Registering a New Company: Enterprise or Sdn Bhd?

In Malaysia, there are 3 main types of business organisations which are Enterprise (Sole Proprietorship and Partnership), Company (Limited and Unlimited), and Limited Liability Partnership (LLP). In this article, we will be focusing on Enterprise and Limited Company by Shares (Sdn Bhd) since these two are more popular in Malaysia.

Each of enterprise and Sdn Bhd have their own pros and cons. If you are planning to start up a business, it is necessary for you to consider the advantages and disadvantages of both business entities for long term purposes.

Following are the differences between Enterprise and Company Limited by Shares (Sdn Bhd)

	Enterprise (Sole Proprietorship and Partnership)	Limited Company by Shares (Sdn Bhd)
	Suitable for new and small business because it save cost and time for registration.	Suitable for business with high revenue or small business that grow into maturity.
Liability	Business owner's personal wealth may be affected and exposed to risks.	Director's personal wealth is protected. The liability of the shareholders are limited to the nominal value of its shares.
Legal Responsibility	Owner liable for the legal obligations and liabilities.	Director liable for the legal obligations and liabilities, not shareholders.
Start-up Cost	RM100++	RM 1500-RM3000
Yearly Maintenance	Below RM 100*	RM5,500++
Registration	SSM counter or online	Company secretary
Tax Rate	Owner have to pay taxes but the tax rate is higher.	Company pays the taxes, not the owner. Tax rate is lower.
Tax Planning Opportunity	Limited. Business profit will be taxed at Personal level. Unfavourable terms in personal tax provisions & practices.	Better tax planning as company is a separate legal entity. Tax saving of at least 20% compared to Personal
Business Continuity (if owner/ partner has passed away)	Sole Proprietorship - Operations may continue if owner authorized personal representative. Partnership - If the agreement allows the partnership to continue, generally the estate will receive payment based on the decedent's past contributions to the partnership, his /her share of the partnership's liabilities and past undistributed profits.	Sdn Bhd will never expire and the company will still exist even the key owner has passed away. If the single director passed away, the company secretary will call a meeting of next of kin for the purposes of appointing a new director. If the next of kin failed to appoint a director within 6 months after the death of the director, the Registrar may direct the company to be struck off the register.

* If owner do not engage an auditor and accountant

Based on the table, it is easier and cheaper to maintain the enterprise compared to Sdn Bhd. There is no obligation for enterprise to appoint secretary and audit their account. The preparation for tax payment is simpler and easier but the owner’s tax rate will be higher as all income will be taxed at the personal level for the owner. And the most important thing is that it does not require more legality to conform especially when it involves the raising of capital for the business because there is no requirement to inform the Registrar.

Normally, enterprise whether sole proprietor or the partnership, run the business in a small to medium industry scale compared to Sdn Bhd because the business risk is lower. So, if you are planning to run a small business, it is more suitable for you to register an enterprise. You may refer this guidelines for registration.

GUIDELINES FOR REGISTRATION OF NEW ENTERPRISE

1. What are the requirements to register an enterprise in Malaysia?

i. Owner must be a Malaysian Citizen or a Permanent Resident of Malaysia.

ii. Owner must be aged between 18 years and above.

iii. Business must be carried out in Peninsular Malaysia or Federal Territory of Labuan.

iv. Only owner / partner is allowed to submit an application.

2. How long will it take to register an enterprise?

Business Registration Certificate can be obtained within 1 hour after payment.

3. How to register an enterprise?

You have to register at Suruhanjaya Syarikat Malaysia (SSM) counter or through online via Ezbiz Online services at ezbiz.ssm.com.my. Then, complete the Business Registration Form (Form A) and attach documents as follows:

i. Photocopy of owner and/ or partner’s identity card;

ii. Permit, licence or Supporting letter for the type of business e.g Nurseries (Department of Social Welfare), Kindergarten, Tuition Centres, Schools/College (Ministry/ Department of Education); and

iii. Approval or Supporting Letter from relevant agency if required by the Registrar of Business.

Your business may be registered using personal name or using a trade name.

(a) Personal Name – Enterprise name using personal name as stated in the identity card is not required to apply for enterprise name approval.

(b) Trade Name - Complete Enterprise Name Approval Form (Form PNA.42).

You can refer this, Guidelines for Business Name Application.

4. How much is the registration fee?

Sole proprietorship using personal name as stated in the identity card– RM30.00

Sole proprietorship or partnership using trade name - RM60.00

Registration of branches – RM5.00 for each branch

Business Information Print-out – RM10.60 (Including GST)

As a reminder, you have to register your business no later than thirty (30) days from the date of commencement of business. A new enterprise registration may valid for a period of one (1) year and does not exceed five (5) years.

