Types of business entities in Malaysia

1. Sole Proprietorship

1.1. 7. Profit: All profits to the sole propietor

1.2. 1. Act: Businesses Registration Act 1956

1.3. 2. Ownership: One person(Malaysian Citizen/Permanent Resident)

1.4. 3. Capital: Self contribution

1.5. 4. Legal status: No seperate legal entity (Owner and business are the same)

1.6. 5. Liability: Unlimited liability (will affect personal assets)

1.7. 6. Requirement of Company Secretary and Audit: Not required

1.8. 8. Taxation: Business profits will be taxed under Personal Income Tax (from 0% to 30%)

1.9. 9. Continuity: Ends when owner dies or decides to stop the business

1.10. 10. Registration: Register with Companies Commission of Malaysia (SSM) [Use personal name (eg: Ali bin Abdul)/ trade name (eg: Ali Enterprise)]

2. Partnership

2.1. 1. Act: Partnership Act 1961

2.2. 2. Ownership: minimum: 2, maximum: 20 partners

2.3. 3. Profit sharing: Profit or loss based on partnership agreement, if no agreement, profit will be shared equally

2.4. 4. Unlimited liability: Liable (if business cannot pay the business debts, assets of partners may be used)

2.5. 5. Registration: Register with Companies Commission of Malaysia (SSM) [Use partners' personal names (eg: Ali & Abdul)/ trade name (eg: AA Enterprise)]

2.6. 6. Decision making: Each partner has the right to be involved in business decision, unless agreement states otherwise

2.7. 7. Continuity: Ends when a partner leaves, unless agreement states otherwise

2.8. 8. Legal status: No separate legal identity (The business must operate under the partners' names, as it cannot own assets, make contracts, or be involved in legal actions independently.

2.9. 9. Taxation: A partnership does not pay taxes as a separate entity; rather, its profits are allocated to the partners, who declare their share as personal income and are taxed according to Malaysia’s progressive income tax rates (0% to 30%).

2.10. 10. Requirement of Company Secretary and Audit: Not required

3. Private Limited Company (Sdn. Bhd.)

3.1. 1. Act: Companies Act 2016 (Act 777)

3.2. 2. Ownership: at least 1 shareholder, maximum is 50 shareholders

3.3. 3. Capital: No minimum paid-up capital (Can be as low as RM1)

3.4. 4. Legal status: Seperate legal entity from the owners

3.5. 5. Liability: Limited to the amount invested in the company for shareholders

3.6. 6. Requirement of Company Secretary: Must appoint qualified company secretary (within 30 days after incorporation)

3.6.1. Audit and Financial Reporting: Have proper financial reports and annual report must be submitted to the Companies Commission of Malaysia (SSM)

3.7. 7. Profit: The company owns its profits and can keep them or distribute dividends to shareholders based on their shares, but dividends are optional (based on company's financial health)

3.8. 8. Taxation: Profits are taxed under Corporate Tax Rates (from 15% to 24%)

3.9. 9. Continuity: The company remains active and operates regardless of changes in ownership or the death of shareholders

3.10. 10. Registration: Register with Companies Commission of Malaysia (SSM) [eg: Shopee Malaysia Sdn. Bhd.]