak follow different rules for sole proprietorships and partnerships.
The Registration of Businesses Act 1956 applies only in Peninsular Malaysia and Labuan. A sole proprietorship or partnership operating in Sabah or Sarawak is therefore not registered under that Act.
In Sabah, the first step is to get a trading licence under the Trades Licensing Ordinance (Sabah Cap. 144), in force since 1 January 1949.
In Sabah, nobody under 18 may hold a trading licence.
In Sarawak, you register the business name with the district office, or with the Inland Revenue Board of Malaysia (LHDN) in Kuching. In Sibu and Kanowit, the local council registers it instead.
A company or an LLP is registered with SSM wherever it will operate in Malaysia, Sabah and Sarawak included.
What Each Type of Business Entity Is, From Sole Proprietorship to Company Limited by Guarantee and Unlimited Companies
The seven structures serve different business needs, and they differ in who owns them and who carries their debts:
- Sole proprietorship: a business owned by one person. It is not a separate legal entity, so the owner’s liability is unlimited.
- Partnership: a business of two to twenty partners. It is not a separate legal entity either, so the partners’ liability is unlimited.
- LLP: a body corporate separate from its partners, in which the partners’ liability is limited.
- Sdn Bhd: a private company limited by shares, with one to fifty shareholders. It is a separate legal entity.
- Berhad: a public company limited by shares, which may offer its shares to the public.
- Company limited by guarantee: a public company with no share capital. Its members are liable only up to what they undertake to contribute if the company is wound up.
- Unlimited company: a company, private or public, whose members’ liability has no limit.
SSM states that a sole proprietorship is not a separate legal entity, so the business owner carries unlimited liability.
Our guide to the sole proprietorship in Malaysia covers a sole proprietorship’s whole life.
A partnership is a business entity formed by two to twenty partners, though not a separate legal entity.
Every partner is liable jointly with the others for the firm’s debts incurred while they were a partner.
A partnership agreement matters from the first day. Putting that agreement in writing gives every partner a record to rely on if they later disagree.
Each partner in an LLP stays liable for their own wrongful act or omission, but not for another partner’s.
Every LLP must appoint at least one compliance officer.
The compliance officer can be a partner or someone qualified to act as a company secretary. Either way, they must be a Malaysian citizen or permanent resident who ordinarily resides in Malaysia.
A shareholder in a Sdn Bhd is not liable for the company’s obligations just by being a shareholder. A shareholder’s liability is limited to any amount unpaid on their shares.
A public company is not necessarily listed on a stock exchange such as Bursa Malaysia. Being listed on the stock exchange is a separate step that only some public companies take.
For a club or a charity that wants to be a company, a company limited by guarantee is the right type of company.
A society or association that is not set up as a company registers with the Registry of Societies rather than with SSM.
A co-operative registers with the Malaysia Co-operative Societies Commission.
Several labels describe a business without being a type of business entity of their own:
- Subsidiary: a corporation in which another corporation controls the composition of the board. A corporation is also a subsidiary if another controls more than half of its voting power, or holds more than half of its issued shares, excluding preference shares. A subsidiary of that subsidiary counts too.
- Holding company: the corporation in control of a subsidiary, also called its parent company.
- Investment holding company (IHC): a company whose activities consist mainly of holding investments, under the tax law’s definition. At least 80% of its gross income, other than income from a business of holding investments, comes from holding those investments. LHDN applies that definition in a ruling published on 28 May 2024.
- Exempt private company (EPC): a private company with no more than twenty members, none of them a corporation. No corporation holds a beneficial interest in its shares, directly or indirectly.
- Small and medium enterprise (SME): a business that meets SME Corporation Malaysia’s definition, in effect from 1 January 2014. In manufacturing, an SME has sales turnover of no more than RM50 million or no more than 200 full-time employees. In services and other sectors, the limits are no more than RM20 million or 75 full-time employees. In each case, a business counts as an SME by meeting either criterion, whichever is lower. Every SME must register with the SSM or an equivalent body.
- Micro-enterprise: under SME Corporation Malaysia’s definition, a business with sales under RM300,000 or fewer than 5 full-time employees.
- Multinational corporation (MNC): a label that describes a business’s reach.
- Government-linked company (GLC): a label that describes who owns a business.
