Setup Company Malaysia

Starting a business is a challenging endeavour. Like many aspects in life, you need to reflect first on the reason why you want to have your own business. Before you move on to setup company in Malaysia, you need to ask yourself if you are physically and mentally ready to handle the technicalities and logistics of the business? Why do you want to become an entrepreneur? These are the tip of the iceberg when it comes to defining your whys.

Malaysia was hailed as the best country to invest in or do business in 2019 by CEOWORLD Magazine (InvestKL, 2020). Also, the country ranks 12th out of 190 countries in ease of doing business in the 2020 Business Doing Report (World Bank Group, 2020). Some looking to setup company Malaysia only needs to follow three procedures with 5.5 days of processing, costing 7.5% income per capita in fees for company registration. These ensure a hassle-free process for aspiring investors (Deshpande, 2018).

Its strategic location is also why one should invest in Malaysia. The country is close to the leading Asian markets. Additionally, in 2020, the government seeks to make Malaysia the gateway to the ASEAN market. Also, the country has a GDP of USD 364.7 billion with a highly skilful and English-speaking workforce (Santander, 2021).

Another advantage is direct foreign ownership. The Malaysian government increased to 70% in 2009 the foreign ownership in insurance companies. The government also offers protection to real property owners, and foreign investors can use the real property as collateral when borrowing. Besides, the country is the largest Sukuk (Islamic bond) market in East Asia, and one of the largest corporate bond markets in Asia is in Malaysia.

Incentives in Malaysia are also one of the reasons to pick Malaysia for investments. The Malaysian government provides incentives like tax holidays, financing, and special deductions applicable to local and foreign investors in selected sectors. Moreover, the government extends a full tax exemption for ten years to companies with “Investment Tax Allowance” status. It also offers a 15-year exemption to companies with a “Pioneer Status” (Bureau of Economic Affairs, 2020).

There are eight types of business entities that a business owner can go for when they setup company Malaysia. These types fall into two categories: Business or Company. For those registered under Business, the two business entities are Sole Proprietorship and Partnership. On the other hand, business entities registered under the latter consist of Private Limited Companies (Sendirian Berhad or Sdn Bhd) and Public Limited Companies. These have sub-types, namely Company Unlimited (Sendirian or Sdn), Company Limited by Guarantee (CBLG), and Company Limited by Shares. The eighth business entity is a hybrid of the two categories that is the Limited Liability Partnership (LLP).

Sole Proprietorship

Sole Proprietorships are businesses with only one owner. You can use its name as a trading name or on an identity card. Only Malaysians or Malaysian residents can register under this business type. Partnerships are similar to Sole Proprietorships; however, it consists of two to twenty business owners. Unlike Sole Proprietorships, you cannot use a personal name as a business name. Both business types have unlimited liabilities.

Private and Public Limited Company

A Private Limited Company is a type of company with limited liability. It means that business owners under this type are a separate legal entity. The company itself is a legal entity that can earn income, and incur losses or debts. Furthermore, it can own and sell properties, sue, and many more in its name. The shares under this business type are not open to the public, and shareholders go from 2 to 50 members. A Public Limited Company, on the other hand, can open its shares to the public and can have an unlimited number of shareholders.

The limited companies above are typically a Company Limited by Shares in which the liability of a shareholder depends upon how much they invested in the company. This business type protects personal assets. Meanwhile, a CBLG is a business type that people commonly use for not-for-profit organizations because it does not involve shares and does not have shareholders. The members do not distribute the profits among them, and they use it solely according to the objectives agreed upon in a memorandum.

Unlimited Company

Unlimited Companies are entities similar to those limited by shares, but the liabilities are unlimited. This means that shareholders have a shared liability to settle their company’s debt or insufficient funds. However, share ownership is flexible which means that a shareholder can return their shares to the company.

