Categories of Business Entities exist in Malaysia and its differences
The most common types of business organisation in Malaysia are as follow :
| Limited Company | Limited Liability Partnership | Conventional Partnership | Sole Proprietorship | |
|---|---|---|---|---|
| Ownership | one or more | two or more (but not more than 20) individual | two or more parties | one |
| Words ended at the end of name registered | “Sdn Bhd” or “Sendirian Berhad” or “Bhd” or “Berhad” | “PLT” (Perkongsian Liabiliti Terhad) | No specific word | No specific word |
| Capital Contribution | Shareholders contribution | Partners contribution | Partners contribution | Self contribution |
| Owners of the business | Shareholders or Members who own ‘shares’ and entitle to certain rights in the Company | Partners who have contributed capital | Partners | Sole Proprietor |
| Legal Status | Separate legal entity | Separate legal entity | No separate legal entity status | No separate legal entity status |
| Party that is liable for debts of the business | Company | LLP | Partners | Sole Proprietor |
| Management of business | Board of Directors | Partners | Partners | Sole Proprietor |
| Personal liability | No personal liability. Liabilities borne by directors or shareholders are to the extent of unpaid shares only. | No personal liability of partner, except for own wrongful act or omission or without authority. Liabilities borne by partners are jointly and severally with the LLP to the extent of unpaid share capital only. | Unlimited liability (jointly and severally liable with the partnership) which can extend to personal assets of the partners. | Unlimited liability which can extend to personal assets of the sole proprietor. |
| Limitation of Liability | Limited | Limited | Unlimited | Unlimited |
| Profit sharing | Follow shareholding proportion in the Company | Specify in LLP Partnership Agreement | Specify in Partnership Agreement | Entitled to all profit |
| No. of Shareholders/
Partners |
Minimum 1 and maximum 50 for private limited company | Minimum 2 and no maximum limit | Minimum 2 to 20 partners (Except for partnerships for professional practice with no maximum limit) | Only one |
| Requirement of Company Secretary / Compliance officer | Acting by qualified/licensed Company Secretary under the Law | Acting by one or more Partners or qualified / licensed Company Secretary under the Law | Not required | Not required |
| Audit Requirement | Accounts required to be audited | Not mandatory unless stated in partnership agreement | Not required | Not required |
| Yearly Compliance to CCM | Must circulate audited financial statement to shareholders.
Mandatory to lodge annual return every anniversary date of company and audited financial statements within 6 from the financial year end to SSM |
Mandatory to lodge an Annual Declaration and solvency statement within 90 days from the financial year end | Not required | Not required |
| Renewal of License | Not required | Not required | Mandatory | Mandatory |
| Annual Filing Fee to SSM | RM150.00 for Annual Return
RM50.00 for Audited Financial Statements |
RM200.00 | Trade Name – RM60.00 per year Personal Name – RM30.00 per year |
Trade Name – RM60.00 per year Personal Name – RM30.00 per year |
| Income Tax Status | Tax on Company | Tax on LLP | Tax on Partners | Tax on Sole Proprietor |
| Income Tax Rate *Year Assessment 2016 (Subject to change yearly) |
19% on the first RM500K profit (applicable for Small and Medium Sized Enterprise) and 24% on the remaining balance of profit. | 19% on the first RM500K profit (applicable for Small and Medium Sized Enterprise) and24% on the remaining balance of profit. | From 0% to 28% | From 0% to 28% |
| Controlling Law | Companies Act 2016 & Companies Regulations 2017 | Limited Liability Partnerships Act 2012 & Limited Liability Partnerships Regulations 2012 | Registration of Businesses Act 1956 & Registration of Businesses Rules 1957 | Registration of Businesses Act 1956 & Registration of Businesses Rules 1957 |
| Succession | Perpetual succession | Perpetual succession | No perpetual succession | No perpetual succession |
| Formation | Lots paperwork and more expensive | Fewer paperwork and formalities | Less paperwork and formalities | Less paperwork and formalities |
| Administration | A bit complex | Simple | Simple | Simple |