Types of business structures and company incorporation in Malaysia

• Sole-Proprietor: is a traditional and a commonly used business structure around the word. Sole Proprietor is also known as a Sole Trader. For some businesses, this structure is suitable because it is the easiest and the cheapest form of business structure out there.

• Partnership: is the second most common structure of business out there. Basically what happens in a partnership is that the business is owned by two or more separate entities.

• SDN BHD: stands for Sendirian Berhad. SDN BHD is a private limited company which cannot make its shares available to the general public. To Incorporate or register a SDN BHD (Private Limited or LLC) company in Malaysia must have a minimum of 2 directors. As the shareholder / director of a SDN BHD, you don’t need to put your personal wealth and assets at risk.

Why is choosing the right business structure for your business important?

Choosing the right business structure is crucial decision for a business. If the right business structure is chosen it boosts a business towards success. The correct business structure will help businesses to reach their full potential. If a business fails in choosing the right structure it will face several severe difficulties while operating in the long run.

Setting up a company in Malaysia by using the SDN BHD (Sendirian Berhad) structure is the best choice for an Entrepreneur. This structure should be opted for by an entrepreneur who is committed and ambitious about his or her business. There are major benefits of using this structure which no other structure offers.

1. The liability is limited. An entrepreneur’s personal wealth is protected if the business encounters a loss or if the business fails.
2. Another major advantage of this structure is that the income tax risk exposure is low. Most SDN BHD are better managed and regulated. The tax planning is better as the company is a separate legal entity. Tax saving up to 20% compared to individual tax rate.
3. The Business Continuity will never stop. A company using SDN BHD structure will never expire and the company will exist even if the key owner passes away.
4. Getting a loan is easier for this structure. It all depends on company’s cash flow, strategy and business prospects. Accounts of SDN BHD Company are more reliable and trustworthy.

Incorporation company in Malaysia require you to engage the service of company secretary, to help you to complete the company registration process.

Every company (sdn bhd) must have at least one company secretary in the Board and the company secretary must be a member of a professional body or licensed by SSM Malaysia.

Contact Bayabumi Accountancy Services today for all your incorporation needs.

Malaysia as a new highlight in the economics of the ASEAN is a prospective place to set up a company. A lot of business owners around the world compete to set their camp on it as a company. The interesting question popping up is “how to incorporate business in Malaysia?” This question should be answered in advance so no unnecessary, time-wasting questions appear in the future where mistakes mean loss of money.

Requirements to Incorporate Business in Malaysia

Prior to discussion about how to incorporate business in Malaysia, we should know the definition of company itself in Malaysia. There are two types of company eligible for company incorporation: (1) a company limited by shares, and (2) an unlimited company. The business owners can determine whether their company will be incorporated as a private company (Sdn. Bhd. / Sendirian Berhad) or public company (Bhd. / Berhad). The requirements of both companies are the same, including:

1. Two shareholders (Section 14CA)
2. Two directors (Section 122)
3. A company secretary, a member of a professional secretarial firm under the Minister of Domestic Trade Cooperative and Consumerism, or an individual licensed by SSM.

Note: Both the directors and company secretary must have their only residence in Malaysia.

Procedures

Once the business owners fulfilled the requirements, they will likely hand over the rest of the secretarial matters to the company secretary. There would be two important steps in company incorporation: (1) application of name search, and (2) lodgement of incorporation documents.

Application of Name Search

This step is conducted to determine the availability of the proposed name. The business name must initiate the step by the completion and submission of Form 13A CA to SSM and a fee of RM 30.00 per each name. After approved by SSM, the name will be reserved for three months from the date of approval. This period will be used for completing and submitting documents necessary to incorporate business in Malaysia.