Suruhanjaya Syarikat Malaysia, also known as SSM, or the Companies Commission of Malaysia, is a statutory body created based on the Act of Parliament that required an overseer and regulator of all corporate and business affairs in Malaysia. In 2002, SSM was founded under the Companies Commission of Malaysia Act 2001, wherein it was delegated the responsibilities and duties of the Registrar of Companies and Registry of Business. Its headquarters is located in Menara SSM, KL Sentral, Kuala Lumpur. The current Minister responsible is Alexander Nanta Linggi, Minister of Domestic Trade, Co-operatives and Consumerism.

The primary reason why SSM was formed is to act as an agency that registers businesses and incorporates companies to be able to give company and business information to the general public. Moving together with technological change, the commission also created the SSM e-Info Services in order for people to access information online through their website. The commission also holds the power of improving corporate governance in Malaysia by monitoring and enforcing activities that assure the observance of obeying business registration and legislation.

Through SSM, business owners may incorporate their business as the following: Sole Proprietorship, Company Limited by Shares, Company Limited by Guarantee or Company Unlimited, or Limited Liability Partnership. They also passed several acts and legislations that companies and businesses must follow in Malaysia. To learn more about them, the information may be sought through their website, Suruhanjaya Syarikat Malaysia.

You need to know about the Malaysian companies act to setup a company in Malaysia. Well, the Malaysian Companies Act 2016 reformed the company law landscape of the country. People also know it as CA 2016, and it changed almost all aspects of company laws in Malaysia, and any business owner shall be familiar with it.

CA 2016 specifies that a company shall have one or more members. Moreover, it indicates that a company may have public and private or limited and unlimited liability classifications. CA 2016 also states that a company must display its registered name and registration number at all business places. Furthermore, CA 2016 delves on the regulations regarding the formation of a company, pre-incorporation contract, company constitution, and company’s objects.

The act also discusses the rules regarding company share capital and the transfer of shares. According to CA 2016, a company must have a minimum of one director and one company secretary. Both must be residents of Malaysia. The act also discusses the directors’ and secretaries’ service contracts, fees and benefits, indemnity, and resignation.

CA 2016 requires companies to lodge their company accounts consisting of financial reports and statements with the ROC or Registrar of Companies. The act also specifies the provisions regarding the company auditor and their appointment and roles. CA 2016 also states the guidelines for company meetings, resolutions, and corporate restructuring.

The Malaysian Company act discusses the liquidation of companies. It says that there will be two ways to wind up a company: voluntary and compulsory. CA 2016 also zeroes on the commencement of winding up and what happens when a company cannot pay its debts. Lastly, the act enumerates a secured creditor’s options regarding the property charged as security to them by a company.

Emphasize Your Store Mission

Your business name should also be as specific as possible. Keep in mind that it is the flag bearer of your store—it needs to convey what it stands for with one look. Avoid generic (and mainstream) names like My Shop or Best Store.

Target Your Target Audience

Your business name should reflect and suggest that it is the right business they should choose. If you have a specific audience in mind, make sure that they will understand its meaning easily. Remember that the market is already saturated—it should be a name that exudes expertise and authority, a brand they can trust.

After brainstorming for possible business names, try to check their availability for domain and trademark. If you plan to have your business registered, you should check if its planned name already exists in the market through  Suruhanjaya Syarikat Malaysia (SSM) Company Name Search Online.

Just sign up for an account, then search your planned names before going to SSM for registration to save time and money. If you want to keep your business name as yours, consider registering it as a trademark to avoid similar names with competitors.

For Sole Proprietorship/ Partner Business

Register for this kind of business in two ways: online via Ezbiz Online or manually through any SSM counter in Malaysia (advised for first-timers). In personally registering for a company name, proceed to BORANG A form to register your company and submit the two documents in-person to SSM Head Office at Level 14 Menara SSM@Sentral in Kuala Lumpur.

