Types of Business Structures in Malaysia

Sole proprietorship, partnership, Sdn Bhd comparison

Types of business structures

In Malaysia, you can choose different types of business structures. Each has different rules and benefits.

Sole Proprietorship:

1 owner only
Easy to set up
You keep all profits
You are personally responsible for debts

Partnership:

2-20 owners
Share profits and responsibilities
Partners responsible for debts
Partnership agreement recommended

Private Limited Company (Sdn Bhd):

Separate legal entity
Owners not personally liable
More complex to set up
Better for larger businesses

Which should you choose?

Small business: Sole proprietorship
With partners: Partnership
Want protection: Sdn Bhd

Overview

Choosing the right business structure is crucial. It affects liability, taxes, and how you run your business.

Comparison Table

Feature	Sole Prop	Partnership	Sdn Bhd
Owners	1	2-20	1-50 shareholders
Liability	Unlimited	Unlimited	Limited
Setup Cost	RM60	RM60	RM1,010+
Tax Rate	Personal rate	Personal rate	15-24%
Audit Required	No	No	Yes

Sole Proprietorship

Advantages:

Easy and cheap to set up
Complete control
All profits yours
Simple tax filing

Disadvantages:

Unlimited liability (personal assets at risk)
Limited capital
Business ends if owner dies

Best For:

Small businesses
Freelancers
Low-risk businesses

Partnership

Advantages:

More capital than sole prop
Shared responsibilities
Combined skills

Disadvantages:

Unlimited liability
Potential for disputes
Profits must be shared

Best For:

Professional practices
Family businesses
Small groups with shared goals

Sdn Bhd (Private Limited Company)

Advantages:

Limited liability
Separate legal entity
Easier to raise capital
Perpetual existence
Lower tax rates for small companies

Disadvantages:

Higher setup cost
More compliance requirements
Annual audit required
Public records

Best For:

Medium to large businesses
High-risk businesses
Businesses seeking investment
Businesses planning to expand

Important Contacts

SSM: 03-8922 1000
Website: ssm.com.my

Frequently Asked Questions

Can I convert from sole proprietorship to Sdn Bhd later?

Yes, you can incorporate a new Sdn Bhd and transfer assets. However, it's a new legal entity, so contracts and licenses need to be reissued.

Do I need a company secretary for Sdn Bhd?

Yes, all Sdn Bhd companies must appoint a licensed company secretary within 30 days of incorporation.

Can a foreigner own a Sdn Bhd?

Yes, foreigners can own 100% of a Sdn Bhd in most industries. Some sectors have equity restrictions.

Which structure has the lowest taxes?

Sdn Bhd has lower corporate tax rates (15% for first RM600k for small companies). Sole prop/partnership taxed at personal rates (up to 30%).

Last updated: March 2026

Disclaimer: This guide provides general information only. Always verify with official sources for the most current information.