Starting a new business is easy enough, and with many Malaysians dabbling in side-income online shops or taking on gig work during the e-commerce boom, entrepreneurship is booming in Malaysia. However, if you are serious about taking your business further, it is important to register a new business entity. In fact, in Malaysia, it is a legal requirement for a business entity to be registered with the Companies Commission of Malaysia (SSM) no later than 30 days from the date of commencement of business.
Registering a business is necessary to prove that the business is final, valid and certified by law to conduct contracts with banks, government agencies and non-government agencies. Having a registered business entity means you will be ready to capitalise on growth opportunities – and the need to apply for financing to expand your business capability for those same opportunities – whenever the need arises.
By registering your business entity with SSM, you also own the unique rights to your company or business name, thereby helping build your brand reputation. This is particularly important to enhance customer trust in your goods or services, especially in a digital, e-commerce world.
Your business’ SSM certificate is universally recognised by all government agencies and banks throughout the country. This makes it incredibly easy for you to apply for government assistance such as grants and business funds, apply for licences and other operating permits, or open a business banking account. This is because your SSM business registration number – also known as the My Company Identity Number (MyCoID) – is the standard identification number of a business entity when interacting with government agencies.
There are five main types of business entities that can be registered under SSM, namely: Sole Proprietorship, Partnership, Private Limited Company (Sdn. Bhd.), Public Company (Bhd), and Limited Liability Partnership (LLP).
These are registered or enacted under three different laws. While sole proprietorships and partnerships are enacted under the Registration of Business Act 1956, Sdn Bhd and Bhd companies are incorporated under the Companies Act 2016.
Meanwhile, the LLP is an alternative business entity under the Limited Liability Partnership Act 2012, that combines the characteristics of private companies (limited liability) and conventional partnerships (fewer compliance requirements).
Table: Comparing the 5 Main Types of Business Entities in Malaysia
|Entity||Sole Proprietorship||Partnership||Sdn Bhd||Bhd||LLP|
|Definition/ Suitability||Business wholly owned by a single individual using personal name as per NRIC IC or trade name.||Suitable for professional firms such as auditors or lawyers.||At least 1 director who ordinarily resides in Malaysia and 1 promoter.||At least 2 directors who ordinarily reside in Malaysia and minimum 1 promoter.||Professionals, SMEs, joint ventures, and venture capital firms.|
|Business Owners||1 owner||2-20 partners||1 – 50 shareholders||Unlimited shareholders||Minimum 2 partners, no maximum|
|Liability||Unlimited personal liability. Owner's personal income/assets are not protected from bankruptcy or debt action on the business.||Unlimited liability, though a partnership agreement can outline the responsibilities and liabilities of each partner.||Company's liabilities separate from directors & shareholders' liabilities.||Company's liabilities separate from directors & shareholders' liabilities.||Company's liabilities separate from directors & shareholders' liabilities.|
|Taxation||Personal income tax||Personal income tax, shared among partners||Corporate tax rate||Corporate tax rate||Corporate tax rate|
As you can see, while sole proprietorships and partnerships have less compliance requirements, they open you as the business owner/partner to liabilities if your business is declared bankrupt or in debt. While Sdn Bhd and Bhd companies have limited liabilities, you must be prepared for higher upfront costs to fulfil your company's various compliance requirements.
LLPs are the middle road between businesses (sole proprietorships and partnerships) and companies (Sdn Bhd and Bhd). So, consider your business goals, your potential partners/shareholders, and your financial capacity to stay compliant before choosing which business entity is perfect for your new business.
Once you have successfully registered your business or company, you need to open a business current account (BCA). Separating your business and personal finances also ensures you get an accurate view of your business cash flow and can readjust accordingly after the first year of operations, prepare your tax bill and financial reporting requirements ahead of time. Time is money and business owners need to hit the ground running financially, paying staff and vendors, and accepting payments from a variety of customers. Thus, setting up your BCA needs to take as little time as possible, and hassle-free, so you can spend more time growing your business rather than being bogged down with paperwork and red tape. Luckily, with Alliance Digital SME, new business owners can open a BCA without even leaving their business premises. Just visit Alliance BCA, click ‘ Open An Account ’ and follow these 3 steps: