Company Types in Malaysia
Updated on Thursday 20th May 2021
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Businessmen who want to set up a company in Malaysia can opt for several legal entities; the legal framework applicable here provides three main categories of legal entities, available for both local and foreign investors, but the requirements can vary, in accordance with the residency of the shareholders. Our team of specialists in company formation in Malaysia can offer an in-depth presentation on the legal procedures available for the incorporation of the company and they can also assist in choosing a legal entity which will reflect the investor’s business needs.
Business forms available in Malaysia
Foreign investors can opt for one of the following legal entities, which will be registered with the Companies Commission Malaysia: the limited company, the partnership and the sole proprietorship. Our team of consultants in company formation in Malaysia can provide an extensive presentation on when it is most suitable to select one of the entities mentioned above. The commercial legislation in Malaysia provides the following types of companies:
- the sole proprietorship – a company type designed for a single businessman, which benefits from very simple reporting requirements;
- the partnership – it is a business association that is formed by the participation of at least two businessmen (who have the quality of partners);
- the limited liability partnership – it represents a legal entity that has the characteristics of a private limited liability company and the ones of a partnership;
- the private limited company – it represents the most common way to open a company in Malaysia;
- the public limited company – a business form that is similar with the private limited company, with the difference that this entity is set up by large corporations, which can sell their shares to the general public (unlike the private limited company);
- the company limited by guarantee – a company type in Malaysia that is generally used by non-profit organizations.
The limited company can be incorporated as a public limited company or as a private limited company. The public limited company requires as least 50 shareholders and the legislation prescribes that the shares of the company can belong to the public; they are also allowed to be listed on the stock-market.
The most common manner to open a company in Malaysia is by registering a private limited company; this is given by the fact that the company’s shareholders benefit from limited liability on the company’s debts. The partnership in Malaysia requires the association of at least two members; the legislation prescribes a maximum number of members, limited at 20; the statutory documents of the partnership specify that the members have unlimited liability.
The sole proprietorship is the simplest form of business in Malaysia, in which a natural person can conduct various business activities under his or her name; our team of specialists in company registration in Malaysia can offer further information on the characteristics of the local business forms.
What are the advantages of a private limited company in Malaysia?
As we presented above, one of the ways for starting a company in Malaysia is by opening a private limited company. This business form is selected for incorporation by local and foreign businessmen due to a set of advantages, which can be presented on an extensive manner by our team of consultants in company registration in Malaysia. The private limited company is characterized by the following:
- it represents a separate legal entity than its investors, thus providing limited liability against company debts;
- it is a suitable vehicle for small and medium-sized companies operating in Malaysia;
- a private limited company has the right of owning its own assets;
- it can be registered by a number of shareholders of up to 50;
- the private limited company can be set up by a single shareholder, owning all the company’s shares;
- the company’s shareholders are liable for the company’s debts only to the amount with which they have participated at the company’s capital.
What are the requirements for opening a Malaysian private limited company?
Since the private limited company represents the most popular way to open a company in Malaysia, we’ll present the main legal requirements that have to be met during its registration. One of the requirements for company formation in Malaysia for this structure is to appoint at least one director who has his or her residence in this country.
The registration of the company is done with the Companies Commission of Malaysia, an institution where the company’s representatives have to lodge specific company data. For example, it is necessary to provide a proposed company name, the selected company type in Malaysia, the business activities that will be developed here, the company’s official business address and other necessary data. Besides these, investors must also pay the registration fee, which is of RM 1,000 for this type of company.
What are the statistics on companies in Malaysia?
Businesses operating in Malaysia are registered by both local and foreign businessmen. It is also necessary to know that the participation of women in the local business environment has increased in the last years; at the same time, the Malaysian business market is highly represented by small and medium-sized companies; our team of specialists in company formation in Malaysia can provide more information on the characteristics of local companies, but investors should also know the following:
- at the level of 2016, small and medium-sized (SME) companies accounted for 98.5% of all the Malaysian businesses;
- 20.6% of the SMEs operating in 2018 were owned by women;
- the largest number of SMEs can be found in the services sector (89.2% of all the Malaysian SMEs);
- in 2016, the country had a total of 907,065 SMEs, out of which 809,126 companies were registered in the services sector;
- only 1.1% of the Malaysian SMEs operated in the agricultural sector (a total of 10,2018 companies);
- in the second quarter of 2019, the value of the agricultural sector in Malaysia stood at RM 25,427 million;
- the construction sector had a value of RM 17,274 million in the second quarter of 2019;
- in 2016, the construction sector accounted for 39,158 companies.
Legal framework for foreign companies in Malaysia
It is important to know that foreign residents can register a company in Malaysia as a private limited company only if a director of the business is a Malaysian resident. Foreign companies, which have already been incorporated in another state, can establish their business operations in Malaysia as a branch.
The video below offers a short presentation on the types of companies that can be registered in Malaysia:
Persons who need to receive more details on the legal entities available in Malaysia are welcomed to contact our team of company formation consultants. Our representatives can assist investors in opening a company in Malaysia and may also advise on the tax regulations applicable to each company type available here. We can also help you with company incorporation in Sweden.