Type of Business Entity in Malaysia | Foundershive

Type of Business Entity in Malaysia

 

 

There are 8 form of business entities in Malaysia that every founder can opt to choose from. Below, we explain the difference type for you to understand further.

 

Company

Under Companies Act 2016, the type of companies is divided into

  1. Limited liability company (limited by shares)
  2. Limited by guarantee 
  3. An unlimited company
  4. Foreign company

1. Limited Liability Company

a) Private Limited Company (Sdn Bhd)

A private limited company is defined as a company which offers its shares privately and limits the responsibility of investing shareholders to the paid-in amount and unpaid amount of owed shares.

Sendirian Berhad or abbreviation ‘Sdn Bhd’ company is a name given to a Malaysian private limited Company

In practical terms, almost all companies will be companies limited by shares

b) Public Limited Company (Bhd)

A public limited company is defined as a company which offers its shares to the public. 

Berhad company or abbreviation ‘Bhd’ company is a name given to a Malaysian public limited company.

They are the largest companies in Malaysia as the public owns the shareholding rights of these companies.

2. Limited by guarantee (CLG)

A company that makes members responsible within the responsible limit of each members and guarantee payment of the shortfall within the limit if there is a debt that cannot be repaid by Company property.

Berhad or abbreviation ‘Bhd’  is a public company, and by default has the term ‘suffixed to its name. However, a Company may omit the abbreviation through application to Companies Commission of Malaysia (CCM)

CLGs are widely used for non profit companies such as charities, clubs, societies and other similar bodies. No profits or dividends are distributed to the members of the company. When there is more than 20 members in a non profit organisation, it is required for this organisation to be registered with CCM.

3. Unlimited Company

It usually registers to form mutual fund that holds asset for investment purposes. For example to purchase a building or to purchase investment derivatives.

Sendirian or its abbreviation “Sdn” is an unlimited company i.e. the liability is extended to the each members shall any losses or lawsuit faced by the Company. 

It has a feature same as partnership except that its members are free to sell their shares back to the Company.

4. Foreign Company

It is for a Company that has set up its business other than in Malaysia and would like to set a branch office in Malaysia

It allows the Company to operate without a local resident director. However, it is costly to set up and are not permitted to do any commercial activities

Business

Under Registration of Business Act 1956 (only in West Malaysia), it is divided into two

  1. Sole proprietorship
  2. Partnership
1. Sole Proprietorship

It is the simplest type of business to start up with. It can be register at CCM directly.

No of member: 1
Member type: Malaysian individual or Malaysian resident individual only
Tax: Personal tax rate
Liability: Unlimited
Separate Legal Entity: No

2. Partnership

It is the type of business that usually being set up by professional bodies. For example accountants, doctors, company secretary. It can be register at CCM directly.

No of member: 2-20
Member type: Malaysian individual or Malaysian resident individual only
Tax: Personal tax rate (divided among partners)
Liability: Unlimited
Separate Legal Entity: No

Limited Liability Partnership (LLP)

LLP is governed under the Limited Liability Partnerships Act 2012. It is a combination of a Private Limited Company (Sdn Bhd) and a Partnership. 

Member: Minimum 2 (no maximum)
Member type: Malaysian individual or Malaysian resident individual only
Tax: Corporate tax rate
Separate Legal Entity: Yes