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Business Startup

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Registering a new business is a manageable and relatively simple task to undertake. It can be done by anyone with age 18 and above. The procedure starts with the consideration of which one of three recognized legal structures the business should fall under:

A. Types of Business Entity

  1. Sole Proprietorship
  2. Here, the business owner is the one and only member of the business and therefore has absolute independence in the decision-making process of the business.
  3. Partnership
  4. This allows for two or more persons (with a maximum of 20) to own the entire business collectively as joint owners.
  5. Limited Liability Partnership (LLP)
  6. Private Limited Company (Sdn. Bhd.)
  7. Public Limited Company (Bhd)


For the business owner, deciding which legal structure to use is a major decision. To assist in deciding which form of business to use, several criteria may be considered.

Ability to hold assets

Under the sole proprietorship, the business assets are the business owner's own personal assets. Under the partnership structure, the partners will collectively own all the assets to the partnership.

For the incorporated company, all assets owned by the company are registered in the company's name and do not belong to any one of the shareholders or members of the company. They therefore do not have any interest in the company's property.

Liability for debts

Under the sole proprietorship, the sole proprietor is entirely responsible for all the debts and risks of the business. Any liability incurred by the business may be claimed from his own personal property. Conversely, however, he can count his business profits as personal property and is exempted from business taxes (although personal income tax is still payable).

In a partnership, all the partners are jointly liable for the debts of the firm, if the debts of the firm cannot be discharged by its own assets, the members of the partnership must contribute from their own personal assets to discharge the firm's debts.

Due to the company's separate legal entity, the liability of the members is limited to the sum paid for their shares in the company. As such, if the company does not have sufficient assets to discharge its liability, the members are not required to contribute from their personal assets.

Legal proceedings

Sole proprietorships and partnerships have no separate legal personality. As such, legal action can only be instituted or defended in its member(s)’ names.

As a separate legal entity, the company has the benefit of acting in its own capacity to take legal action (or defend an action). Members of the company have no right to institute any legal proceedings on behalf of the company and therefore, cannot be sued as well.

Dissolution of the business

Under the sole proprietorship, the moment the business owner dies, the business itself will be dissolved. Dissolving a partnership can be done by way of agreement, operation of law or in the event that any partner dies, resigns or becomes bankrupt.

However, the fact that the company is a separate legal entity means that it enjoys perpetual succession. The business will not be dissolved simply because any one of its members withdraws, dies or becomes bankrupt.

Raising capital

For sole proprietorships and partnerships, capital is raised through contribution of the owner or partners’ personal assets or through loans.

Under the company structure, capital is raised through sale of shares. In private limited companies, shares are available for sale to anyone only by approval of the shareholders. For public limited companies, shares are sold to the general public.

Once the business owner has considered the different aspects of the various forms of business structures and has decided which structure to use, he then has to register his business.

With regards to sole proprietorships and partnerships, the Companies Act 1965 and Registration of Business Act 1956 makes it a requirement to register the business with the Companies Commission of Malaysia. The Commission's guidelines firstly, that the business owner obtain approval for his proposed name for the business. Subsequently, he is required to complete the Commission's Form A (Registration of a New Business). This includes detailing the application's particulars, the date at which the business commenced, the nature of the business and the branch (or branches) of the business.

Incorporating a company, however involves several more processes. Since these processes may be technical and complex, employing the services of a Company Secretary will ensure that all aspects have been taken care of.

Comparison Between Private Limited Company (Sdn. Bhd.) & Sole Proprietorship/Partnership

B. Requirements to Incorporate a Company in Malaysia (Companies Act, 2016)

  • Minimum one (1) for private company and two (2) for public the age of 18 and has his principal or only place of residence within Malaysia – Section 196 of Companies Act 2016
  • Minimum one (1) subscribers to the shares of the company – Section 9 of Companies Act, 2016
  • The secretary of the company must be a professionally qualified as a member of a prescribed body or is licensed by the Registrar of Companies.

  • C. Company Secretary (Sample Resolutions/ Templates/ Letters)

    Sample Resolutions

    1.Closing of Current Account

    2.Opening of Current Account

    3.Purchase of Motor Vehicle

    4.Acquisition of Property

    5.Disposal of Property

    6.Appointment/Resignation of Director(s)

    7.Variation of Banking Signatories

    Sample Templates

    Form 48A

    Coming up soon

    Form 32A

    Coming up soon

    Sample Letters

    Appointment of Auditor

    Appointment of Tax Agents

    Resignation of Director

    D. Legislation

    1. Registration of Business Act 1956
    2. Coming up soon
    3. Partnership Act 1961
    4. Limited Liability Partnership Act 2012
    5. Trust Companies Act 1949
    6. Securities Commission Act 1993
    7. Securities Industry Act 1983
    8. Offshore Companies Act 1990
    9. Companies Commission of Malaysia Act 2001
    10. Future Industry Act 1993

    E. Problems faced by Partners/Shareholders


    1. Partnership agreement
    2. Shareholder agreement
    3. Partner's dispute
    4. Shareholder's dispute


    Login or register to read our Frequently Asked Questions about Business Startup.