- Franchise: an agreement that lets the franchisee run a business under the franchisor’s system and use the franchisor’s mark or know-how. The franchisor keeps continuing control over the business operations, and may charge a fee. The franchisor must register the franchise with the Registrar of Franchises before operating it or offering it for sale. A franchisee of a foreign franchisor registers before starting, and a franchisee of a local franchisor registers within 14 days of signing the franchise agreement.
Whatever the label, a business carrying it still has one of the registered structures as its legal form.
The Factors That Decide Which Structure Suits You
Eight factors decide which business structure in Malaysia suits a business, usually in this order:
- Personal liability: who pays the debts incurred by the business.
- Ownership: who may own the business, and how many owners it can have.
- Tax: how the profit is taxed at the level you expect to make.
- Yearly cost: what it costs to keep the structure registered and compliant.
- Room to grow: how you bring in a partner or an investor later, if your business objectives call for one.
- Paperwork and privacy: what you lodge every year, and what the public can see.
- Records and deadlines: how long you keep records, and what a missed filing costs.
- Continuity: what happens when an owner dies or a partner leaves.
A sole proprietor or a partner carries unlimited liability, which can extend to their personal assets. A limited company and an LLP are separate legal entities with limited liability.
Banks often ask the directors of a small company to guarantee its borrowing personally. A director who signs a personal guarantee is liable under it whatever the company’s structure.
Where a company leaves Employees Provident Fund (EPF) contributions unpaid, its directors are liable for them along with the company, including anyone who was a director while the contributions fell due.
The EPF can recover the whole unpaid amount from the company or from any one of those directors.
Only a Malaysian citizen or permanent resident aged 18 or above may register a sole proprietorship or a partnership. A foreigner who is not a permanent resident therefore needs another route to start a business.
A sole proprietorship has one owner and a partnership two to twenty. An LLP has at least two partners with no maximum, and a Sdn Bhd has one to fifty shareholders.
Bringing in a partner or an investor later, for business expansion, works differently in each structure.
A Sdn Bhd brings in an investor by issuing new shares, or an existing shareholder can transfer theirs. The investor’s stake is set by the shares they hold.
Every new partner in a partnership must be a Malaysian citizen or permanent resident aged 18 or over, and the partnership cannot pass 20 partners.
For more on what each structure keeps doing once it is registered, read our guide to starting a small business in Malaysia.
A sole proprietorship or partnership needs no company secretary and no statutory audit. Its yearly duty is to renew its registration within 30 days before the expiry date.
A Sdn Bhd must have a qualified company secretary. It lodges its Annual Return within 30 days of its anniversary date, and its financial statements within 30 days of circulating them.
A private company appoints an auditor for each financial year unless it qualifies for audit exemption.
An LLP needs a compliance officer. It also lodges an annual declaration, signed by two partners, stating whether it can pay its debts as they fall due. The first declaration is due within 18 months of registration, and then one each year within 90 days of the LLP’s financial year end (FYE).
According to SSM, a company’s financial affairs are accessible to the public, unless it is an exempt private company that lodges a certificate in place of its financial statements.
Anyone who buys a company’s information from SSM can also look up its directors, shareholders and registered office address.
A partnership is dissolved by the death or bankruptcy of any partner, unless the partners have agreed otherwise.
The Sole Proprietorship, Partnership, Limited Liability Partnership, Private Limited Companies and Public Limited Companies Side by Side
The table below compares the four popular business structures, with the Berhad alongside them.
