What is a private limited company (Sdn Bhd) in Malaysia?
Sdn Bhd, or Sendirian Berhad, is a Private Limited Company in Malaysia mandated under the Companies Act 2016 and regulated by the Companies Commission of Malaysia (SSM). It is a private company in Malaysia, with shares not traded publicly on exchanges. It is also regarded as Pvt Ltd, meaning “private limited,” which indicates the owners’ limited liability to the company. The shareholders of this business entity in Malaysia are protected if the company faces financial issues. Shareholders are only liable for the company’s debts up to their capital contributions, and their assets cannot be seized. Moreover, Sdn Bhd is legally distinct from its owners, allowing it to buy or sell property, enter into contracts, and take legal action in its name. This structure is the most popular among foreign investors, as they can own 100% of the company, although specific sectors like agriculture, banking, education, and oil and gas require 50% Malaysian ownership.
How to start a private limited company in Malaysia as a foreigner
A local company in Malaysia is required to undergo proper registration procedures before being allowed to operate legally. Here is a four-step procedure for starting a private limited company in Malaysia.
Step 1. Choose and secure a company name
The first step to starting Sdn Bhd in Malaysia is choosing and securing a company name. Before registering a company, a name search is essential to ensure the preferred name is distinct from other businesses, preventing public confusion and establishing a unique identity for business transactions and marketing. Anyone can apply for a name search through the MyCoID platform by reserving the name for up to 30 days or proceeding with direct incorporation.
Step 2. Register with the Companies Commission of Malaysia (SSM)
After selecting a name, gather the necessary documents and submit them to the Companies Commission of Malaysia (SSM). To register a private limited company in Malaysia, make an account on the MyCoID portal, where all registration procedures are done online. After registering, verify your ID and activate your account at the nearest SSM counter. Upon activation, you will receive your MyCoID login credentials via email. Complete all registration forms, submit necessary documents, and pay the relevant fees.
Furthermore, SSM uses a classification system to categorize businesses based on their activities. This classification system is the Standard Industrial Classification (SIC) code or the SSM business code list. It consists of a five-digit number representing a specific industry or type of business. When registering your business with the Companies Commission of Malaysia (SSM), you must provide your company’s correct business code to SSM.
Step 3. Acquire necessary business licenses
A business license in Malaysia, issued by the local council (Pihak Berkuasa Tempatan), is essential for legally operating your business. This license, known as the Business Premises License, is distinct from the company registration certificate issued by SSM. Failure to obtain a license can result in fines, confiscation of assets, or business suspension.
Step 4. Register as a taxable business entity in Malaysia
Register your company with the Inland Revenue Board (LHDN) to obtain a tax identification number. It is essential to comply with Malaysia’s tax requirements. Company tax file registration is required for any entity managing and operating a company, and businesses must apply for a Tax Identification Number (TIN) upon commencing operations. From January 1, 2024, TIN registration must be done online via the MyTax Portal. However, the TIN is automatically generated for newly incorporated companies registered through the MyCoID Portal.
Advantages of a private limited company in Malaysia
Here are some of the advantages of a private limited company in Malaysia:
- Limited liability: One of its main advantages is limited liability, with their liability limited to their share capital investment, meaning shareholders’ personal assets are safeguarded from the company’s debts.
- Separate legal entity: A Sdn Bhd operates independently, allowing it to enter contracts, own assets, and engage in legal actions in its name. This offers legal clarity and protects shareholders’ interests.
- Access to funding: Sdn Bhd companies can raise funds through equity or loans, and its legal entity status enhances credibility, making it easier to attract investors and secure financing.
- Tax benefits: Sdn Bhd benefits from lower corporate tax rates and is eligible for tax incentives like pioneer status and investment tax allowances.
- Perpetual existence: A private company in Malaysia functions separately from the lives of its owners, allowing it to continue operating even if shareholders or directors leave, retire, or pass away. This continuity ensures stability and reassures employees, investors, and clients.
- Foreign ownership: Foreigners are allowed full ownership and operation of a Sdn Bhd company. The Sdn Bhd private limited company in Malaysia is a business structure that allows 100% foreign ownership, although specific sectors like agriculture, banking, education, and oil and gas require 50% Malaysian ownership.
- Flexible management: Shareholders can appoint directors, set company policies, and distribute profits according to their preferences. PLC company in Malaysia maintains flexible management and ensures that the business runs smoothly.