If you will register through EzBiz, create an account first by visiting the ezBiz Online Registration Page, and then fill in the necessary information. One way of one-time activation is through the nearest SSM office by meeting the following criteria (a) a Malaysian Citizen or a Permanent Resident of Malaysia, (b) 18 years old and above. However, online means you can do activation through its portal, under User Profile- User Verification Request then submit all required documents. They are as follows: copy of ID (front and back), picture of the owner with the ID, supporting document with user’s name (ex. passport, birth certificate, driver’s license, or utility bills).

For Sendirian Berhad (Sdn Bhd) Company

Following the Companies Act of 2016, you need a director (18 years old and above, Malaysian citizen, and does not violate Section 198 of Companies Act 2016) and a shareholder (can be the same person with the director). To register, create an account on the MyCoID portal and activate it at an SSM counter. Upon activation, you can find login credentials via email to access the Company name search feature on the Direct Incorporation Application part. Fill in the necessary company information (proposed company name, business code, directors, and shareholders information), then submit and make payment for the Notice of Registration.

For Foreigners

For non-Malaysian business owners, all foreigners can register a private limited by shares (Sendirian Berhad – “Sdn Bhd”) company in Malaysia. But, at least one shareholder should be living in Malaysia to comply with the Malaysian Companies Act of 2016.

The business registration of a company in Malaysia may take 5 to 10 business days. Several factors may delay or expedite the incorporation process. Thus, a business owner must keep these in mind to avoid interruptions and inconveniences.

The registration of the company name with the SSM may take 24 hours. Moreover, the preparation and registration of the pertinent documents may take a minimum of two working days. Next, it may take all the shareholders and directors one working day to sign the necessary documents. Lastly, a company may have to wait for 3 to 5 working days after document submission for the SSM approval.

A company may achieve the estimated timeline above if there are no technical issues. Documents must be in order and complete according to the SSM requirements since missing pertinent information may cause delays. Moreover, the company name must also be unique to avoid further complications and setbacks.

Depending on your type of business, you will have to pay different fees for legal requirements and business permits. For example, a typical food and beverage business owner in Malaysia starting a private limited company would have paid about RM5000 before the business is allowed to operate.

Here is a list of the most common fees you have to pay for starting out a business in Malaysia. RM60 for the registered trade name, RM30 for the person or the business name, RM1,000 for the SDN BHD registration, if you are going to start out as a private limited company, RM3,000 for the solicitor’s fee, and Insurance premiums that can amount as much to RM900 per month.

Keep in mind that some additional costs may be incurred if you register your business differently from a private limited company, such as partnership agreement fees if you start out as a partnership or a BHD registration if you start out as a public limited company. Besides the legal requirements that you have to pay for, you also have to include other costs such as worker’s compensations and the utility bills of your office or business center.

You need to apply for various licenses when you setup a company in Malaysia. However, what license will depend on what kind of business or enterprise you are trying to put up. Nonetheless, some general licenses are still applicable regardless of the type of business you are trying to start. Here are some of it:

Business Premise License

This is the most common and the first license that you should apply for when starting a business in Malaysia. You can get this from your respective Local Authorities, and the requirements to get one may vary in each. Application for this license may become complicated as you will need to secure first a supporting letter from the Department of Occupational Safety and Health (DOSH). The Local Authority can process the department of Environment (DOE) and The Fire and Rescue Department before your application and the business license.

Signboard License

Along with the business license, the signboard license is also one of the first licenses that you should accomplish. These two are also the most essential licenses regardless of the business type. The law indicates in Malaysia that every entity must have a business premise and signboard license.

Company Income Tax Registration

As a responsible company, you should also register your income tax. It is part of the main duties of whoever is managing and operating the company. You are required to submit your company registration license when getting your company income tax registration.

It is advisable to open a separate bank account for your business. Although sole proprietors can use their personal bank accounts in business transactions, it would help create another bank to separate business and personal finances.

Since most people use bank transfers and credit cards in business transactions, you need to set up a bank account for quick transactions. It can also help monitor the cash flow and bookkeeping.