Lodgement of Incorporation Documents

This step is so crucial because the failure will cause an obligation to repeat the whole process from the application of name search. So, all documents must be completed and submitted within 3 months. The documents include:

1. The Memorandum and Article of Association stamped at RM 100.00.
2. Form 48A
3. Form 6
4. An original of Form 13A
5. A copy of the approval letter from SSM
6. A copy of the identity card (usually passports) of directors and company secretary

The whole process of company incorporation is completed with the release of a Certificate of Incorporation by SSM. 

Malaysia starts stealing the world’s attention for its business potential. A decade ago, this country was mostly known as one of the most favorite tourist destinations in the ASEAN. But, today’s Malaysia is quite different. It has strengthened its pillar of economics and successfully created a conducive atmosphere for the global trend of multinational companies. So now, it is not complicated to make your company building plan come true in Malaysia. The following guideline will assist you and answer all of your questions in association with Malaysia company registering.

Malaysia Company Registration Guideline

Malaysian warmly welcomes foreigners to plunge into the economics of the country. There are two ways foreigners can take if they wish their company to legally enter Malaysia business sector. The first is incorporating a local company with Suruhanjaya Syarikat Malaysia (SSM), or registering their foreign company. The latter refers establishing a form of SDN BHD company that is fully owned by two foreign directors. In short, foreign business owners must select whether they want to go on with incorporation or registration. The legal matters associated to Malaysia company registration are under provisions of the Companies Act 1965 (CA 65). In general, there are two steps the business owners (usually represented by a company secretary in Malaysia) must take in company registration in Malaysia.

Step 1. Name Application

In the step, the business owners must check the availability of the company’s name proposed. The form involved is Form 13A. The Malaysia company registration form must be requested from SSM, completed and submitted back to SSM. The submission includes a fee of RM30.00 valid for one name. The name refers to the name registered in its homeland.

Step 2. Company Registration

This step starts after the approval of the company’s name – which means that it is available to use. The business owners must request the Malaysia company registration form from SSM, complete and compile it with other necessary legal documents for submission to SSM. The submission must be done in 3 months after the name approval.

Documents in Malaysia Company Registration

1. A copy of the registration or incorporation certificate of the company
2. A copy of the statute, charter or Memorandum of Association of the company
3. Form 79
4. A memorandum of power of the authorized attorney residing in Malaysia
5. Form 80
6. Additional legal documents including: (1) copy of Form 13A (2) a copy of the letter justifying the approval of the company’s name

Besides the name approval and submission of company registration documents, the business owners must also regard other requisite terms in the form completion. For instance, the company must have at least two directors and one company secretary. Both directors may be or not residents in Malaysia depending if they select incorporating or registering their company. But, a company secretary must be a resident in Malaysia.

What is a Private Limited Company?

A private limited company is a business entity that is, as the name implies, privately held. Private limited companies usually consist of small and medium businesses. The owner of a private limited company would limit his or her liability to their shares, and limits the number of shareholders in a company to a maximum of 50. Shareholders of a private limited company are also restricted from publicly trading shares.

A private limited company is a legal entity it its own right and the company’s finances are a separate thing altogether from the owner’s finances. A private limited company is one of the most suitable structures for both profit and non-profit making business entities. With the private limited company option, the company has an indefinite lifespan, and will be able to run as long as there is somebody to run it.

How to Set Up a Private Limited Company

To establish a private limited company, investors would need to complete the following steps:

• Select a suitable and unique name for the company
• Acquire a registered company address for the business
• Appoint at least one director
• Appoint at least one shareholder to manage the details of the company shares

Who Can Establish a Private Limited Company?

If you have the means to do it, you can establish a private limited company by yourself and own 100% of the shares, or divide the shares among other shareholders in your company if you have more shareholders.

Owners of private limited companies are known and shareholders, and each of these shareholders would hold a certain number of shares in the business. To become a shareholder of a private limited company requires the individual to purchase one or more shares which are issued by the company. Each share purchased would represent an equal percentage of the business. Basically, the more shares you hold, the bigger the percentage of the business that you own.
The people in charge of running and managing a private limited company is known as a director(s). The requirement for a private limited company ordinarily is to have at least one director, which in a lot of cases usually ends up being the owner of the company themselves.