| Sole proprietorship | Partnership | LLP | Sdn Bhd | Berhad | |
|---|---|---|---|---|---|
| Owners | One | Two to twenty partners | At least two partners, no maximum | One to fifty shareholders | At least one member, no maximum |
| Liability | Unlimited, and can reach personal assets | Unlimited, and every partner is liable jointly with the others | Limited; a partner stays liable for their own wrongful act, not another partner’s | Limited to any amount unpaid on shares | Limited to any amount unpaid on shares |
| Separate legal entity | No | No | Yes | Yes | Yes |
| Who may own it | Malaysian citizens and permanent residents aged 18 or above | Malaysian citizens and permanent residents aged 18 or above | Any two or more individuals or bodies corporate | Individuals or bodies corporate, including foreigners in most sectors | Individuals or bodies corporate |
| SSM registration fee | RM30 a year on a personal name, RM60 a year on a trade name | RM60 a year | RM500, once | RM1,000, once | RM1,000, once |
| Yearly duties | Renew within 30 days before expiry | Renew within 30 days before expiry | Annual declaration within 90 days of FYE, the first within 18 months of registration | Annual Return within 30 days of the anniversary date; financial statements within 30 days of circulation | Annual Return within 30 days of the anniversary date; financial statements within 30 days of the annual general meeting |
| Company secretary or compliance officer | Neither | Neither | Compliance officer | Qualified company secretary | Company secretary |
| Audit | No statutory audit | No statutory audit | Only if the LLP agreement requires it | Yes, unless it qualifies for audit exemption | Yes |
| Tax | Owner’s personal scale, 0% to 30% for the years of assessment 2023 to 2025 | Each partner’s share on their own personal scale | 15%, 17% and 24% bands if it qualifies; otherwise 24% | 15% on the first RM150,000, 17% on the next RM450,000 and 24% above RM600,000 if it qualifies; otherwise 24% | As for a Sdn Bhd |
Is a Sdn Bhd the Same as an LLC, a Ltd or a Corporation?
Malaysia has no LLC. The private company limited by shares, which is the Sdn Bhd, does an LLC’s job. It keeps each owner’s liability limited to their shares.
Ltd and corporation are not Malaysian forms either.
Many other countries end the names of their private limited companies in Ltd, and use PLC to mark a public limited company.
In Malaysia, a private limited company’s name ends in Sdn Bhd and a public company’s in Berhad or Bhd. That makes the Berhad the public counterpart of the Sdn Bhd.
A corporation formed abroad has no matching form to register as here, so in Malaysia it is a foreign company.
A foreign LLC or Ltd that wants to trade in Malaysia has three routes.
One is to register here as a foreign company, which is the branch route. Another is to set up a Sdn Bhd of its own and become that Sdn Bhd’s foreign parent company. The third is to form an LLP with at least one other partner. The LLP’s compliance officer must be a citizen or permanent resident living here.
The section on the structures open to a foreigner and to foreign companies covers all three routes.
What Business Entities in Malaysia Cost in the First Year and Every Year After
A sole proprietorship pays SSM RM30 or RM60 a year, and a partnership RM60 a year, in the first year and every year after. An LLP pays RM500 to register and RM200 every year after.
A company pays professionals as well as SSM. With professional fees, a Sdn Bhd costs about RM3,900 to RM9,200 in its first year and about RM3,070 to RM8,400 every year after.
SSM’s Fees
SSM’s registration fee depends on the structure. For a sole proprietorship or partnership, SSM charges it every year rather than once. A sole proprietorship pays SSM RM30.00 a year on a personal name or RM60.00 a year on a trade name. A partnership pays RM60.00 a year. An LLP pays SSM RM500.00 once. A company pays SSM RM1,000.00 once, plus RM10.00 for Supply of Corporation Information to Agencies.
A sole proprietorship or partnership renews its registration at the same yearly rate.
A private company pays SSM RM150.00 to lodge its Annual Return, plus RM50.00 to lodge audited financial statements or RM20.00 for unaudited ones.
An LLP pays RM200.00 for the annual declaration it lodges every year.
For more on what starting a business costs, with two worked examples, read our guide to starting a business.
Professional Fees
A company also pays professionals every year. SSM requires a Sdn Bhd to have a qualified company secretary, and a company usually pays an auditor too. Most companies also pay a tax agent or an accountant to prepare their tax return.
As a rough guide, a company secretary costs about RM600 to RM2,000 a year and a registered office address about RM300 to RM1,200 a year.
Audit and accounting cost about RM2,000 to RM5,000 a year, and these costs rise with the company’s size and transactions.
A sole proprietorship or partnership that pays a professional at all usually pays only for help with the owner’s own tax return.
An LLP can appoint a partner as its compliance officer, rather than paying a professional, if the partner is a Malaysian citizen or permanent resident living in Malaysia.