By setting up a bank account, you can protect your personal identity. Moreover, it can simplify the preparation for taxes. If you have a partnership or corporation business, you will need a bank account as a separate legal entity.

There are several business grants for those who want to setup a company in Malaysia. As a matter of fact, there are twelve different business grants that you can choose from. Here are some of them:

Soft Loans Scheme for Services Sector (SLSS)

Given for startups and for those who are in the services sector who want to upgrade their services. It is a loan for Capital Expenditure. It has an interest rate of 4% per annum for SMEs and not exceeding RM 5 Million.

Tabung Usahawan Siswazah (TUS)

It is also known as the “graduate entrepreneur’s scheme.” It focuses on giving loans to new entrepreneurs so they can keep up their business. Through this grant, it is expected that more people will want to start a business. The value of the fund that will be given will depend on the nature of the enterprise, but it is usually around RM 20,000 to RM 250,000. Those who will receive this can repay it at 4% interest per annum in a span of ten years.

Tabung Pembangunan Pengangkutan Awam (TPPA)

This is given to those who are in the public transportation business, especially commercial bus and taxi operators. This grant aims to finance individual entrepreneurs, cooperatives, companies, and firms who match their services to public transportation. The amount of the fund that can be given ranges from RM 30,000 to RM 10 Million, depending on the company’s kind of services.

If you want to establish a home-based business here in Malaysia, there are things you must consider. Where your business must come from, or to whom you should sell, or what are you selling? Suruhanjaya Syarikat Malaysia (SSM) has a lot to offer, especially to people like you who want to be a home-based entrepreneur.

If you establish a home-based business, there is a higher chance that you will gain more than what you expected because of the fewer additional fees such as rent for a place and taxes. It will also put you into the advantage of earning money while you just stay at home. There are also possible cons if you choose a home-based business. Since you will be doing your business transactions at your own home, you will have to work hard promoting your business through different mediums such as social media to attract and gain clients and customers.

A home-based business requires you to be solely responsible for your business as the owner. Going through this venture contains numerous distractions and hindrances, such as your family members. These will affect your business performance enormously. As a home-based entrepreneur, you should manage your time suitably to maximize your workforce and profit.

However, you would not need to worry! Suruhanjaya Syarikat Malaysia (SSM) will help you organize things and offer you a home-based business that will fit you perfectly. Now, all you have to do is earn your profit.

Foreigners are only allowed to register businesses under Private Limited Companies or Sendirian Berhad. Through this, foreigners are allowed to have 100% ownership of the business with at least two company directors that are permanent Malaysian residents. The percentage of ownership might also vary depending on the industry you are in. However, there are some industries that foreigners are not allowed to dive into.

Another business entity allowed for foreigners is the Labuan International Company which is an offshore company. All foreigner-owned businesses incorporated through this can be 100% owned by a foreigner with no Malaysian resident. Foreigners may also establish an Unlimited Company, Company Limited by Guarantee, and Company Limited by Shares through incorporating their business under a Labuan Company.

In addition to that, a foreigner can also establish a regional or representative office. It is a way for foreigners to be present in Malaysia. However, regional offices are prohibited from participating in any commercial trade or generate income from its activities.

Malaysia has a set of policies to protect its people, such as the Anti-Money Laundering and Anti-Terrorism Financing Act. It is a “Know Your Client” requirement that mandates that all directors and shareholders must be present for the signing of the incorporation documents. If you have opened a corporate bank account and finished the mandatory registration process, you are halfway to setting up your business. Your company has to be licensed with SOC (Social Security Organization), which is required to protect yourself and your workers from work-related accidents, and this is required for all businesses.

Taxes must be filed with the Income Tax Department, as well. In order to register, either you must appear in person or online. If you plan to hire workers, you must register with the Employees Provident Fund (EPF), which is mandatory when recruiting a new employee, and you must submit a completed form.

You will also need to submit your Business Registration Certificate. Other documents issued by the SSM must also be submitted at the nearest EPF office. Depending on the industry you are in, certain industries require you to register with the Human Resource Development Fund (HRDF).