Why Having a Private Limited Company is Beneficial?

Running a business as a private limited company would offer you the advantages below:

• A professional status, as private limited companies are usually seen as a more professional body compared to other business entities like the sole trader for example.
• Owners of a private limited company have a more tax efficient income within the legal limitations.
• When you own a private limited company, you are protected from personal liability. Personal assets will not be at risk with this company option if the business fails. The liability of the shareholders is only limited to the amount (if any) unpaid shares which are held by them.
• Doing business with other companies is also much easier when you’re a registered and incorporated private limited company because of the level of professionalism that goes with this type of business entity.

Social Security Organization (SOCSO), or also known as PERKESO (Pertubuhan Keselamatan Sosial) was established on 1 January 1971, under the Employees’ Social Security Act 1969 as a government department of the Ministry of Labour and Manpower.

SOCSO is able to provide free medical treatment, facility for physical or vocational rehabilitation, and financial assistance to employees, if they have loss their ability due to accidents or diseases that have reduced their abilities to work or rendered them incapacitated through the Act and Regulations.

SOCSO was entrusted with the administration of two social security schemes, which are the Employment Injury Scheme and the Invalidity Scheme.

For Employment Injury Scheme, it is to provide coverage and protection for employees who suffers from employment injury. The coverage includes industrial accidents while carrying out their duties; accidents while travelling; accident during emergency; occupational disease.

As for Invalidity Scheme, is to provide coverage and protection for an insured person who is considered as suffering from invalidity by reason of specific morbid condition of permanent nature either incurable or is not likely to be cure and no longer capable of earning, by work corresponding to his strength and physical ability, at least one-third (1/3) of the customary earnings of a sound insured person. This scheme also provides 24-hour coverage to employee who suffers from invalidity or death due to any cause and not related to his employment.

It is SOCSO’s Vision to become the premier and outstanding leader in social security 2020, with their Mission to provide a social security protection to employees and their dependents through social security schemes and to increase awareness on occupational safety and health that will ultimately improve the Employees’ social well-being.

Malaysia has always been a country that attracts a lot of interest from investors, whether international or local. Why investors would choose to have their company registration in Malaysia has a lot to do with the following factors:

• Company registration in Malaysia involves a low start-up costs if compared to other countries such as Singapore for example.
• A company registration in Malaysia allows that company to benefit from the country’s double taxation treaties if they are resident companies, which minimize the withholding taxes on fund transfers overseas. There are also no withholding tax levies on dividends which are made abroad by Malaysian owned businesses.
• Malaysia is ranked by the World Bank as the 6^th easiest place in the world to do business and the country has also been ranked as the 25^th most competitive economy in the world.
• A company registered in Malaysia would be eligible to be part of the free trade agreements which have been signed between Malaysia and six other ASEAN countries.

The company registration process in Malaysia involves going through the Companies Commission of Malaysia, known locally as the SSM. The SSM is the governing body that is responsible for all successful company incorporations in the country and every business must deal with them for the company registration process.

Investors who intend to use this option as their preferred company registration in Malaysia pathway would need to fulfil the following requirements:

• Have a minimum of one director who is at least 18 years of age and currently residing in Malaysia at the time of incorporation. The selected candidate must not have undergone bankruptcy, been convicted or imprisoned for the past 5 years.
• Have one company secretary who must be a member of any of the prescribed professional bodies or licensed by the SSM.
• Have a minimum paid-up capital of at least RM1.
• Have an official registered office in Malaysia where all business communication and notices may be addressed to. Investors could opt to have their secretarial office as the registered office if needed.

Everyone is looking to the highest quality with the lowest price. However, not every service or things with lowest pricing is at highest quality.

Although some firms provide low secretarial fees, but they would probably not send reminders on time to their client, which ended up the penalty clients have to pay is even more expensive. In addition, one may be debarred from acting as a director in future due to the bad record of non-compliance.

For some firms that provide secretarial services at slightly lower fees, they may be not providing you with proper security system for your secretarial files keeping. Loss of secretarial files can cause you very heavy penalties. Generally, under the new Companies Act 2016, which is expected to be gazette soon, the penalty can easily reach RM500,000 for default in each provision of the Act.

One might be paying low secretarial fees, yet end up paying higher fees in total, after all the add-on fees, penalties, etc.

Relative to other professional firms that is of equal size and set-up, you will realise that Bayabumi Services is still the one that is offering the highest quality of services at the cheapest rate in the market currently. This is the minimum rate for us to make a thin profit above our break-even cost in order for us to serve you better while maintaining our high quality of standards in the competitive, fast-paced and globalised market. 

There are many things you need to consider when starting up, but one key thing to add to your to do list a Shareholders’ Agreement. A Shareholders’ Agreement is one of the most important documents a private company should have. Such a document will set out the rules, obligations and responsibilities of the shareholders, their relationship with each other and their relationship with the company.

Even though there is no legal requirement to have a formal Shareholders’ Agreement, every company with more than one shareholder is well advised to have one. Often people think they understand each other and have common goals, but as the business changes or issues arise views can change and diversity can arise. Often when the profits start to increase one may want to invest and grow the business; others may want to reap the rewards personally or when profits are very low one may want to find an investor, a loan or another shareholder the other one may want to struggle through to retain ownership. Putting this framework in place to resolve potential issues/disputes before they happen enables shareholders to work through a process that they have all agreed to, rather than having to decide how matters will be resolved or having to ask a court to decide. As a result, it will reduce the potential for conflict between shareholders and help the company to be run smoothly and profitably.

What contents will be included in Shareholders’ Agreements?

The contents of a Shareholders’ Agreement will vary for every company. Each agreement needs to be bespoke and tailored to the needs of the parties involved.

What is Form E? Who needs to file the Form E? What if you fail to submit Form E?

Borang E is an Employer’s (annual) Return of Remuneration for every calendar year and due for submission by 31st March of the following calendar year.

According to the Income Tax Act 1967 (Akta 53): –

“Every employer shall, for each year, furnish to the Director General a return in the prescribed form…”

Unless it has granted the de-registration status from IRB, otherwise every company, enterprise or partnership is obligated to file the said return; regardless number of Employees during or end of the calendar year.

It generally outlines the payroll information of the Company for the said calendar year: –

1)   The number of employees being employed, including new and resigned;
2)   Details for employees earning more than RM34,000 p.a. and above, who are known as taxable employees and subject to Schedular Tax Deductions (STD or commonly known as “PCB” in Malay language);
3)   Total remuneration for each taxable employee, STD withhold and remitted;
4)   Total the number of new employees.

*Monthly STD withheld from Employees has to be remitted to IRB by 15th of the following month.

So, what if you fail to submit Borang E? Failure in submitting Borang E will result in the IRB taking legal action against the company’s directors. A minimum fine of RM200 will be imposed by IRB for failure to prepare and submit the Form E to IRB as well as prepare and deliver Form EA to the employees.

However, it is always easier if you engage with services provider to help you in taking care of all these matters. At 3E Accounting, all experienced professional can definitely provide you optimum support. 

Anyone who wanted to incorporate a business will need to register their company, which first step is the lodgement of company name search application to SSM Malaysia (Suruhanjaya Syarikat Malaysia). By doing so is to seek for SSM’s approval of using the desired name in your new company.

However, even you have searched on SSM Online System and checked with SSM e-Info system, whereby the search result shows no one is using your desired company’s name, there might be some other reasons why SSM officers may reject your company’s name applied.

So why would SSM officers reject the application of new company name?

Firstly, company name search application might be rejected by SSM due to proposed company’s name is similar with the existing company and may cause some confusion to the public. Apart from that, reason why SSM officer rejects the company name search application is probably due to the proposed company’s name is similar with the former name of existing company and may create undesirable confusion to the Public members.

Another reason why SSM officers will reject your company name search application is because the proposed company’s name is prohibited by the Companies Act 1965 or any other relevant Acts. Last but not least, the proposed company’s name is undesired for the use as company name.

Below are some actual company name search applications rejected by SSM:

• Company name suggested:

3R LOGISTICS (WEST MALAYSIA) SDN. BHD.

Rejected because somewhat alike with another registered company name:

3R LOGISTIC SDN. BHD. 584288 X 

• Company name suggested:

KONSORTIUM LOGISTIC LUBRICANT BERSATU SDN. BHD.Rejected because company name suggested too general and need to have language adjustment. Need to add wording for company name, for example, KONSORTIUM LOGISTIK INDAH SDN. BHD.

• Company name suggested:

ESA REALTY SDN. BHD.Rejected because ESA is listed as controlled list and prohibited name.

It is always better to engage with experienced professional services provider in the company name search application for you to have a hassle-free process when you register a company. At 3E Accounting, we understand how crucial your time is when setting up a business. Hence, we are ready to support you from the start of your business. Please feel free to contact us for more information.

The T20 group is defined with the median household income of at least RM13,148 while the M40 and B40 groups’ median household income have moved their bars up to RM6,275 and RM3,000 respectively, according to the Household Income And Basic Amenities Survey 2019 research findings from DoSM. In the report, it stated that the median household income for T20, M40 and B40 has shown a compound annual growth rate (CAGR) of more than 6%.

On top of that, Malaysia’s household median monthly income crossed the RM5,000 mark for the first time in 2016, with M40 households registering the highest growth in median income, according to the Department.

Keep in mind that the income group definitions are not fixed. The names, B40, M40, and T20, represent percentages of the countries’ population of Bottom 40%, Middle 40%, and Top 20% respectively. The values may increase or decrease year-to-year, depending on the country’s GDP, which is why the median household income is used as the determinant instead.

Malaysia’s taxes are assessed on a current year basis and are under the self-assessment system for all taxpayers. All income accrued in, derived from, or remitted to Malaysia is liable to tax. That said, income of any person (other than a resident company carrying on the business of banking, insurance or sea or air transport) derived [from sources] outside Malaysia and received in Malaysia is exempted from tax. One thing worth mentioning is Malaysia has an extensive number of double tax treaties available for the avoidance of Double Taxation.

Corporate Income Tax
resident and non-resident organisations doing business and generating taxable income in Malaysia will be taxed on income accrued in or derived from Malaysia.

Individual Income Tax
individual income tax in Malaysia is imposed on earned in Malaysia or received in Malaysia from outside Malaysia.
very individual is subject to tax on income accruing in or derived from Malaysia.

Beginning 1st January 2019, the Government will offer a free insurance scheme worth RM2 billion to individuals between the ages of 18 to 55 within the 4.1 million B40 households. This scheme will provide medical coverage for 5 years to the targeted recipients.

Finance Minister Lim Guan Eng said that the Government will be introducing a National Protection Scheme beginning Jan 1 next year, to provide free insurance and takaful protection for 36 critical illnesses for qualified low-income households or B40.

The scheme is an initial step by the federal government to widen access to health services for vulnerable groups. Lim said the scheme will provide health protection against 36 critical illnesses, for qualified recipients with payment up to RM8,000.

Lim said coverage under the scheme commences Jan 1, 2019 and the scheme’s registration and customer support services will be in operation from March 1, 2019.

“The scheme also gives daily payments as income replacement in the event of hospitalisation for up to 14 days at RM50 per day or RM700 per year,” he said.

“All qualified recipients under the scheme will be notified through SMS messages,” Lim said, adding that further information on the mechanism and implementation of the scheme will be disclosed when it is officially launched in early 2019.