Choosing the right business structure is a crucial decision when starting a business in Malaysia, as it impacts taxation, legal liability, and growth potential. Making the wrong choice could lead to higher taxes, financial risks, or operational challenges. Each type of business entity has its own legal, tax, and operational implications. Below are the most common types of business structures in Malaysia to help you make an informed decision. While these are widely used, other niche structures may exist for specialized business needs.

1. Sole Proprietorship

A Sole Proprietorship is the simplest and most cost-effective business structure. It is owned and managed by a single individual.

Key Features:

2. Partnership

A Partnership is similar to a sole proprietorship but involves two or more individuals (up to 20) sharing ownership.

Key Features:

• Requires at least two partners
• hared profits and liabilities
• No separate legal entity (partners are personally liable)
• Must be registered with SSM
• Taxed as personal income (maximum tax rate of 30%)
• Suitable for professional firms (lawyers, accountants, consultants)

3. Private Limited Company (Sdn Bhd)

A Private Limited Company (Sdn Bhd) is a separate legal entity from its owners, providing limited liability protection.

Key Features:

• Requires a company secretary for compliance with Malaysian corporate laws
• Owned by shareholders (minimum of one shareholder)
• Limited liability (shareholders’ personal assets are protected)
• Corporate tax rates apply (15% for the first RM150,000, 24% thereafter)
• Can raise funds through investments
• Suitable for businesses looking for credibility and growth potential

4. Public Limited Company (Berhad)

A Public Limited Company (Berhad) is a larger entity that can sell shares to the public and is usually listed on Bursa Malaysia.

Key Features:

• Minimum of two directors and shareholders
• Can raise capital from public investors
• Strict regulatory and reporting requirements
• Corporate tax rate of 24%
• Suitable for large businesses looking for expansion and public investments
• Requires a company secretary to handle regulatory compliance

5. Limited Liability Partnership (LLP)

A Limited Liability Partnership (LLP) combines the benefits of a partnership and a private limited company.

Key Features:

• Separate legal entity
• Limited liability for partnersRequires at least two partners
• More flexible management compared to a private limited company
• Corporate tax rate of 24%
• Suitable for professional service providers and small businesses
• Requires outsourced accounting services for tax compliance and financial reporting

6. Foreign Company

A Foreign Company refers to businesses incorporated outside Malaysia but operating in the country.

Key Features:

• Businesses must register with the Companies Commission of Malaysia (SSM) before operating in Malaysia. This involves submitting the required documents, including the company name, business address, and details of directors or owners. Depending on the structure, additional approvals or licenses may be necessary.
• Requires a local representative or agent
• Subject to Malaysian business regulations and taxes
• Corporate tax rate of 24%
• Suitable for international businesses expanding into Malaysia
• Often requires outsourced accounting and company secretary services to ensure compliance with Malaysian laws

Choosing the Right Business Structure

Selecting the appropriate business structure depends on factors such as liability, taxation, ownership control, and long-term business goals. For example, a sole proprietorship is ideal for freelancers and small-scale businesses looking for easy setup and low costs. A partnership works well for professional firms like law or accounting practices. If you want limited liability and scalability, a Private Limited Company (Sdn Bhd) is the best choice. Meanwhile, Public Limited Companies (Berhad) suit businesses planning to go public, and LLPs offer flexibility for professional service providers. Choosing wisely can help optimize taxation and business growth. Entrepreneurs should consider consulting a professional accountant or business consultant for guidance.

Why Choose Us?

At TAN ACCOUNTING ADVISORY, we specialize in company registration, outsourced accounting, company secretary services, tax advisory, and compliance solutions. Our expert team ensures that you choose the most tax-efficient and legally compliant business structure in Malaysia. Whether you need help with accounting, payroll, or corporate secretarial services, we provide tailored solutions to meet your business needs.

📞 Contact us today for a free consultation and let our experts help you establish your business quickly and efficiently. Don't miss the opportunity to optimize your tax savings, ensure legal compliance, and streamline your business operations with our outsourced accounting and company secretary services in Malaysia!