Types of Companies

Types of Companies
Malaysia

The basics of setting up a business entity in Malaysia isn’t so difficult to understand: First off, let’s start with Types of Business Entities. There are three (3) different types of business entities to choose from:

  1. Sole Proprietorship (also known as Sole Trader)
  2. Partnership business entity
  3. c)Limited Company (SDN. BHD. or Sendirian Berhad or BHD. or Berhad)
Sole Proprietor (or Sole Trader)

Like many other countries out there, the Sole Proprietorship business entity in Malaysia is owned solely by one individual, as his/her liability is unlimited. What unlimited liability means is: If a business fails or is declared bankrupt, creditors can sue the sole proprietor’s owner for all debts owed to respective merchants. This means personal assets, personal income and employment income are all liable.

Partnerships

The “Partnership” business entity is a joint-entity holder with two or more persons to carry out a legal business in Malaysia. The Companies Commission of Malaysia requires that partnership entities MUST comprise of at least two (2) members and a maximum twenty (20) members.

Partners in a partnership business entities are also bounded by unlimited liability.

Limited Company (SDN BHD or BHD)

Sendirian Berhad (SDN BHD) is a private limited company, where it prohibits any invitation to the public to subscribe to any of its shares, deposit money with the company for investment or subscription. Minimum members in a private limited company is TWO (2) and maximum is FIFTY (50). Berhad (BHD) is a public limited company where its shares can be offered to the public for fixed periods and any other forms of subscription. The minimum amount of members’ (shareholders) are TWO (2) and maximum of unlimited amount of members.

There are three (3) types of limited companies in Malaysia:
Limited by Shares
Limited by Guarantee
Unlimited company with/without share capital

Foreign Companies

Foreigners (non-Malaysian residents) are allowed to register a private limited company in Malaysia, so long as TWO (2) of the company’s directors are permanent (principal place of residence) residents in Malaysia.

Foreign companies are companies ALREADY incorporated (formed) outside of Malaysia but set up its business premises and operations in Malaysia. There are two ways to go about being a ‘foreign company’ in Malaysia:

  • Register a branch in Malaysia, or;
  • Incorporate a local company