Last Updated 08 May 2020

Type of Business in Malaysia

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In Malaysia the most common types of businesses are sole proprietorships, partnerships, private limited companies, corporation. Firstly, Sole Proprietorships have only one business owner and only Malaysian citizens or permanent residents can register. Personal names or trade names can be used as business names. The Application of Business Name form must be filled in before a business can be registered. Some names like those associated with government agencies or royalty or the name of another person who is not the owner of the business cannot be registered.

Secondly, partnerships consist of two or more business partners combining their resources in a business with a view to profit. Like in the case of sole proprietorships, only Malaysian citizens or permanent residents can register partnerships. A partnership agreement is usually drawn up by legal counsel, which outlines the responsibilities of each partner, conditions of termination and means of resolving intra-partner disputes. Personal names or trade names can be used as business names and the Application of Business Name form must be filled in before a business can be registered.

Some name like those associated with government agencies or royalty or the name of a person who is not the owner cannot be registered. Thirdly, they are registered legal entities formed by several persons that can own property, draw contracts and employ people. The most common type of company in Malaysia is a company limited by shares (public limited and private limited companies). Private limited companies cannot sell shares to the public, and are distinguished by the appellation "Sendirian Berhad", shortened to "Sdn Bhd" or "S/B".

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Public limited companies source their capital by selling shares to the public, and are distinguished by the appellation "Berhad", shortened to "Bhd". Companies in Malaysia are governed by the Companies Act 1965, which protects the rights and interests of shareholders and investors, and provides regulations for the incorporation of companies, the formulation of company constitutions, management and closures. A company must have a minimum of two members, but a private limited company is limited to 50 members (public limited companies have no member limit).

And the last one is corporation. A corporation is a legal entity, operating under state law, whose scope of activity and name are restricted by its charter. Articles of incorporation must be filed with the state to establish a corporation. Stockholders' are protected from liability and those stockholders who are also employees may be able to take advantage of some tax-free benefits, such as health insurance. There is double taxation with a C corporation, first through taxes on profits and second on taxes on stockholder dividends (as capital gains).

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