Altomate’s Company Secretary & Incorporation Package as an Example
Using Altomate as the example, the Company Secretary & Incorporation package costs RM1,399 one-time through the app, including SSM’s registration fee. The package always comes with a company secretary subscription. For that subscription, Altomate recommends its Essential plan, at RM100 a month billed annually at RM1,296 including SST.
The Essential plan is open to Malaysian and foreign founders and to individual and corporate shareholders. It covers preparing and lodging the Annual Return and financial statements with SSM, one free resolution and a dedicated client servicing officer.
The subscription runs on a two-year contract, with a RM1,000 early termination charge.
The Totals for Each Structure
The table below puts these costs together for each structure, for the first year and for every year after.
| Structure | First year | Every year after |
|---|---|---|
| Sole proprietorship | RM30 on a personal name, RM60 on a trade name | RM30 or RM60 to renew |
| Partnership | RM60 | RM60 to renew |
| LLP | RM500 to register | RM200 for the annual declaration |
| Sdn Bhd, SSM fees only | RM1,000 to register, plus RM10.00 for Supply of Corporation Information to Agencies | RM170 to RM200 for the Annual Return and financial statements |
| Sdn Bhd, with professional fees at the ranges above | About RM3,900 to RM9,200 | About RM3,070 to RM8,400 |
| Sdn Bhd, using Altomate’s package and Essential plan as the example | RM2,695 through the app: the package plus RM1,296 for the Essential plan, plus any audit and accounting the plan does not cover | RM1,296 for the Essential plan, plus any SSM fees, audit and accounting the plan does not cover |
How Each Structure Is Taxed, and When a Company in Malaysia Pays Less
A sole proprietor’s profit, and a partner’s share of a partnership’s profit, is taxed as that person’s own income on the personal scale. A company and an LLP, by contrast, are taxed on their own profit at their own rates. A company is therefore subject to corporate tax, not the personal scale. LHDN states that gains or profits from carrying on a business are liable to tax, and a sole proprietor’s business profit is assessed as their own income. LHDN’s personal scale for the years of assessment (YA) 2023 to 2025 runs from 0% on the first RM5,000 of chargeable income to 30% above RM2,000,000. Under the income tax law as at 1 November 2023, a company resident and incorporated in Malaysia can pay the small company rates. It qualifies if its paid-up ordinary capital is RM2,500,000 or less and its gross business income is no more than RM50,000,000. A qualifying company pays 15% on its first RM150,000 of chargeable income, 17% on the next RM450,000 and 24% above RM600,000. A company can lose those rates through a related company, which is one with more than RM2,500,000 of paid-up capital. It loses them if either company owns more than 50% of the other, or if a third company owns more than 50% of both. It also loses them if foreign companies or non-citizens own more than 20% of it. Other companies pay 24%. An LLP resident in Malaysia, with capital contributions of RM2,500,000 or less and gross business income of no more than RM50,000,000, pays tax at the same 15%, 17% and 24% bands. Similar ownership exclusions apply. The profit an LLP pays, credits or distributes to its partners is exempt from tax in their hands. For a partner who is an individual, that exemption is subject to the 2% charge introduced in Malaysia from the year of assessment 2026, set out below.
Calculated on the same chargeable income, before any relief, rebate or zakat and before the cost of taking a company’s profit out, the personal scale and the small company rates meet at RM157,500. Below it, the personal scale is lower, and above it, the company’s rates are lower.
From the year of assessment 2026, the profit an LLP pays, credits or distributes to a partner who is an individual is exempt up to RM100,000. Above that, the individual pays tax at 2% on the chargeable income in respect of that profit.
For more on what each structure pays in tax and on paying yourself, read our guide to starting a business.
A company also pays a company secretary and usually an auditor. Personal reliefs lower the individual’s tax, and the small company rates have conditions. Because of these costs, reliefs and conditions, the company’s lower tax above RM157,500 is not all saving for the owner.
Banks, Grants and Government Contracts, by Structure
Every structure can open a business bank account and apply for most support. The structures differ in the documents you produce and the conditions a few schemes set.
Grants and financing mostly look at registration, ownership and size rather than at the structure itself.
For schemes aimed at SMEs, SME Corporation Malaysia’s definition, effective 1 January 2014, decides who counts. The definition leaves out, among others, entities listed on the main board. It also leaves out any subsidiary of a main-board listed company, a multinational corporation, a government-linked company or a state-owned enterprise.