You must also register your company with a Business Registration Certificate. Other SSM-issued permits must also be obtained at the EP Office near your location. You have to register with the Human Resource Development Fund (HRDF) for certain industries that you want to set your company in.

If you are thinking of setting up a business in Malaysia, but you are in another country, physical presence is not required. You don’t need to be in Malaysia to start the business. A foreigner who intends to create a business in Malaysia can start and operate even without their appearance.

For a convenient way of processing, you can outsource corporate service firms to help you set up the business. While you are in another country, these firms will process the Malaysian government’s documents and requirements.

You should not worry whether you can legally build a business in Malaysia if you are a local who stays abroad or a foreigner. Through outsourcing, you can kickstart your business.

The tax incentives are one of the biggest reasons to setup a company in Malaysia. The Malaysian government has planned tax incentives, which can save companies almost 4 billion USD. New businesses are eligible for reduced tax rates or tax exemption.

New businesses can enjoy the benefit of having not more than a 10 percent income tax rate. This is applicable for their first ten years of operations. Aside from this, depending on their level of income and size of the workforce, they would be grouped into two tax tiers and be eligible for reduced tax rates.

Tier 1 is for businesses with at least 50 high-value employees, five key employees, and annual expenditures amounting to RM 10 million and above. Tier 1s have the privilege of a 0 percent income tax rate for five years. They can also renew it for another five years. Similarly, Tier 2 are for those who have at least 30 high-value employees, and four key employees. Furthermore, they need to have a minimum annual expenditure of RM 5 million. They are eligible for a 5 percent income tax rate for five years and renewable also for five years.

Foreign Investment and Ownership

Keep in mind the sectors covered by restrictions for foreign ownership in Malaysia. Namely: financial services such as banks, FinTech companies, capital markets, and insurance industries. Consumer needs providers like water, energy supply, petroleum, wholesale, and distributive trade such as grocery stores and food and beverage businesses. Education, media, freight forwarding and shipping, security, employment agencies, and professional services are also other sectors where foreigners can’t invest.

Aside from limiting foreign investments in the sectors mentioned above, Malaysia also has specifications that require minimum investment from indigenous ethnic groups called Bumiputera ownership. Management restrictions state that foreign managers are allowed on two conditions. No trained Malaysian managers are available, or their position is an important position that protects investor interests.

Country, Territory, and Jurisdiction Restrictions

The government also forbids certain countries and territories from any transactions with Malaysia, specifically Israel. Meanwhile, under the Strategic Trade Act of 2010 that restricts and controls export, some countries also have prohibitions (on certain levels). In Africa, these include Liberia, Libya, Rwanda, Somalia, Sudan, Eritrea, Ivory Coast, and the Republic of the Congo. Middle Eastern countries such as Iran, Iraq, Afghanistan, Lebanon are on the list with Asian country The Democratic People’s Republic of Korea.

Travel Restrictions

In light of the COVID 19 pandemic, the government still bans foreign nationals from entering Malaysia (with some exceptions). However, they allow limited cross-border travel with Singapore for business and official purposes. Among Malaysian citizens, authorities highly discourage interstate travel.

If you are planning to start your own company in Southeast Asia, then Malaysia is the place to be. The country is a strategic location where you can experience a high Return on Investment. Malaysia offers excellent infrastructure, a skilled workforce and a competitive market. Plus, you can always seek assistance to make the entire process faster and better.

Now that you are ready to start your business journey, it is time to put things into action. After preparing your detailed business plan, you can decide how to proceed. You have two options, do it on your own or ask assistance from a professional firm to help you incorporate your company.

With Setup Company Malaysia, you can discover the wonders of Malaysia’s business industry and build your own success along the way. Allow us to help you grow your business through our wide range of services. Our team can address all your needs, from company incorporation and business advisory to legal and taxation services. Feel free to contact us to learn more about our tested methods and profitable results.