Sole Proprietorship In Malaysia

Who Can be a Sole Proprietor in Malaysia?

Setting up a sole proprietorship in Malaysia is quite easy since this business entity is one of the most simple and legal business structures. In Malaysia, the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) and the Registration of Businesses Act 1956 control and define sole proprietorships in the country.

Sole proprietorship business offers great business opportunities along with additional benefits. These benefits of starting a sole proprietorship business in Malaysia are quick and easy registration, no corporate tax payments, lowest manual maintenance, less formal business requirements, easy winding process, and more. 

A sole proprietorship is held entirely by a single person who uses their personal name, identity card, or trade name. Foreigners and corporate legal entities are not permitted to register sole proprietorships in Malaysia. Only the business owner can apply for a sole proprietorship. 

Apart from this, the following requirements must be met in order to incorporate a sole proprietorship in Malaysia:

  • ~The owner must be a Malaysian citizen or a Malaysian permanent resident.
  • ~The business owner must be at least 18 years old.

Once the registration process is complete, SSM issues a Certificate of Incorporation. After registering with SSM, you must get the appropriate licenses, permits, or approval letters from other authorities to register a sole proprietorship in Malaysia

Documents Required for Sole Proprietorship Registration

You must submit the following documents for setting up a sole proprietorship in Malaysia:

  • ~A copy of the business owner identity card (I/C)
  • ~A business name as proposed by the owner
  • ~The nature of business of the company
  • ~The official business address 
  • ~A letter of approval from a government agency

Other Criteria for Registering a Sole Proprietorship in Malaysia

The registration process of registering your sole proprietorship in Malaysia should not take more than 30 days to complete. You can either do it in person or online at the Companies Commission of Malaysia (SSM). it is essential to fill out Form A which includes the following details:

  • ~The business’s name
  • ~The principal location of the business
  • ~The date of business launch
  • ~The address of the business’s branch (if any)
  • ~The type of business 
  • ~The owner’s information

How to Register a Sole Proprietorship Company in Malaysia?

In this section, we shall dive into the registration process for setting up a sole proprietorship business in Malaysia:

  • ~You must obtain the registration form from the SSM counter with a photocopy of your IC and complete it.
  • ~After this, an SSM officer performs a name search to see if the business name you proposed is available.
  • ~Next, you must pay the annual fee to incorporate a sole proprietorship in Malaysia. The annual charges are as follows:
  • ~Trade name: RM60 per year; 
  • ~Personal name: RM30 per year; 
  • ~Branch (s): RM5 per year
  • ~Finally, your sole proprietorship in Malaysia is ready to operate. After payment, you can get your sole proprietorship registration certificate at the SSM counter in an hour.

Benefits of Sole Proprietorship in Malaysia

Here are some of the primary benefits of setting up a sole proprietorship in Malaysia:

  • ~Owning a sole proprietorship gives the owner entire control and decision-making authority over the company. All profits will go straight to the business owner's pocket.
  • ~All the taxable income of a sole proprietorship is taxed at the personal income tax rate of the sole proprietorship’s owner.
  • ~A sole proprietorship in Malaysia has the lowest annual maintenance cost compared to a Private Limited Company (Sdn. Bhd.), Limited Liability Partnership, or Partnership.
  • ~Because the majority of sole proprietorships are micro or small business owners, they are subject to fewer restrictions and regulations. For example, sole proprietorship businesses are not required to prepare audited reports.
  • ~You can dissolve your sole proprietorship in Malaysia immediately by visiting SSM, or your sole proprietorship business will be automatically closed if you do not pay your yearly fee on time.

A sole proprietorship in Malaysia is the most common and simplest business in the country. Furthermore, any Malaysian citizen or Permanent Resident can register it themselves.

Conclusion

Setting up a sole proprietorship can be challenging for you without expert help. The time, effort and expertise required might be overwhelming. Furthermore, you might be risking non-compliance if you do not adhere to all the rules and regulations. A smarter choice is to partner with an Employer of Record (EOR) in Malaysia and set up your global team.

Multiplier’s EOR services ensure you do not have to go through the stringent and demanding processes of setting up a local entity. Our digital platform allows you to onboard and manage employees, customize benefits, release contracts within minutes and a lot more. For more information regarding our services, visit our website.

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Frequently Asked Questions

What risks are associated with the sole proprietorship business in Malaysia?

There are primarily the following risks involved in the below two situations:

  • ~When it’s completely tied to the owner of the business
  • ~When there’s no separation between the owner and the business under the law

What are the funding options available to sole proprietors in Malaysia?

As compared to a corporation, the funding options available to sole proprietors in Malaysia might be limited. However, SME Bank has a wide range of financing options available. Furthermore, young entrepreneurs can gain access to several funding schemes, including the Young Entrepreneur Fund (YEF). This scheme provides funds for young Malaysian entrepreneurs who fall between the age of 18-30.

How is a sole proprietorship taxed in Malaysia?

In a sole proprietorship, there is no difference between the owner and the business. Thus, all profits and losses earned by the business go directly to the owner of the business. Thus, there is no need for filing a separate tax return. Sole proprietorships in Malaysia are charged income tax as applicable to individuals, from 2% to 26%.

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