Choosing the right form of business entity can be decisive to the success and life of your business. You can consider various options according to the types & scale of business.
Sole-Proprietor: this is the most traditional form of business. It offers nearly NO protection to the owner of the business but is the easiest & cheapest to set up.
Partnership: this is another common form of business ownership. It is rather easy to set up but lack of legal protection.
Company (Sdn Bhd ): A separate legal entity jointly owned by multiple investors. It has unique advantages in raising capital and paying taxes.
Best for EntrepreneurCorporate Perceptions:Committed & Ambitious 1Liability:Limited liability.
Your personal wealth is protected.Startup Cost:RM1,460++ 2Yearly Maintenance:RM5,500++ 3Income Tax Risk Explosure:Low.
Most Sdn Bhd are better managed & regulated.Tax Planning Opportunity:Better tax planning as company is a separate legal entity. Tax saving of at least 20% compared to Personal. 4Business Continuity:Forever.
Sdn Bhd will never expire and company will still exist even the key owner has passed away. 5Ability to Apply Loan:Easier & Higher Creditibility.
Depends on company cash flow, strategy and business prospects. Accounts of Sdn Bhd Company is more reliable & trustworthy. 6Corporate PerceptionsLiabilityStartup CostYearly MaintenanceTime to Start BusinessIncome Tax Risk ExplosureTax Planning OpportunityBusiness ContinuityAbility to Apply Loan
Sole-ProprietorCorporate Perceptions:Small scale businessLiability:Unlimited Liability.
Business owner's personal wealth may be affected & exposed to risks.Startup Cost:RM100++Yearly Maintenance:RM1,500++Time to Start Business:1 hour at SSM counterIncome Tax Risk Explosure:Very High.
Most businesses do not keep proper accounting records.Tax Planning Opportunity:Limited.
Business profit will be taxed at Personal level. Unfavourably terms in personal tax provisions & practices.Business Continuity:Owner died, business closed & registration subject to renewal & expiry.Ability to Apply Loan:Not easy.
Depends on owner’s personal capacity & wealth.
PartnershipCorporate Perceptions:Small scale businessLiability:Unlimited Liability.
All partners are jointly liable & responsible for all possible losses or business failure.Startup Cost:RM100++Yearly Maintenance:RM1,500++Time to Start Business:1 hour at SSM counterIncome Tax Risk Explosure:Very High.
Most businesses do not keep proper accounting records.Tax Planning Opportunity:Limited
Business profit will be taxed at Partners' Personal level. Unfavourably terms in personal tax provisions & practices.Business Continuity:Partner died, business closed OR the beneficiary do not easily get what left by the passing partner.Ability to Apply Loan:Unlikely.
Different partners may have different personal capacity & wealth. Bankers may not accept such differences.
- A survey found that major corporations & well established companies in Malaysia prefer to trade with Sdn Bhd Company due to the higher commitments & responsibilities in operating Sdn Bhd Company. ↩
- Special offer by NBC => register sdn bhd at RM1,460 only. Market price is ranging from RM2,500 to RM3,500. ↩
- Every Sdn Bhd Company needs to engage Company Secretary, Auditors, Tax Agent & Accounting Clerk to meet the yearly submission requirements (SSM & LHDN). ↩
- Company tax rate for first RM500,000 profit is 20% while individual will reach 25% tax rate. ↩
- Sdn Bhd just needs to hold AGM every year & the shares owned by the passing shareholder can be transferred to his/her designated beneficiary or estate. Investment in Sdn Bhd can act as part of the Estate Planning. ↩
- Due to the fact that Sdn Bhd needs to get its accounts audited by the Auditors annually, the accounts of Sdn Bhd is always carried with higher creditability. ↩