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Setting up a business can be an exciting prospect for many. If you’re looking to explore opportunities in Asia, consider Malaysia to base your operations in and establish a company. According to Doing Business 2020, Malaysia ranks among the top five countries in Asia for its ease of doing business. More notably is the fact that Malaysia has a lot of potential to become the top 20 startup enterprise ecosystems by 2030 on a global scale. This is in line with the country’s recent launch of the Malaysia Startup Ecosystem Roadmap (SUPER) 2021 - 2030.
Boosted by the Covid-19 pandemic, according to International Trade Administration, the ecommerce revenue in Malaysia also reached $4 billion in 2020. By 2024, it is predicted that the market will hit $12.6 billion, increasing at a Compound Annual Growth Rate (CAGR) CAGR of 14% between 2020 and 2024. There is no better time than now to start your own business.
But before you officially embark on this exciting journey, there are a number of things to do prior to launching your startup. From settling on a business type to registering it online, here are the steps to starting a company in Malaysia.
When you're starting a business, one of the first decisions you'll have to make is selecting an appropriate business entity that works in your favour. We’ve covered the common forms of business entities below, starting with the easiest to most difficult to set up:
For locals only:
The best fit for start-ups, a sole proprietorship is a business wholly owned by an individual using a personal name according to their identity card or trade name. As it has the simplest registration process – can be completed within an hour – it is also the most common business structure adopted in Malaysia. The registration fee only includes RM30, if you’re using your personal name, or RM60 per year, if you’re opting for a trade name as your business name. Subsequently, you will be required to pay this amount on an annual basis for business renewal purposes.
Governed by the Partnership Act 1961, a general partnership requires a minimum of two or up to twenty partners with a legitimate local residential address in Malaysia. Under this business structure, there will be no corporate tax payments required of the partnership. Rather, the partners will be taxed as individuals. The fee required starts from RM100 and similar to that of a sole proprietorship, the registration of a partnership can be completed within an hour by the SSM.
Sendirian Berhad (Sdn Bhd)
Also known as a private limited company, a Sdn Bhd should consist of a minimum of one or up to fifty shareholders. It is mandatory to file their annual returns and financial statements during the financial year end. To register, an incorporation fee of RM1,000 is required to pay the SSM. The application process can be completed within one business day.
Limited Liability Partnership (LLP)
An LLP is an alternative business vehicle governed by the Limited Liability Partnerships Act 2012. As a separate legal entity from its partners, an LLP is a combination of a company and a general partnership. The LLP is ideal if you are starting with at least two persons and are involved in a lawful business set up to make a profit. From a cost perspective, it will require RM500 payable to the Suruhanjaya Syarikat Malaysia (SSM) and the registration process will usually take up to seven working days, depending on the availability of MyLLP Portal.
Under the Labuan Companies Act 1990 (LCA 1990), residents and non-residents of Malaysia are able to establish a Labuan company and enjoy tax incentives. There should be at least one director acting as a resident director and secretary. Starting with a fee of RM50, your name approval can be provided within one day. However, note that you will need to apply for a 2-years’ multiple entry Labuan Company Work Permit. This is important when you are coming to Malaysia for business-related activities.
Sendirian Berhad (Sdn Bhd)
Similar to the Sdn Bhd for locals, non-residents in Malaysia can also register a 100% foreign-owned company that will be limited by shares. To set up a Sdn Bhd, there should be at least one director residing in Malaysia and one shareholder. Depending on your paid-up share capital, the registration fee starts at RM1,000 for a capital of up to RM50,000. You will receive a certificate of incorporation within one day if your application process is successful.
If you have yet to choose a business name, you will need to do so in order to complete the company registration process. Take some time to brainstorm and decide on the name of your business, which is categorised into:
Personal name: Go by the name on your identity card. This will not require approval.
Trade name: As your proposed business name, this will need to be approved by the Suruhanjaya Syarikat Malaysia (SSM) - also known as the Companies Commission of Malaysia.
Remember, this is how your clients or customers will recognise your company, both in Malaysia and overseas. With that in mind, you would want to give it some extra thought and have a unique name that best represents your business as a whole. The cost of the new registration of a trade name or personal name will be RM 60 or RM 30 respectively.
More importantly, be sure to have a couple of names to choose from and see if it’s available by running a check online via SSM. Once that is complete, you can proceed to register your business name with the SSM. The name will be reserved for you but only for 30 days from the date of approval.
Moving forward, you will need to prepare the constitution, statutory declaration by a director or promoter as well as the declaration of compliance. Have with you a copy of your director’s and company secretary’s identity cards to ensure the registration process goes smoothly. With these incorporation documents ready, the overall procedure can take no longer than 10 days.
With the ease of use that technology provides, it’s never been easier to expand into international markets. More and more people are looking for ways they can take advantage of this new era in business by venturing into cross-border business. If you’re starting from scratch, learn how to define your brand and make it stand out from the competition.