IMPORTANT THINGS YOU SHOULD KNOW BEFORE SETTING UP A BUSINESS

1. What type of business entities I should register?

Under the Malaysia Legal System there are 7 types of business entities in Malaysia which are – Sole Proprietorship, Partnership, Limited Liability Partnership, Company which consists of Private Company and Public Company, Unlimited Companies and Foreign Company.

2. What is meant by sole proprietorship?

When it comes to startup a business, nothing is more straightforward than a sole proprietorship. Also known as an Enterprise, a sole proprietorship is the simplest business to get started with for new entrepreneurs who want to start a small business with limited capital (eg: starting your own restaurant, online business).

3. What is meant by partnership?

If two or more persons seeking to form a business together, a partnership is the easiest business entity to begin with. In a partnership business, two or more people will combine their resources to form a business and agree to share profits and liabilities.

4. What you should know about Limited Liability Partnership?

In partnership, every partner have unlimited liabilities in which they have to share liabilities including risks and losses. Meanwhile, a Limited Liability Partnership as its name suggests, gives each partner liabilities that are only limited to the amount they put into the business. Therefore, each partner is not responsible or liable for another partner’s misconduct (separate legal entity). A limited liability partnership must have the words “Perkongsian Liabiliti Terhad” or “PLT” at the end of its name.

5. What are the basic criterias of Private Company and Public Company?

Private Company: a company that privately owned either by an individual or a group and whose shares are not offered for public. A private company must have “Sendirian Berhad” or “Sdn. Bhd” in its name.

While Public Company: a type of business entity that offers shares to public in order to raise funds for business expenses. The name of a public company shall end with the word “Berhad” or “Bhd.”

6. What is meant by Unlimited Company?

Unlimited Company is basically a private company except the fact that the members have unlimited liabilities to contribute to the obligations of the company. The members and shareholders will be personally responsible if there is any loss or the company is in debt. The name of an Unlimited Company shall end with the word “Sendirian” or “Sdn.”

7. What is meant by Foreign Company?

Foreign company is a business entity which is incorporated outside of Malaysia. A foreign company that is not registered under the Companies Act 2016 (Act 777) is not allowed to conduct business in Malaysia.

8. Is there any guideline to help deciding which types of business entities would be the best for one’s business plan?

There are many factors to consider before choosing a business structure such as flexibility, liability, capital investments, taxes and control. However, the two utmost critical factors that needs to be decided first are –

• Who are the owner of the business
• How the company’s profit will be distributed to its shareholders

9. Which types of business entities are the most advantageous and low risk?

Each business entities have their own advantages and disadvantages. In order to decide which types of business entities would be the most ideal for one’s business, we should first look at the nature of the business you would like to set up. Here are the key differences between each business entities-

10. What are the laws that govern each type of business entities?

• Sole proprietorship : Registration of Business Act 1956 (Act 197)
• Partnership : Partnership Act 1961 (Act 135)
• Limited Liability Partnership : Limited Liability Partnership Act 2012 (Act 743)
• Private & Public Company: Companies Act 2016 (Act 777)

Prepared by

Nur Syaheerah Razailani & Noori Sufiyya Binti Mazlan
MESSRS MISYAIL OTHMAN & CO