For more on opening a business bank account and the government help that exists, read our guide to starting a small business in Malaysia.
A sole proprietorship or partnership registered with the Ministry of Finance (MOF) can supply the government, but moving to a company later means registering with the MOF again.
Hiring Staff, and the Owner’s Own EPF and SOCSO
Any structure that employs someone registers as an employer with the Social Security Organisation (SOCSO) and with the EPF. The structure changes the owner’s own position, not the employer’s duty. An employer registers with the EPF before the end of the first week of the first month in which it pays wages that attract contributions. Failing to register is an offence. For more on what to do before hiring your first employee, read our guide to starting a small business in Malaysia.
The owner’s own cover depends on the structure. A sole proprietor or a partner is self-employed.
The Self-Employment Social Security Act 2017, in its text as at 1 March 2020, names twenty industries in its First Schedule.
The Act applies to every citizen or permanent resident carrying out a self-employment activity in one of those industries. Such a person must register with and contribute to SOCSO for every self-employment activity.
Those twenty industries cover a range of business activities, including passenger transport, goods and food delivery, agriculture, fisheries, the preparation and selling of food, manufacturing and construction. They also include hawking, accommodation premises, selling through a website or online marketplace, communications and multimedia, data processing, agents, and professional, scientific and technical services.
Failing to register or contribute is an offence carrying a fine of up to RM10,000, imprisonment of up to two years, or both.
EPF is a choice for the self-employed.
A director who draws a salary from their own Sdn Bhd is generally treated as the company’s employee for EPF. The company therefore registers and contributes for them.
If a company leaves EPF contributions unpaid, its directors are liable for them along with the company. The EPF can recover the whole unpaid amount from the company or from any one of those directors.
Which Structure Is Right for You: A Checklist
Answer each question below about your own situation and business goals. Together, your answers point to one common type of business entity: the sole proprietorship, the partnership, the LLP or the Sdn Bhd. The table after the questions shows which structure each pattern of answers points to.
- Are you a Malaysian citizen or permanent resident? If you are not, the sole proprietorship and the partnership are closed to you. Only a citizen or permanent resident aged 18 or above may register one. Your route is a Sdn Bhd, or an LLP whose compliance officer is a citizen or permanent resident living in Malaysia.
- Are you starting alone or with others? Starting alone points to a sole proprietorship or a Sdn Bhd, since one person can be a Sdn Bhd’s sole shareholder and sole director. Two to twenty people can form a partnership. Two or more can form an LLP, or share a Sdn Bhd of up to fifty shareholders.
- How much could go wrong financially? If a debt or a claim against the business could cost more than you could pay personally, choose the LLP or the Sdn Bhd for the benefits of limited liability each business structure offers. A sole proprietor’s or a partner’s liability is unlimited and can reach their personal assets.
- What profit do you expect? Calculated on the same chargeable income, before any relief and before the cost of taking a company’s profit out, the personal scale is lower below RM157,500. Above RM157,500, on the same basis, the company’s rates are lower. A company also pays a company secretary and usually an auditor, and the small company rates have conditions.
- Does a client, bank, funder or tender require a company? If one does, that settles it. Registering the company from the start avoids a move later. A sole proprietorship or partnership that moves to a Sdn Bhd, for example, must cancel its MOF registration and apply afresh. SME Corporation Malaysia’s definition of an SME needs only registration with SSM or an equivalent body. SME status alone therefore does not call for a company.
- Do you plan to take investment? An investor usually expects shares in return for their money. Only a company limited by shares can issue them. A business plan that includes taking investment points to a Sdn Bhd. A Sdn Bhd may not offer its shares to the public, so raising money from the public needs a public company.
- How much yearly paperwork will you take on? A sole proprietorship or partnership needs no company secretary and no statutory audit, and it renews its registration. A Sdn Bhd needs a qualified company secretary, lodges an Annual Return and financial statements every year, and usually pays an auditor.