Compared to enterprise, operation of business as Sdn Bhd gives more advantages as the shareholders of the company, i.e. the shareholders and the company are two different entities. The company also would be liable for all of the debts and it would not affected the shareholders at all.

In the case of the company be wound up, shareholders will only be liable for the unpaid shares to the company and if the shares are fully paid, then there is no obligation for them to contribute their personal assets to settle the company's debt. Besides, accounts of Sdn Bhd is more reliable and trustworthy, therefore it is easier to apply for loans (depends on certain condition).

GUIDELINES FOR REGISTRATION OF NEW SDN BHD

1. What are the requirements to register a Sdn Bhd in Malaysia?

The company needs to have at least two (2) persons as the company directors and fulfil the condition as below:

i. Malaysian or Foreigner with principal address in Malaysia.

ii. Above 18 years of age.

iii. Not an undischarged bankrupt.

iv. Have not been convicted of a serious offence within the past 5 years.

2. How long will it take to register a Sdn Bhd?

The company can normally be set up within three (3) to ten (10) working days.

3. What are needed to register a Sdn Bhd?

i. Proposed name of the New Company

ii. Business activities of the New Company (max 3)

iii. Photocopy I/C (Malaysian) or Passport (Foreigner) of all directors & shareholders.

iv. Residential addresses of all directors & shareholders, if these are different from I/C.

v. Information of Paid-up capital of the Company (Min. RM2 & Max RM2,500)

vi. Share structure of the New Company (percentage of shareholding by each shareholders)

4. What are the procedures to register a Sdn Bhd?

There are basically three (3) stages to register a company in Malaysia:

i. Application of Name Search

Obtain proposed name approval from SSM. Normally SSM will take a few hours to two (2) working days to reply on the request. The steps involved are:

(a) Completion and submission of Form 13A CA (Request for Availability of Name) to SSM; and

(b) Payment of a RM30.00 fee for each name applied.

You can refer to this Guidelines for Business Name Application

ii. Preparation of Documents.

Once the name search approval is obtained, company secretary will prepare the documents to be signed by the shareholders and directors. The process can be completed within few hours to few working days, depending on the actual appointment timing between the company secretary, shareholders and directors. The full payment for incorporation is required to be fully settled before proceeds to next stage. The normal incorporation fee is around RM 1500 to RM 3000.

iii. Stamping and Submission

As all the documents are signed, company secretary will submit them to the relevant government agencies for stamping and submission. The registration documents must be submitted to SSM within 3 month from the date of approval of the company’s name by SSM, failure of which a fresh application for a name search must be done.

Normally SSM will take one (1) to five (5) working days to issue the Incorporation Certificate (Form 9). The company is successfully registered once the Form 9 was issued by SSM.

5. How much is the maintenance fees of a Sdn Bhd for a year?

The yearly maintenance cost varies for different companies and it mainly depends on business turnover or sales, volume of business transactions and total assets of that particular company for a particular financial year. The maintenance fees of a dormant Sdn Bhd should be in the range of RM2,000 to RM3,000 (Include audit fee and secretary fee). If the company is active during the year, the compliance cost that the company need to pay in order to maintain the legal status is around RM 5000++ inclusive of:

(a) Audit Fees

(b) Tax Agent Fees

The followings are the estimated yearly maintenance fees for a company which has a turnover or sales ranging between RM100,000 to RM500,000:

Yearly Secretarial Fee of RM780.
Lodgement of Annual Return to SSM of RM270 (inclusive of SSM Fee of RM150) and lodgement of Audited Accounts to SSM of RM170 (inclusive of SSM Fee of RM50).
Annual Fee for Accounting Service of RM1,200 to RM3,000 to prepare management accounts and financial statements to be audited. The fee is only applicable to those companies which do not have accounting personnel to manage and prepare their financial statements for audit purposes.
Annual Fee for Audit Service of RM1060 to RM3,000.
Annual Service Fee for Computation of Company's Income Tax to Tax Agent of RM400 to RM1,200.
Total cost is around RM 8,000 per annum

From the comparison for both business entities, it is clear that the decision is basically based on budget, corporate perception and the liability. If you register for an enterprise, all capital, effort and hard work devoted to the business in return would entitled for all of the net profit generated from the business as a reward. However, your liability is unlimited.

For Sdn Bhd, the profit generated from the business belongs to the company not the director and shareholders. The liability of shareholders is limited and the director is not liable for liability. Company must appoint company secretary to ensure that all requirements had been complied with and to take care of all statutory books and records.

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