9 Types of Companies in Malaysia That Employers Need To Know

When starting a business in Malaysia, understanding the type of company in Malaysia is one of the most important steps. Each business entity comes with different rules, taxes, and levels of liability that affect how you operate, hire, and grow.

Whether you’re a Malaysian entrepreneur or a foreign investor, choosing the right company structure helps you manage risk, attract investors, and stay compliant with the Companies Act 2016 and Registration of Businesses Act 1956.

Below, we explore all the main types of companies in Malaysia, their features, costs, and suitability, plus a practical checklist to help you decide which structure fits your goals best.

9 Types of Companies in Malaysia

Below are a quick overview of all nine company types you can choose from and how they fit different business needs.

1. Sole Proprietorship (Enterprise)

A sole proprietorship is the simplest and most affordable business structure in Malaysia. It’s owned by a single person who has full control over the business, but also bears unlimited personal liability for all debts and obligations.

Key Characteristics

Owned by one individual.
Not a separate legal entity (the owner and business are the same).
Profits are taxed under the owner’s personal income tax.
Only Malaysian citizens or permanent residents can register.

Suitability

Ideal for freelancers, small shop owners, or new entrepreneurs who want to start quickly with minimal cost and paperwork.

Advantage:

Easy and inexpensive to set up and close.
Minimal compliance, no annual audit required.

Disadvantage:

The owner’s personal assets are not protected if the business incurs debts.

2. Partnership (General Partnership)

A partnership involves two or more individuals running a business together with shared profits and responsibilities. It’s governed by the Partnership Act 1961.

Key Characteristics

Can have 2 to 20 partners.
Not a separate legal entity.
Each partner is jointly and severally liable for debts.
Only Malaysian citizens or permanent residents may register.

Suitability

Common among professionals such as lawyers, accountants, and consultants who want to pool resources and share expertise.

Advantage:

Easy to form with shared capital and ideas.

Disadvantage:

Partners are personally liable for each other’s business actions.

3. Limited Liability Partnership (LLP)

Introduced under the Limited Liability Partnerships Act 2012, an LLP combines features of a partnership and a company. It provides limited liability protection while maintaining flexible internal management.

Key Characteristics

Separate legal entity from partners.
Minimum of two partners (individuals or companies).
Liability limited to the amount contributed.
Taxed at the partner level, similar to partnerships.

Suitability

Ideal for professional services firms or startups that want flexibility with legal protection.

Advantage:

Combines partnership flexibility with company-style protection.

Disadvantage:

Harder to raise capital compared to a private limited company.

4. Private Limited Company (Sdn Bhd)

A Private Limited Company, or Sendirian Berhad (Sdn Bhd), is the most common type of company in Malaysia. It is a separate legal entity, meaning the company can own assets, enter contracts, and sue or be sued in its own name.

Key Characteristics

Separate legal entity.
Minimum of 1 director and 1 shareholder (can be the same person).
Shareholders’ liability limited to their capital contribution.
Can have up to 50 shareholders.
Must register under the Companies Act 2016 with the Companies Commission of Malaysia (SSM).
Can be 100% foreign-owned in most sectors (subject to industry restrictions).

Suitability

Perfect for SMEs and growing businesses that want credibility, tax efficiency, and easier fundraising.

Advantage:

Limited liability and stronger business credibility.
Easier access to loans and investors.

Disadvantage:

Higher setup and compliance costs (audits, annual filings).

5. Public Limited Company (Bhd)

A Public Limited Company, or Berhad (Bhd), is similar to an Sdn Bhd but can sell shares to the public. Many large corporations and listed companies use this structure.

Key Characteristics

Can have unlimited shareholders.
Must have at least 2 directors.
Can list shares on Bursa Malaysia (stock exchange).
Must hold annual general meetings (AGMs).
Subject to strict reporting and disclosure rules.

Suitability

Best for large corporations or businesses seeking public investment or long-term growth.

Advantage:

Easier to raise funds from the public.

Disadvantage:

Highly regulated and costly to maintain.

6. Unlimited Company (Sdn)

An unlimited company (Sdn) offers complete flexibility in operations but exposes members to unlimited liability for all debts and obligations.

Key Characteristics

Separate legal entity, but members’ liability is not limited.
Members are personally responsible for company debts.
Can later convert to a limited company by passing a special resolution.

Suitability

Rarely used, but suitable for businesses where owners are confident in financial stability and want operational freedom.

Advantage:

May gain higher trust from creditors due to full liability.

Disadvantage:

High personal financial risk for owners.

7. Company Limited by Guarantee (CLG)

A Company Limited by Guarantee is typically used for non-profit organisations, clubs, or associations. It has no share capital, and members agree to contribute a specific amount (the “guarantee”) if the company is wound up.

Key Characteristics

Not-for-profit purpose.
Members’ liability is limited to the guaranteed amount.
Profits must be reinvested into the organisation.
Registered under the Companies Act 2016.

Suitability

Ideal for charities, foundations, NGOs, and professional associations.

Advantage:

Limited liability with eligibility for tax exemptions in some cases.

Disadvantage:

Cannot distribute profits to members.

8. Foreign Company (Branch Office / Representative Office)

Foreign companies seeking to enter Malaysia have the option to register as either a branch office or a representative office.

Branch Office

An extension of the parent company.
Can conduct commercial activities.
Must register with SSM and appoint a Malaysian resident agent.
Parent company bears all liabilities.

Representative Office

Non-trading entity (cannot earn revenue or sign contracts).
Used for market research or coordination activities.
No separate legal identity.

Suitability

Ideal for overseas companies testing the Malaysian market before full incorporation.

