A Complete Guide to Businesses in Malaysia – Sole Proprietor, LLP, Partnership, or And Company
Choosing the right business entity in Malaysia is a critical step in the company formation process. Before proceeding with your company registration in Malaysia, it’s essential to identify the most suitable legal structure that aligns with your business goals, operational needs, and future growth plans.
Each type of business entity in Malaysia—whether it’s a sole proprietorship, partnership, or Sendirian Berhad (Sdn Bhd) or Private company — comes with its own set of benefits and considerations. These include differences in liability protection, taxation policies, and regulatory compliance requirements. Making an informed decision at this stage lays a strong foundation for long-term success and smooth business operations in Malaysia.
Types of Business Entities in Malaysia
Following are the common forms of business entities in Malaysia:-
- By an individual operating as a Sole Proprietor
- By two or more (but not more than 20) persons in Partnership, or
- By two or more persons in Limited Liability Partnership, or
- By a locally incorporated Company or by a Foreign Company registered under the provisions of the Company Act 1965
Understanding Malaysia’s business registration types is crucial to be able to understand which one would work best for you:
| Company | Limited Liability Partnership (LLP) | General Partnership | Sole Proprietorship | ||
| Entity Name Appearances |
Company name ends with the word “Sdn Bhd” or “Bhd”, “Berhad”, “Sendirian Berhad” | Company name ended with the word “PLT” (Perkongsian Liabiliti Terhad) | Must register under a Trade Name ( Using Enterprise, Trading, Services etc ) | There are two types of business names:
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| Capital Contribution | Share capital | Partners contribution |
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Own contribution | |
| Owner(s) of the business | A Company is a business entity where members or shareholders hold shares, granting them specific rights and privileges concerning the company’s operations and decision-making. | In an LLP, partners hold a stake in the capital and profits of the business. | Partners | Sole Proprietor | |
| Legal Status | Separate legal entity | Separate legal entity | Not a separate legal entity | Not a separate legal entity | |
| Party that is liable for debts of the business | Company | LLP | Partners | Sole Proprietor | |
| Responsibility for management of business | Board of Directors | Partners | Partners | Sole Proprietor | |
| Personal liability | Directors and shareholders are not personally liable for the company’s debts. Their financial responsibility is limited solely to any unpaid portion of their shares. | Partners are only liable for their own wrongful acts or unauthorized actions, with liability limited to unpaid share capital, shared with the LLP. | Partners have unlimited liability, jointly and severally responsible, which may extend to personal assets. | The owner’s unlimited liability can extend to personal assets. | |
| No. Of Shareholders/Partners | Minimum 1 and maximum 50 in private company | Minimum 2 and no maximum limit | 2 to 20 partners(Except for partnerships for professional practice with no maximum limit) | Sole proprietor only | |
| Company Secretary / Compliance officer | Qualified Company Secretary | Compliance Officer or partner of the LLP | N/A | N/A | |
| Statutory Audit Requirement | Required to be Audit | Not compulsory unless it is provided in the partnership agreement | No Audit required | No Audit required | |
| Annual Compliance | Must file annual return and financial statements every calendar year.
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Must lodge an annual declaration and solvency statement with CCM (the 1st within 18 months from the date of registration and thereafter, 90 days from the end of the financial year) | Business Renewal | Business Renewal | |
| Annual Submission to SSM | Annual Return with Audited/ Unaudited Financial Statement | Annual Declaration | Can be done within 30 days before the date of expiry | Can be done within 30 days before the date of expiry | |
| Annual Fee to SSM | RM200 | RM200 | Trade Name – RM60 per year Personal Name – RM30 per year |
Trade Name – RM60 per year Personal Name – RM30 per year |
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| Income Tax Status / Income Tax Rate | standard corporate income tax rate in Malaysia is 24% for both resident and non-resident companies | An LLP is taxed at corporate income tax rate of 24% in Malaysia | Subjected to personal income tax as high as 30%. | From 0% to 30%Taxation Basis: Income is taxed as personal income of the proprietor. Personal Income Tax Rates:
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| Rules & Regulations | Companies Act 2016 | Limited Liability partnership Act 2012 (LLP), Limited Liability Partnership Regulations 2012 | Registration of Businesses Act 1956 (RBA) | Registration of Businesses Act 1956 (RBA) | |
| KEY features | – More paperwork & more expensive – Limited Liability – Complexity in Administration (statutory audit, AGM, board resolution and etc) – Higher Compliance Cost – One local resident director is required to setup a Company – Suitable for business affordable to maintain business with higher operation costs – The public will have access to the financial affairs of the company. |
– Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed) – Limited Liability, – Simplest Administration (Not compulsory for statutory audit), – Local resident compliance officer is required to setup LLP – Lower Compliance Cost – Suitable for newly started-up business with low entry cost – Not required to disclose financial statements to the public. – Perpetual succession : – The changes status of the partners will not affect the existence of the LLP corporation |
– Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed) – Unlimited Liability, – Simple Administration (Not compulsory for statutory audit), – Lower Compliance Cost – Suitable for newly started-up business with low entry cost – Not required to disclose financial statements to the public. |
– Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed) – Unlimited Liability – Simple Administration(Not compulsory for statutory audit),, – Lower Compliance Cost – Suitable for newly started-up business with low entry cost – Not required to disclose financial statements to the public. |
Choosing the right business entity in Malaysia depends on various factors, including liability protection, compliance requirements, operational complexity, and tax obligations. Sole Proprietorships and General Partnerships offer simplicity and lower costs but come with unlimited personal liability. Limited Liability Partnerships (LLPs) provide a balance between ease of management and limited liability, making them ideal for small businesses and professional firms. Companies (Sdn Bhd) offer the strongest legal protection and credibility but require higher compliance and maintenance costs.
Entrepreneurs should carefully assess their business goals, financial capacity, and risk tolerance before making a decision. Consulting with a professional advisor can help ensure that the chosen structure aligns with long-term business objectives.
Related Resources:
👉 Malaysia Company Incorporation Services
👉 Nominee Director Service Malaysia
👉 Corporate Tax Planning Malaysia
👉 Sdn Bhd Company Guide Malaysia
👉 Visa Requirements for Foreign Entrepreneurs