- Is it a professional practice? An LLP may be formed to carry on a professional practice if its partners are individuals practising that profession and it holds professional indemnity insurance at the approved amount.
| If your answers are mostly | The structure they point to |
|---|---|
| A citizen or permanent resident, working alone, with little financial risk, a modest profit and no plans to take investment | Sole proprietorship |
| Two to twenty citizens or permanent residents working together, with little financial risk and an agreement on how they share profit and losses | Partnership |
| Two or more partners, including professionals in practice together, who want limited liability without shares or a company secretary | LLP |
| A foreigner; or anyone who wants limited liability, expects chargeable income above RM157,500 before reliefs and before taking profit out, plans to take investment, or has a client, funder or tender that requires a company | Sdn Bhd |
Where your answers point to a Sdn Bhd, your next step is to register it with SSM. You can do this yourself through SSM4U and the Corporate Registry System (CRS), or through a company secretary, the officer a Sdn Bhd must have in any case.
Altomate’s Company Secretary & Incorporation package is one example of the company secretary route.
Altomate prepares the documents and lodges them with SSM for you, and SSM registers the company. The package comes with a subscription for the company secretary a Sdn Bhd needs.
The Structures Open to a Foreigner and to Foreign Companies
A foreigner who is not a permanent resident of Malaysia cannot register a sole proprietorship or a partnership. A foreign owner can instead use a private company limited by shares, which is a Sdn Bhd, or, if the owner is a foreign company, a registered foreign company, which is a branch. Under the Companies Act 2016, a foreign company may not itself carry on business in Malaysia unless it is registered as a foreign company. An LLP is open to foreign partners as well. Its compliance officer must still be a Malaysian citizen or permanent resident who ordinarily resides in Malaysia.
A foreign owner can hold all of a Sdn Bhd’s shares in most sectors. Some sectors, though, carry local equity, capital or licence conditions set by other authorities. Retail and distribution, financial services, education and healthcare are among them.
A foreigner may form a company as its sole shareholder. The Companies Act 2016 requires only the minimum number of directors to ordinarily reside in Malaysia, and for a private company that minimum is one.
So the residency test binds a foreign sole shareholder only if they also want to be the sole director.
A foreign company registers a branch in Malaysia as a registered foreign company.
The registered foreign company must at all times have an agent in Malaysia.
For more on the routes open to a foreigner, read our guide to starting a business.
A foreign company’s whole route, from choosing between these forms to registering and running one, is a subject of its own. Our article on multinationals setting up in Malaysia covers it.
Changing Structure or Type of Company Later
A sole proprietorship or partnership cannot convert into a Sdn Bhd, because there is no legal conversion from one to the other. Instead, you register the company afresh, move the business across to it, and then close the old business. A partnership does have one conversion open to it, into an LLP. A private company can also convert into an LLP if the shareholders of the company become all of the LLP’s partners and the company’s assets carry no security interest. Converting into an LLP transfers the business, its property, rights and liabilities to the LLP.
Moving a business into a new company means moving each part of it.
Contracts with customers and suppliers have to be transferred to the company or signed again in its name. Assets have to be sold or transferred to it, and the company opens a bank account of its own. These steps are needed because the business’s contracts, assets and bank account do not pass across by themselves.
For more on moving to a Sdn Bhd later, read our guide to starting a small business in Malaysia.
A company can also change its own type.
A public company with a share capital may convert to a private company, and a private company to a public one.
An unlimited company may convert to a limited company.
How Each Business Entity Registered in Malaysia Ends
You close a sole proprietorship or partnership by notifying SSM within 30 days of the business ending, on the notice of termination (SSM’s Form C). A company ends by being struck off the register or by being wound up, voluntarily or by the High Court. An LLP closes by the same two routes, winding up or striking off.
After a company is struck off, the liability of every director, officer and member continues.
Mistakes People Make When Choosing the Right Business Entity
Three mistakes come up most often when founders choose a structure.
- Choosing on the registration fee alone
- Choosing a company for its tax rate at too low a profit
- Choosing a sole proprietorship, then needing a company
To register, a sole proprietorship pays RM30 or RM60 a year, far less than a Sdn Bhd’s RM1,000, paid once. The difference is what each costs every year after.
At a profit where the personal scale is lower, choosing a company for its tax rate costs money rather than saving it.
Calculated on the same chargeable income, before any relief, rebate or zakat and before the cost of taking a company’s profit out, the two taxes meet at RM157,500. Below that figure, the personal scale is the lower of the two.