How to Choose the Right Company Type for Your Business

Selecting the right type of company in Malaysia depends on your business goals, ownership structure, and risk tolerance.

Checklist for Employers

☐ Business size and future growth plans

☐ Desired level of personal liability

☐ Capital requirements

☐ Ownership (local vs. foreign)

☐ Compliance tolerance and reporting needs

Quick Comparison Table

Entity Type	Liability	Tax Basis	Ownership	Compliance	Typical Use
Sole Proprietorship	Unlimited	Personal tax	Local only	Very low	Small business, freelancers
Partnership	Unlimited	Personal tax	Local only	Low	Professional firms
LLP	Limited	Partner tax	Local & foreign (subject to law)	Moderate	Startups, service firms
Sdn Bhd	Limited	Corporate tax	Local/foreign	High	SMEs, growing firms
Bhd	Limited	Corporate tax	Local/foreign	Very high	Large corporations
CLG	Limited	Corporate tax (non-profit)	Local/foreign	Moderate	NGOs, associations
Sdn (Unlimited)	Unlimited	Corporate tax	Local/foreign	Moderate	Special cases
Branch Office	Unlimited (Parent)	Corporate tax	Foreign	Moderate	Overseas expansion
Holding/Subsidiary	Limited	Corporate tax	Local/foreign	High	Group businesses

Costs and Timeline to Register Each Entity Type

Different company types in Malaysia have different registration fees, capital requirements, and setup durations.

Entity Type	Typical Registration Fee	Minimum Paid-Up Capital	Estimated Setup Time
Sole Proprietorship	RM 30-RM 100	None	1-2 days
Partnership	RM 60-RM 500	None	1-2 days
LLP	RM 500-RM 800	None	3-5 days
Sdn Bhd	RM 1,000-RM 2,000	RM 1 (min.)	5-10 days
Branch Office	RM 5,000+	Based on parent	2-4 weeks

Foreign-owned Sdn Bhd companies must appoint at least one local company secretary and maintain a registered office address in Malaysia.

What Happens If You Want to Convert Your Sole Proprietorship Into Sdn Bhd?

Many small business owners eventually decide to convert their sole proprietorship into an Sdn Bhd for credibility, liability protection, and tax benefits. This is how to convert:

Register a new Sdn Bhd with SSM.
Transfer all business assets, licenses, and contracts to the new entity.
Close the old sole proprietorship after all obligations are settled.
Update bank accounts, suppliers, and tax records under the new name.

Common Mistakes Employers Make (and How to Avoid Them)

Even with clear laws and guidelines, many employers still make avoidable mistakes when setting up or managing their company in Malaysia.

These issues often lead to unnecessary taxes, compliance penalties, or even legal exposure. Check out some of the most common ones and how to prevent them.

Choosing the Wrong Entity Type

Many new business owners pick the easiest option, like a sole proprietorship or partnership, without realizing it means unlimited personal liability.

When the business faces debt or legal issues, the owner’s personal assets may be at risk.

How to avoid it:

Plan ahead. If you aim to grow, take investors, or handle large contracts, choose a Private Limited Company (Sdn Bhd) or Limited Liability Partnership (LLP) for better protection and credibility.

Ignoring Foreign-Ownership Rules

Foreign investors sometimes assume all company types allow full ownership. In reality, industries like education, agriculture, banking, and oil & gas require at least 50% Malaysian ownership.

How to avoid it:

Check MIDA or SSM guidelines for your sector before registration, or get help from a licensed company secretary familiar with foreign investment laws.

Underestimating Ongoing Compliance

Once registered, certain company types, especially Sdn Bhd and Bhd, must submit annual returns, audited reports, and maintain a registered office.

Failing to comply can lead to fines, business suspension, or deregistration.

How to avoid it:

Work with a qualified company secretary or accounting firm to manage filing deadlines, audits, and documentation properly.

Overlooking Tax Implications

Each company type has different tax treatments. For example, sole proprietorships pay personal income tax, while Sdn Bhd companies pay corporate tax (24%) with possible SME tax benefits.

Without planning, you might end up paying more than necessary.

How to avoid it:

Estimate your annual profit. If your business grows quickly, a corporate structure may provide better tax efficiency and incentives.

Ignoring Compliance When Converting to Sdn Bhd

Some employers decide to switch from sole proprietorship to Sdn Bhd but skip key steps like asset transfer, tax updates, or notifying suppliers. It will create confusion and even double taxation risks.

How to avoid it:

Follow the proper conversion process, close your old business formally, transfer assets and contracts, and re-register under your new Sdn Bhd before trading continues.

FAQ Section

What are the nine types of companies in Malaysia?

They include: Sole Proprietorship, Partnership, Limited Liability Partnership (LLP), Private Limited Company (Sdn Bhd), Public Limited Company (Bhd), Unlimited Company (Sdn), Company Limited by Guarantee (CLG), Foreign Company (Branch/Representative Office), and Holding or Subsidiary Company.

Can a foreigner fully own a Sdn Bhd?

Yes. In most sectors, foreigners can hold 100% ownership, except in industries with restrictions such as education, agriculture, and oil and gas.

How much does it cost to set up a Private Limited Company (Sdn Bhd)?

Registration fees typically start from RM 1,000 to RM 2,000, excluding professional or secretary service fees.

When should I convert from a Sole Proprietorship to Sdn Bhd?

When your business grows, earns consistent profit, or needs to attract investors or protect personal assets.

What’s the difference between a Branch Office and a Representative Office?

A branch office can conduct commercial operations, while a representative office cannot make profits and is limited to research or coordination tasks.

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