How to: Start a business in Malaysia

JULY 04, 2018 - 3:25 PM

Malaysia's dynamic business environment, technologically innovative firms and well-developed infrastructure point to strong growth prospects. Still, in-depth understanding of the investment environment is key especially for foreign firms looking to establish a presence in the country. Here is a quick guide on how to get started.

1. Choose your business structure.

The three most common types of business structures in Malaysia are:

  • Sole Proprietorship 
  • Partnership 
  • Sendirian Berhad (ie Sdn Bhd or Private Limited)

A sole proprietorship can only have one registered owner, while a partnership business can be registered under two owners and can have as many as twenty registered partners.

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Meanwhile, a Sdn Bhd business - a company limited by shares - needs to have a minimum of one director who do not have a bankruptcy status as well as a minimum of one shareholder.

All businesses have to be legally registered with the Companies Commission of Malaysia (SSM). For more information on each type of business structure, click here

2. Register your business

To register a sole proprietorship or partnership

Visit the Companies Commission of Malaysia (CCM) office or the online EZBIZ portal to register a business as a sole proprietorship or a partnership. 

Costs:

  • Sole Proprietorship using personal name – RM30
  • Sole Proprietorship using trade name – RM60
  • Partnership – RM60

Information required:

  • Business name
  • Photocopy of Identification Card
  • Completed Business Name Approval Form (Form PNA.42)
  • Completed Business Registration Form (Form A)

To register a private limited company (Sdn Bhd)

Costs:

  • Reservation of name for 30 days - RM50
  • Incorporation fees - RM1,010.60

Information required: 

  • Principal Business Activity
  • Information on Identification Card or Passport of Shareholder/Director 
  • Amount of paid-up capital 
  • Percentage of shareholding of each shareholders (if there are multiple shareholders)

Restrictions on foreign companies

It is important to note that foreigners are not allowed to start unlimited companies, sole proprietor companies, partnerships, enterprises, or LLPs in Malaysia. Foreigners are only allowed to register private limited companies or Sendirian Berhad (Sdn Bhd) companies.

While Sdn Bhd (Sendirian Berhad) is a viable registration option for most businesses, some industries will require businesses looking to file as Sdn Bhds to have 50 per cent Malaysian ownership. Those industries include education, oil & gas, banking, tourism, and agriculture.

If your business falls outside of that list, you can qualify as a 100 per cent foreign-owned Sdn Bhd. But there are still some financial requirements. For advisory and consultancy businesses, that means having a minimum paid-up capital of RM500,000 (S$165,000). For import, export, restaurant, or trading businesses, minimum paid-up capital of RM1,000,000 is needed. The business must also show promise of benefiting the Malaysian economy, including creating employment opportunities for Malaysians.

Foreigners are also encouraged to start another type of entity - an international off-shore Labuan International Company (LIC) which has special features, extra benefits and lesser or fewer prerequisites. Companies under this business structure can be fully owned by foreigners. There are also more and bigger tax exemptions as well as lower tax rates for the LIC. This registration type is common among import, export, trading, and consultant businesses, but is not imited to those industries. Set-up as an LIC is also easy, with businesses only requiring one director and one shareholder. 

Filing as an LIC comes with a multitude of benefits, including:

  • The ability to be 100 per cent foreign owned, without requiring a Malaysian partner
  • A low paid-up capital requirement
  • Simple business structure
  • Quick turnaround for registration, as little as two weeks
  • Registration can be completed without being present in Malaysia
  • No trade licenses are required

Sources: Transferwise, Ringgitplus

Useful websites:
Companies Commission of Malaysia (SSM)
Malaysian Investment Development Authority
SME Corporation Malaysia