1

Registration of
Business Entities 3
 Synopsis

This chapter discusses the responsibility of

business operators in Malaysia to register their
businesses with the authorized agency. It also
discusses the advantages and disadvantages of
the various types of business registration.

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 Objectives

The objectives of this chapter are:

To identify the types of business entities in
Malaysia.
To provide an understanding of the importance of
registering a business.
To explain business registration procedures.
To discuss legal aspects related to business
formation.

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 Learning outcomes

At the end of this chapter, students should be able to:

Identify the five types of business entities that are
available.
Explain the advantages and the disadvantages of
each business entity.
Describe the steps to register the business entity.
List the government organizations involved in the
registration of the business entity.
Explain the similarities and differences among the
business options.
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 List of Topics

 Business Entity Types in Malaysia

 Benefits and Limitations
 Registration Procedures

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 Introduction

 It is the responsibility of all business operators who

conduct business activities with the objective of
making profit to register their businesses. The
registration works to legalize a company’s business
activities.
 Business registration in Malaysia is managed by the
Companies Commission of Malaysia (SSM), an
agency under the Ministry of Domestic Trade,
Consumer Affairs, Cooperative and Consumerism.

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 Introduction (cont.)

 Basically, there are four types of business entities that

must be registered with the SSM—sole proprietorship,
partnership, limited liability partnerships and private
limited companies.
 Cooperatives are another option of doing business.
Cooperatives have different objectives and the
registration must be done at the Cooperatives
Commission of Malaysia (SKM).
 Each of the entity above has its own advantages and
disadvantages, which should be considered by an
entrepreneur prior to registration.
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 Types of Business Entities in
Malaysia
 Sole proprietorship
– A sole proprietorship is a business entity that is solely owned,
funded and managed by one owner only. Sole proprietorship is the
most popular and the simplest or easiest form of business entity in
Malaysia.
 Partnership
– A partnership is a business entity that is owned by two or a
maximum of 20 people. However, for professional businesses such
as accounting, legal, quantity surveyors, architects, engineer firms,
etc., the maximum number of members could be up to 50 people.
Both Sole Proprietorship and Partnership business entities are registered
under the Business Registration Act 1956.

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 Types of Business Entities in
Malaysia (cont.)
 Limited Liability Partnership (LLP)
– Limited Liability Partnership (LLP) is an alternative
business vehicle regulated under the Limited Liability
Partnerships Act 2012, which combines the
characteristics of a private limited company and a
conventional partnership.
– LLP has a legal personality separate from partners
(separate legal entity), like private limited company.
– LLP has perpetual succession and offers benefits of a
private limited company without the painful reporting
requirements.
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 Types of Business Entities in
Malaysia (cont.)

– The LLP concept also supports start-ups, small and

medium enterprises (SMEs), joint ventures and venture
capitals to grow without having to worry too much about
personal liabilities, personal assets and strict
compliance requirements.
– An LLP can be formed by a minimum of two persons up
to an unlimited number of members.

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 Types of Business Entities in
Malaysia (cont.)
 Private Limited Company
– A business that is registered as a company is allotted
under the Companies Act 1965. A company is a body
that has a legal entity separate from members or the
founder.
– The concept of a company is based on several
individuals who are entrepreneurs contributing to a
bigger capital sourcing to make the business easily
manageable and expandable.

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 Types of Business Entities in
Malaysia (cont.)

– Several improvements have been made in the

Companies Act 2016 whereby the total number of
members or partners in a company starts from a
minimum of one or single director to a maximum
of 50 individuals.
– All kinds of management and monetary financing
in the company is contributed by and among
members, based on ownership percentage, from
the total agreed upon by all.

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 Types of Business Entities in
Malaysia (cont.)

– Shareholders liability is limited to the amount of share

own or held by the members only.
– The establishment of a company is quite complicated.
For example, there is legal requirements to appoint a
Company Secretary responsible for company’s
secretarial function and an Auditor responsible for
financial matters and financial reporting.

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 Types of Business Entities in
Malaysia (cont.)

– There are two legal documents that should be

completed to form a private limited company: the
Memorandum of Association and Articles of
Association.
– A Private Limited Company is not allowed to invite the
public to buy company shares.
– This type of company must use ‘Sendirian Berhad’ or
‘Sdn Bhd’ at the end of the company name.

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 Types of Business Entities in
Malaysia (cont.)
 Cooperative
– A cooperative (also known as co-operative, co-op or
coop) is an autonomous association of people united
voluntarily to meet common economic, social and
cultural needs and aspirations through a jointly owned
and democratically controlled business.
– In Malaysia, the minimum number of members in a
primary cooperative is 100; and in the Farmers’
Cooperative, it is 50.

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 Types of Business Entities in
Malaysia (cont.)
– A cooperative has a separate legal entity and members,
directors, managers and employees are not liable for
any debts incurred unless the debts are the result of
recklessness, negligence or fraud, or if the members
were guarantors to the cooperative’s loan.
– A cooperative usually only allows a limited distribution
of profits to members.
– Every cooperative society must be registered under the
cooperatives law, supervised by the Malaysia Co-
operative Society Commission or Suruhanjaya Koperasi
Malaysia (SKM).
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 Benefits and Limitations of
Sole Proprietor

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 Benefits and Limitations of
Sole Proprietor (cont.)

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 Benefits and Limitations of
Partnership

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 Benefits and Limitations of
Limited Liability Partnership

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 Benefits and Limitations of
Limited Liability Partnership
(Cont.)

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 Benefits and Limitations of
Private Limited Company

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 Benefits and Limitations of
Private Limited Company (cont.)

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 Benefits and Limitations of
Cooperative

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 Benefits and Limitations of
Cooperative (cont.)

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 Registration Procedures

A start-up entrepreneur will need to know where

and how to register the business entity. There are
only two places to register:
the Companies Commission of Malaysia, or
the Cooperative Commission of Malaysia.
For more details, visit the websites available:
www.ssm.com.my (syarikat) and
www.skm.com.my.(Koperasi)

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 Summary

Business registration is compulsory for all

entrepreneurs. Each of these business forms has
distinct characteristics, advantages and
disadvantages, differing scope of business
activities, registration requirements, capital
requirements as well as registration procedures.

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