At RM157,500 of chargeable income, an individual on the personal scale for the years of assessment 2023 to 2025 pays RM9,400 on the first RM100,000. The next RM57,500 is taxed at 25%, which is RM14,375, so the individual pays RM23,775 in all.
A company on the small company rates pays 15% on the first RM150,000, which is RM22,500. The next RM7,500 is taxed at 17%, which is RM1,275, so the company also pays RM23,775.
Some small business owners choose a sole proprietorship and then apply for a grant, financing or a tender that asks for a company.
A sole proprietorship cannot convert into a Sdn Bhd, so the company has to be registered afresh and the business moved across. So check the scheme’s or buyer’s own conditions before you register.
Registration of Business and Registration of Company: Registering the Structure You Choose
Every structure SSM registers is registered online. The routes for a business and a company both start at SSM4U, and an LLP has a route of its own:
- Open and verify your SSM4U account. As a new user, you register for an SSM4U account, then verify your identity once, before you can access CRS. If you register using a MyKad, MyPR, MyKAS or MyTentera card, SSM says you verify your identity at the nearest SSM counter or a Tap.it kiosk. If you register as a foreign national, you activate the account online instead.
- Register a sole proprietorship or partnership through ezBiz Online. Sign in at SSM4U and go from there into ezBiz Online.
- Register a company through CRS. Company registration with SSM runs through CRS, which you reach through SSM4U.
- Register an LLP through MyLLP. An LLP is registered through SSM’s MyLLP portal.
A business registration through ezBiz Online is usually approved within a few working days of a complete application.
For company incorporation, SSM’s own review of an application typically takes one business day. On the route through a company secretary, it takes about three days to go from submitting your information to holding a Certificate of Incorporation. That time covers your own submission time, the company secretary’s review, SSM’s review and obtaining the certificate.
An LLP registration through MyLLP usually takes a few working days once the application is complete.
A sole proprietorship or partnership also has a deadline.
SSM requires a new business to be registered within 30 days from the date it starts trading. Carrying on an unregistered business is an offence carrying a fine of up to RM50,000, up to two years’ imprisonment, or both.
Whatever the structure, three things follow registration: two before you start trading, and one before you pay the first wages.
- The tax identification number (TIN):
- For an individual: LHDN’s guidance, updated 15 June 2026, says a Malaysian citizen or permanent resident aged 18 or over is registered for a TIN automatically, from National Registration Department data. Such a person checks their TIN on MyTax rather than applying. Under the same guidance, a non-citizen or temporary resident applies online through e-Daftar and, if carrying on business, attaches the SSM registration certificate.
- For a company: LHDN’s guidance, updated 4 August 2026, says a newly registered company’s TIN is registered automatically when it registers with SSM. The same guidance says a company, LLP, trust body or co-operative that is dormant or has not commenced business must still register with LHDN and furnish Form E. That requirement took effect from the year of assessment 2014.
- Any licence or permit the activity needs: if the activity needs a licence, permit or approval, it must be obtained from the relevant authority before the business starts trading. Registering with SSM does not replace it.
- Registering as an employer: once you hire and before the first wages, you register as an employer with SOCSO and with the EPF. The EPF registration is due before the end of the first week of the first month in which you pay wages that attract contributions.
You can register a Sdn Bhd yourself, through SSM4U and CRS, or through a company secretary. Our guide to registering a company in Malaysia walks through both routes in full.
If you use Altomate on the company secretary route, you do not need an SSM4U account or a counter visit. Altomate prepares the documents and lodges them with SSM for you, and SSM registers the company.
Where to Go From Here
Personal liability and who may own the business decide most choices. A Malaysian citizen or permanent resident working alone, with little at risk, can start as a sole proprietorship. Anyone who needs limited liability, or who is not a citizen or permanent resident, is choosing between an LLP and a Sdn Bhd.
Your answers to the checklist point to one suitable business structure. Where that structure has an article of its own, that article covers its whole life, from registering it to closing it.
The next step follows from your answer. A sole proprietorship or partnership is registered through ezBiz Online, which you reach through SSM4U.
A Sdn Bhd is registered through CRS, also reached through SSM4U, or through a company secretary. An LLP is registered through SSM’s MyLLP portal.
