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Registration of Business Entities Business registration in Malaysia -…
Registration of Business Entities
Business registration in Malaysia
Introduction
Business operators who conduct business to earn profit must register their businesses.
Registration makes business activities legal.
Main registration agency: Companies Commission of Malaysia (SSM).
Cooperatives register with Suruhanjaya Koperasi Malaysia (SKM).
Each business type has its own advantages and disadvantages.
Types of Business Entities in Malaysia
Sole Proprietorship
Partnership
Limited Liability Partnership (LLP)
Private Limited Company
Cooperative
Benefits and Limitations
Consider the advantages and disadvantages of each business type before registration.
Compare ownership, liability, capital, management and legal requirements.
Registration Procedures
Identify the appropriate registration agency.
SSM — business entities such as sole proprietorship, partnership, LLP and companies.
SKM — cooperative societies.
Websites: www.ssm.com.my and www.skm.com.my
Sole Proprietorship
Definition and characteristics
Owned, funded and managed by one person.
Simplest and most popular business form in Malaysia.
Registered under Business Registration Act 1956.
Advantages (+)
Owner gets 100% of profits.
Easy and inexpensive registration.
Registration cost stated in PDF: RM60 + RM10 documentation.
:Limitations (−)
Capital depends on owner's resources.
Difficult to raise additional capital; no shares issued.
Complex decisions may be difficult for one person.
Partnership
Definition
Owned by 2–20 people.
Professional firms may have up to 50 members.
Registered under Business Registration Act 1956.
Advantages (+)
Partners contribute capital.
Skills and responsibilities can be shared.
More efficient management.
Partners exchange ideas for better decisions.
Limitations (−)
Unlimited liability for business debts.
Partners may be liable for other partners' actions.
Different opinions can cause disagreements and disputes.
Limited Liability Partnership (LLP)
Definition
Combines characteristics of a conventional partnership and a private limited company.
Governed by Limited Liability Partnerships Act 2012.
Separate legal entity from its partners.
Minimum 2 persons; no maximum number stated in the PDF.
Has perpetual succession.
Advantages (+)
No limit on the number of owners.
Registration fee stated in PDF: RM500.
Can own property, enter contracts, sue and be sued in its own name.
Limitations (−)
Some parties may not recognise or understand LLPs.
May face credibility issues with consumers, clients and businesses.
Tax rules may be complicated and create additional tax or personal filing issues.
Private Limited Company (Sdn. Bhd.)
Definition and characteristics
A separate legal entity from its founders and members.
Governed by company law; the PDF discusses the Companies Act 1965 and amendments under the Companies Act 2016.
Membership stated in the PDF: minimum 1 and maximum 50 individuals.
Shareholders' liability is limited to the shares they own.
Must use Sendirian Berhad (Sdn. Bhd.) at the end of its name.
Cannot invite the public to buy its shares.
The PDF mentions Memorandum of Association and Articles of Association.
Requires a company secretary and auditor, as described in the PDF.
Advantages (+)
Shareholders' personal assets are protected from company financial difficulties.
Good market reputation and credibility.
More systematic management structure.
Limitations (−)
Registration process is complicated and time-consuming.
Legal and professional assistance may be needed.
Board meetings, audits and other procedures take time.
Cooperative
Definition and characteristics
Voluntary association of people with common economic, social and cultural needs.
Jointly owned and democratically controlled.
Primary cooperative: minimum 100 members.
Advantages (+)
Formation is relatively easy.
People with common interests can join.
Members can join or leave voluntarily.
Democratic management through elected representatives.
Limitations (−)
Limited capital-raising ability.
Low returns may discourage members from investing more.
Government assistance may be insufficient.
Lack of managerial skills can reduce efficiency.
Registration Procedures
Final Summary
Business registration is compulsory for entrepreneurs, according to the chapter.
Malaysia has five business entity types discussed in the PDF.
Every entity differs in ownership, liability, capital, management, legal requirements and registration procedures.
Entrepreneurs should compare the benefits and limitations before choosing a business structure.
The main registration agencies are SSM and SKM.