Set up a company in Malaysia - Matters to Consider

Do we need to set up a company to start up business in Malaysia?

Businesses in Malaysia are required to be carried out by either these two types of business organisations:

1. Business firms (governed under Registrar of Business Act 1956)
2. Registered companies (governed under Companies Act 1965)

Start up Business in Malaysia - What is a business firm?

Business firms can be either of these two types:

1. Sole proprietor/ Sole trader - Sole proprietor is a business carried out in the name of an individual.
2. Partnerships (governed by Partnership Act 1961) - Partnership is a business owned by two or more individuals.

Both these types of business firms have no separate legal existence apart from the persons who owns the business and properties cannot be held under the name of the business firms. All contracts are signed in the name of the individuals who own the business and their liability is unlimited.


A comparison highlighting the distinction between a company, partnership and sole-proprietorship is summarized and simplified as follows:








A company is a person separate from its members.


Two or more persons carrying on business with a view of profit.


Individual in business on his own.



Need to be registered with the Registrar of Companies as a company.


Need to register their business under the Registration of Businesses Act, 1956.


Needs to register his business under the Registration of Businesses Act, 1956.



Shares in a company are generally transferable although the right of transfer may be restricted.


Generally, a partner cannot transfer his status as partner to someone else without the consent of all the other partners.


A sole-proprietor may transfer his business to someone else.



Members of a company as such are neither its managers (directors) nor is agents.


Partners are agents of the firm for carrying on its business in the ordinary course of business and are generally entitled to manage the firm.


The sole- proprietor owns and manages the firm himself and can employ employees to manage the firm for him.


Number of members

There is no maximum number of members

(expect where it is a private company, in which case the maximum is fifty).



The maximum is twenty. (There is no ceiling on the number of members for professional firms.14E)


There is only one person in a sole-proprietorship.



A company must be constituted in writing, i.e. by a Memorandum and Articles of Association.


Partners may withdraw capital but their liability for the firm’s debts to its creditors is unlimited.


A sole-proprietor may also withdraw capital. His liability for the firm’s debts to its creditors is unlimited.


Capital and liability

Capital subscribed by members for their shares cannot ordinarily be returned to them, but (in a limited company) they are not liable for its debts once they hold fully paid shares.



Partners may withdraw capital but their liability for the firm’s debts to its creditors is unlimited.


A sole proprietor may also withdraw capital. His liability for the firm’s debts to its creditors is unlimited.


Borrowing powers

Companies can borrow for purposes covered by their objects as contained in their Memorandum of Association.


Partners have unrestricted powers of borrowing in terms of amount and purpose.


A sole proprietor has unrestricted powers of borrowing.


Security over assets

Companies can use current assets as security by creating floating charges.


Partners cannot create floating charges but they can mortgage the firm’s assets.


A sole proprietor cannot create floating charges but can mortgage the firm’s assets.


Rules, procedure and information to public

Companies are subject to various statutory rules of procedure and are required to supply certain information to the public.


Partnership may be formed informally and they need not supply information to the public.


Sole proprietor-ships are formed informally and information about the firm need not be published. 



A company is dissolved by winding up and liquidation which is a formal procedure.


Partnership may be dissolved informally, e.g. by agreement of the partners.


Sole proprietor-ship may be dissolved in-formally by the sole proprietor himself.



The most popular form of company that allow owner to have a separate form of legal entity between the Company and the owner.

The Company is own and invest by its shareholders. Shareholders can be either an individual shareholders or corporate shareholders. Whereas, the operation and management of the company are manage by the Board of Directors appointed by shareholders.

A sole proprietor or partnership can upgrade to a company, whereby it is more appropriate when the company is growing and become more complexity in business for the following reason:-

l Enjoyed the separate legal entity
l Proper govern by the Companies Act and its memorandum and articles of association
l Public confidence on the company's annual financial statement as accounts are properly audited by
   independent auditor
l Stepping stone to convert to public company's and listed on Bursa Kuala Lumpur in future

Things to do before incorporated a new company:

1) think of the most suitable name for your business.
2) get at least two director with having residential. Address in Malaysia and must be at least 18 of age.
3) plan out the shares holding structure.
4) determine the principal business activities.
5) appoint a qualified company sectary.( a must requirement under the companies act)

Having decided on the above matter let's now select from our plan that best suite you:
A) Basic Package
B) Standard Package

Now you are ready to incorporate a brand new company.

Basic requirement to be a business owner for SOLE PROPRIETOR/PARTNERSHIP:-
1. He / She must be of age 18 YEARS and above
2. He / She must not be an Un discharged BANKRUPT
3. He / She must not have been CONVICTED of an OFFENCE within a Period of 5 Years before the APPOINTMENT
4. He / She must be a RESIDENT of Malaysia

Introduction to Sole Proprietor/Partnership

Sole proprietorship/ Partnership are governed by the Registration of Business Act, 1956, which is under the jurisdiction of Suruhanjaya Syarikat Malaysia (SSM) or Companies Commission of Malaysia (CCM) under the Domestic Trade and Consumers Affairs Ministry.

A sole proprietorship by its definition mean a business that is owned by one person whereas partnership mean the owner are more than one persons (But limited to 20 partners). Only a Malaysian citizen or permanent resident who has attained the age of 18 years and above is eligible to register as business owner.

Both Sole Proprietor/ Partnership do not enjoy the concept of separate legal entity, which mean that the owner or partners is jointly liable to the business dealing. Therefore, creditors of the Sole Proprietor / Partnership may sue for debts incurred and also obtain a court order to claim against his personal assets, including his house.

Therefore, in most of the cases when business expands, the owner will request to change the business to a limited company, i.e. a SDN. BHD. Company.

For further information or an initial discussion of your requirements, please contact us