Requirements to register a private limited company in Malaysia
The following are the requirements to register a PLC company in Malaysia:
- Your company’s name;
- Details of primary business activities;
- Identification cards or passports for all shareholders;
- Recent proof of residential address in Malaysia;
- Information regarding the minimum paid-up capital;
- Shareholding percentages for each shareholder.
Moreover, a Malaysian company must have:
- At least one subscriber for its shares;
- At least one resident director;
- A minimum of one company secretary in Malaysia.
Can private limited companies buy real estate in Malaysia?
Private limited companies (Sdn Bhd) can purchase real estate in Malaysia. This is a common practice for businesses that need to own property for their operations, such as offices, factories, or warehouses. However, some restrictions or limitations may depend on the specific circumstances. For example, the acquisition of property by foreign companies in Malaysia is regulated by the National Land Code (NLC), the Economic Planning Unit (EPU), and various state regulations. A “foreign company” refers to an entity incorporated outside Malaysia or a Malaysian company with 50% or more of its voting shares held by non-citizens. To acquire property, foreign companies must seek approval from the relevant state authority and adhere to minimum property price thresholds and guidelines established by the EPU.
Costs and timeline of private limited company registration
Registering a Private Limited Company in Malaysia does not have a fixed timeline. Depending on various factors, expect the business registration to take a few days to a few weeks. However, registration is just the beginning. Other crucial steps must be taken, including applying for business licenses and opening a Malaysian bank account. Moreover, registering your PLC company in Malaysia requires payment of relevant fees. Below is a table of the necessary registration costs:
| Details | Fee |
|---|---|
| Company name reservation | RM 50 ($11.19) |
| Direct registration (Company name reservation and incorporation) | RM 1,000 ($224) |
Need help setting up a Private Limited Company in Malaysia? We’re here to assist!
Establishing a Private Limited Company (Sdn Bhd) in Malaysia as a foreigner can be a complex and time-consuming process. From navigating legal regulations to managing all the necessary paperwork, there are many steps involved. Our expert team is ready to guide you through each phase, ensuring that your company setup is smooth and compliant with all legal requirements. Whether you need assistance with the full process or just specific parts, we’ve got you covered. Leave your details below, and we’ll get in touch, or email us directly at [email protected] for personalized assistance.
Frequently Asked Questions (FAQs)
Is Sdn Bhd a private limited company in Malaysia?
Yes, Sdn Bhd, or Sendirian Berhad, is a Private Limited Company in Malaysia registered under the Companies Act 2016 and regulated by the Companies Commission of Malaysia (SSM).
What are the disadvantages of a private limited company?
The disadvantages of a private limited company include divided ownership, which can lead to conflicts among stakeholders as decision-making requires shareholder votes; a maximum of 50 shareholders, which can hinder growth and funding; restrictions on raising funds from the public, forcing reliance on loans or existing investors; and limited options for share transfers, making it challenging to introduce outside investors.
Is a local company with foreign shareholders in Malaysia allowed?
Yes, a local company with foreign shareholders is allowed in Malaysia. Foreigners can invest in Malaysian companies through various means, including joint ventures or Foreign Direct Investment (FDI).
What is the difference between Pte Ltd and Sdn Bhd?
Pte Ltd and Sdn Bhd are common abbreviations for private limited companies in Malaysia. Pte Ltd stands for “Private Limited Company,” while Sdn Bhd stands for “Sendirian Berhad,” which is the Malay equivalent of “Private Limited.”
Is Sdn Bhd a private or public company?
Sdn Bhd is a private company in Malaysia.
Is the private limited company and limited liability company in Malaysia the same?
Yes, private limited companies and limited liability companies are essentially the same in Malaysia. Both terms refer to a type of business in Malaysia that offers limited liability to its shareholders.
What is the difference between a limited liability partnership and a limited liability company in Malaysia?
The business structure is the difference between a limited liability partnership in Malaysia (LLP) and a limited company (LLC) in Malaysia. An LLP is a partnership where each partner has limited liability. It’s a hybrid structure that combines elements of a partnership and a company. In contrast, an LLC is a separate legal entity from its owners. It’s more similar to a company than a partnership.
What are examples of LLP companies in Malaysia?
Professional service providers, including legal, financial, and company secretarial firms, are examples of LLP companies in Malaysia.
Can foreigners set up LLP in Malaysia?
Yes, foreigners can set up a Limited Liability Partnership (LLP) in Malaysia, which has a similar registration process to that of a company. You must submit the necessary documents to the Companies Commission of Malaysia (SSM).
What is the tax rate for LLCs in Malaysia?
The corporate tax rate for Limited Liability Companies (LLCs) in Malaysia is currently 24%.
