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  • Prasna Devi

5 Reasons to Run Your Business under a Sdn Bhd in Malaysia

There are 8 different types of business entities for entrepreneurs to register as in Malaysia and it's important to note that each business entity has different requirements and suits different business goals. The most common one is of course, a private limited company or what most of us refer to as Sdn Bhd.

Now you must be wondering why a Sdn Bhd is widely preferred by both local and foreign business owners. Here are the top 5 reasons to incorporate your business as a Sdn Bhd business entity.

1. Your Business Is 100% Foreign-Owned

Foreigners have limited options when it comes to setting up a business to run in Malaysia, especially one that is also cost-effective. Generally speaking, the incorporation of a Foreign Company is expensive as it requires a high share capital and high incorporation fee, so the best option would be to incorporate a Sdn Bhd - a private limited company.

The requirements for a foreigner to incorporate a Sdn Bhd is the same as a Malaysian where only 1 director and shareholder (which can be the same person) is needed. You would also need to provide your proof of residency in Malaysia.

2. Your Business Is in One of the Regulated Industries

Manufacturing sector, construction sector, medical sector, oil & gas sector, finance sector, and telecommunication sector are some of the examples of regulated industries in Malaysia.

Apart from registering your business entity with Companies Commission of Malaysia [SSM], you might need to acquire a specific license from the respective governmental authority to operate your business legally. That often requires your business to be registered as a Sdn Bhd with a minimum paid-up capital.

3. Separate Your Personal Liabilities from the Business’

Sdn Bhd is a separate legal entity - it can receive income, acquire properties, enter a contract with a third party, and be a part of legal actions.

Despite the fact that you own the Sdn Bhd as a shareholder and manage it as a director, the Sdn Bhd itself bears responsibility for compliance matters and other day-in-day-out operations. Your personal wealth is protected should the business fail or suffer losses.

4. Enjoy Corporate Tax Benefits

If you are running your business as a Sole Proprietorship or a Partnership, there is no differentiation between personal income tax and taxes for your business; in other words, if your estimated annual profit is RM 500,000, this taxable business income of a Sole Proprietorship or a Partnership will be taxed at a personal income tax rate of 24% instead of the company tax rate of 17%.

However, if you run the business as a Sdn Bhd, the personal income tax rate only applies to the amount of salary you receive from your business while your company will pay the company tax rate for its taxable income each year.

5. Raise Funds from Investors

The options to raise funds for the expansion of a Sole Proprietorship or Partnership business are limited to only business loans from banks or P2P lending platforms.

A Sdn Bhd allows you to raise funds through investments from equity crowdfunding platforms (ECF) or by selling shares in your company to investors. A Sdn Bhd also has more credibility, for it is managed by a board of directors and is backed by shareholders who have contributed to the paid-up capital of the business.

If you need help with the incorporation of your business, you should engage a professional firm that provides corporate secretarial services - like JS Partners. Reach us via WhatsApp 📲

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