How to Start a Business in Malaysia as a Foreign Entrepreneur

Starting your very own business in Malaysia can be a very exciting and challenging experience. According to Trading Economics, Malaysia is the 12th most optimal country to conduct business. So it is without a doubt that Malaysia is an attractive destination for foreign entrepreneurs. 

If you’re a foreigner trying to start your own business, you will need to comply with several legal and administrative requirements. Read on if you’re interested to start your own business in Malaysia.

Can foreigners start a business in Malaysia?

Let’s first answer the million-dollar question. Can foreigners start a business in Malaysia? 

The short answer to that: Yes you can. However, there is a catch. 

Let us explain.

Since Malaysia is a participant in several international trade agreements such as ASEA Free Trade Area, they encourage foreign investment and trading. The Malaysian government welcomes foreign investors and has also implemented policies and programs to attract foreign capital expertise. 

However, there are also restrictions and policies if a foreigner would like to start a business in Malaysia. There are restrictions on the types of business entities and also sectors that a foreigner can start in Malaysia.

Foreign business entities available in Malaysia

The first thing to do when you’d like to start a business in Malaysia is to decide on the type of business entity that best suits your needs. As a foreigner in Malaysia, your options to start a business are: 

1. Branch Office (Foreign Company)

2. Representative Office

3. Private limited Company

4. Sole Proprietorship

5. Partnership

6. Limited Liability Partnership

Branch Office

A branch office or in other words, a foreign company is basically an extension of the foreign parent company. The foreign parent company will be liable and responsible for all the debts that are incurred in the branch office in Malaysia. The activities conducted by a branch office must be the same as the foreign parent company. However, it is also best to take note that a branch office is a short-term solution for businesses that like to expand their business to Malaysia for a short-term basis. To create a branch office for a company, there must be at least one Malaysian resident agent to set up the branch in Malaysia.

Representative Office

Foreign companies that are considering increasing their market and understanding the Malaysian business environment can set up a representative office in Malaysia. However, since a representative office does not have a legal standing in Malaysia, therefore the parent company will be responsible for the debts and liability incurred in a representative office. 

Unlike a branch office, a representative office cannot engage in any sort of activities that will generate profit or sign deals, enter contracts or undertake any reading activities. It is only restricted to only promotion and liaison activities, market research and coordinating activities for the parent company.

Private Limited Company

One of the most common types of business entities for foreign investors is a private limited company. If you’re a foreigner planning to start your very own private limited company in Malaysia, Foreigners are able to own 100% of the company. However, there are still some industries that will require 50% Malaysian ownership. These industries include agriculture, banking education, and oil and gas. 

Click here to know more about Private Limited Companies!

Sole Proprietorship

A sole proprietorship is the simplest form of business entity to set up. However, to successfully set up a sole proprietorship, foreign entrepreneurs must have a permanent resident status in Malaysia to do so.

Partnership

Similar to a sole proprietorship, all partners in the partnership must be Malaysians or must have permanent resident status to register their very own partnership.

Limited Liability Partnership

Limited Liability is the combination of a partnership and a company. Yes, in other words, it is a separate legal entity from its partners.

As a foreigner, you can set up your LLP in Malaysia without being a resident of Malaysia. However, the compliance officer for LLP must be a permanent resident, citizen or ordinarily resides in Malaysia.

What’s next for me?

Once you have chosen a business structure, you need to register your business with the Companies Commission of Malaysia (SSM):

Name search and reservation

You need to search for an available business name and reserve it with SSM. The name must not be identical or similar to existing businesses, and it must comply with SSM's guidelines for business names.

Business registration

You need to submit the necessary documents and information, such as the Memorandum and Articles of Association (for Sdn Bhd), business plan, passport, and visa, to SSM. The registration fees and timeline depend on the business structure and method of registration (online or in person).

Licenses and permits

Depending on the nature of your business, you may need to obtain additional licenses and permits from various government agencies, such as the Ministry of Trade and Industry, the Ministry of Health, or the local council. Click here to know more.

Tax registration

You need to register your business with the Inland Revenue Board (LHDN) and obtain a tax identification number. You also need to comply with Malaysia's tax laws and regulations, such as filing annual tax returns and paying corporate tax and goods and services tax (GST).

Other challenges

In addition to these requirements, foreigners may face additional challenges in starting a business in Malaysia, such as language and cultural barriers, obtaining financing, and finding local partners or staff. It is important to seek professional advice and support from local experts, such as lawyers, accountants, and business consultants, to navigate these challenges and ensure compliance with the legal and regulatory framework.

Embark on your business journey in Malaysia

Starting a business in Malaysia might be a rewarding and profitable venture and without a doubt, Malaysia is a place full of potential. However, if you plan to start your very own business in Malaysia, you will need careful planning, administrative and regulatory compliance, and thorough research. 

By understanding the process of starting a business in Malaysia and seeking professional advice and support, you can overcome the challenges and capitalize on the opportunities of doing business in this dynamic and diverse country.