How to start a business in Malaysia: A DHL guide

For most of us Malaysians, we were always told to secure a job, save money, settle down and start a family. And for most of us, that was always the case.

However, times are different.

There are those who break tradition in search of success. Nevertheless, success won’t magically appear from a 9 to 5 day job. No, success comes from those who are willing to take calculated risks. Success comes from those who want to start their own business empire.

Are you one of those who are ready to take a leap of faith? I hope that you’ve understood that starting a business is a risky move. You’re jeopardizing your day job which brings you a stable income every month to venture into something that might not even bear fruit. That takes guts!

So, if you have the courage and are willing to take risks, you already have the traits of a successful entrepreneur! But before you do anything rash, why not take a step back and think a little more about the details? Specifically, you’d have to first question yourself: What you’d want to do with your business? Or what type of business are you trying to start?

The road ahead is not an easy one. Allow us to walk you through the general process to clear out some fog so that you can start your business journey with ease!

Choose your business type to start in Malaysia

I’m sure you have already heard of several types of businesses from various sources. However, if you’re just starting your business journey, you'll need to know three common types of business in Malaysia.

1. Enterprises (Business)

• Sole proprietorship

• General Partnership

The first type of business is enterprise. And within an enterprise, lies Sole Proprietorships and General Partnerships. As the name suggests, sole proprietorships are founded by one entrepreneur, while a general partnership can be started by 2 to 20 business partners. 

Both a sole proprietor and a general partnership are considered the easiest and cheapest business entity to create.  This is because the registration process for these enterprises can be completed within an hour physically or online!

2. Private Limited Company (Sendirian Berhad or Sdn Bhd)

I’m sure you might have noticed a lot of companies have ‘Sdn Bhd’ behind their name. That’s right! A ‘Sendirian Berhad’ or ‘Sdn Bhd’ is the Malay translation for a Private Limited Company in Malaysia.

Confused? Don’t be! Let’s break down each word for us to better understand the term. ‘Private’ means that the company is under private ownership, as its shares are not traded in the stock market. While ‘Limited’ means that the liabilities of this company are limited to only the amount of money or capital invested in the business.

3. Limited Liability Partnership (LLP)

Ever wondered what will happen when you combine the traits of a General Partnership with a Company? Well, it will give birth to a new type of business entity that we call a Limited Liability Partnership (LLP)! 

Introduced in 2012, LLP was initially for professional bodies such as chartered accountants, lawyers or company secretaries who were not able to start their own Private Limited Companies. However, as time has changed, these professional bodies are now free to choose whatever types of business they wish to start for their business journey. 

Still, LLP is yet a viable option today for professional bodies to choose as it provides the same benefits of a Private Limited Company while being affordable and flexible like a general partnership.

Which type of business suits me the best?

Enterprise (Business)

If you’re trying to start a small business such as selling stuff online or setting up a small stall outside of your house or neighbourhood, an enterprise might be the best way to do so. Starting an enterprise requires less hassle and is easier to get started with and it can be done within the hour.

Advantage: 

• The cheapest and easiest option to set up within the three business entities. 

• Compliance can be easily met. 

• Business owner(s) have full control over the business. 

Disadvantage: 

• Higher personal income tax for business owners. 

• Less opportunity for potential investment and future partnerships.

• Unlimited liability to the business owner(s).

Private Limited Company (Sdn Bhd)

As the most common type of company in Malaysia, a Private Limited Company will best suit you if you have plans to grow or expand your company in the future. Sdn Bhd is best suited for businesses that plan to grow at a rapid pace as it is the most credible type of business entity in Malaysia. However, this comes with a price of higher annual fees and troublesome compliances.

Advantage:

• Ease of fundraising from investors or a higher chance to get bank loans.

• Able to enjoy corporate tax benefits.

• A company is a separate legal entity from its shareholders.

Disadvantage:

• High annual maintenance fee.

• Higher cost of incorporation or registering your business.

• Cumbersome compliances and requirements to follow.

Limited Liability Partnership (LLP)

If you’re a Malaysian and part of a professional body or someone who wishes to start your own company with your business owners, LLP can also be a viable option compared to the other three. Similar to a Private Limited Company, LLP also protects its business partners from liabilities that occurred as liability is only limited to the paid-up capital in an LLP. 

Advantage:

• LLP is a cheaper option compared to a Private Limited Company (Sdn Bhd).

• Shares the same tax benefits with Private Limited Company (Sdn Bhd).

• Flexible agreement with business partners is similar to a general partnership. 

Disadvantage:

• It's not easy to get a green light for bank loans or funding from investors. 

• No way for an LLP to sell its share to raise funds as an LLP does not rely on share options.

• Less room for business growth. 

The choice is yours!

Each of these company entities has its own advantages and disadvantages. It all depends on the type of business that you want to start and how much money and time you are willing to invest in your new start-up business. It’s vital to understand each business entity throughout before choosing one over another!

Register your company

Now with everything cleared up and you’ve already known what type of business you’d want to start, let’s talk about the requirements you will need to register or start your desired business. 

Enterprise

Requirements:

• You must be a Malaysian citizen or a permanent Malaysian resident. 

• You must be over 18 years old. 

• Registration can be done within an hour.

Private Limited Company (Sdn Bhd)

Requirements:

• Minimum of RM 1 paid-up capital

• At least 1 Shareholder

• At least 1 Director

• 1 company secretary (within 30 days of company registration)

• A Malaysian registered address

• Registration takes about 5 to 7 working days. 

Limited Liability Partnership 

Requirements: 

• At least 2 business partners

• Only for businesses with the purpose of making profit.

• At least 1 Compliance Officer from the business partners. 

• It will take around 4 to 15 days to register.

Opening a corporate bank account (for Private Limited Companies)

For entrepreneurs who choose to start a Private Limited Company (Sdn Bhd), you will need to open a separate corporate bank account to store your money. 

If you’re unsure of why you will need a separate account for your business, that is because you will use this bank account to store the paid-up capital that you and your shareholders have paid. It will also act as the place where you keep the money received from any business transactions done through the company. 

As you may have already known, a Private Limited Company (Sdn Bhd) is a different entity from its owners, which means that the money that you made through your company is something that you cannot directly put inside your pocket. Instead, it should be stored in your company’s bank account.

Apply for business permits and licenses  

So, think you have everything you need to finally start your business? Well, I’d say you’re partially right. That’s just this one last thing that you might have forgotten... Yes, you’ve guessed it! You’ll need business permits and licenses to conduct your daily business operations!

For instance, if you’re thinking of running your business operations on physical premises, you will need a premises license to do so. And applying for a premise license might be slightly infuriating as you will need to do some research. Depending on the location of your physical store or building, you might need to go to different authorities or local councils as each district has a different local council governing the area.

The start of a brand new business journey

Congratulations! Once you’ve got your required licenses you’re officially set to achieve your dreams to be a successful entrepreneur. The road ahead might not be an easy one, but with enough persistence and courage, nothing is unachievable!