Company Formation

Type of Business Entities and Companies in Malaysia

Type of business entities & companies in Malaysia;

  1. Sole proprietorship
  2. Partnership
  3. Limited Liability Partnership
  4. Private Limited Company (Sdn. Bhd.)
  5. Public Limited Company (Public)

What is sole proprietorship?

  • The sole proprietorship requires only one owner and is one of the simplest types of businesses to establish.
  • If the company is declared bankrupt or in debt, the owner's personal income or assets will not be secured.
  • The Registration fee is inexpensive which RM 30.00 for personal name and RM 60.00 for trade name.

However, There is a risk that has to be considered which:

  • In the case of bankruptcy, creditors can easily sue the owner to repay their debt.
  • The owner is personally liable for all of the company's debts.
  • It is difficult to persuade third-party investors to invest into the business because there are no share options in this sort of company.

What is Partnership?

  • The business has two or more owners and a maximum of 20 owners.
  • These partners share their investment to conduct business with the purpose of making a profit.
  • Partnerships are appropriate for professional firms such as accountants and attorneys.
  • The partnership agreement specifies each partner's obligations and liabilities, and the business partners divide the company's profits and liabilities.

Private Limited Company (Sdn. Bhd.) & Public Limited Company (Berhad)

What is Limited Liability Partnership (LLP)?

  • SSM has created a new business type called limited liability partnership (as an alternative for businesspeople to conduct business, LLP would combine the qualities of a company and partnership firm but provide the protection of limited responsibility for its partners).
  • It is regulated under Limited Liability Partnership Act 2012.
  • It was created for all business objectives with the goal of profit. LLP can also be formed by professionals such as lawyers, chartered accountants, and company secretaries for the purpose of carrying on their professional practise.
  • The LLP will also assist SMEs in starting up and growing their businesses without having to worry about their personal responsibilities, assets, or rigorous compliance requirements.

Benefits of Limited Liability Partnership (LLP)

  • Limited liability to its partners.
  • Has permanent  succession.
  • Internal business regulation can be made more flexible through a partnership arrangement.
  • Provides flexibility in terms of formation, maintenance, and termination.