Not Sure Which Business Structure Fits Your Company?
Talk to the SASCO team to understand the types of business entities in Malaysia and their compliance implications before you register with SSM.
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Many first-time founders feel confused by the different types of business entities in Malaysia available when registering with the Companies Commission of Malaysia (SSM). As a result, some pick a structure that does not suit their business needs from the start.
Each structure carries a different liability profile, compliance burden, and growth potential. This ranges from the simple sole proprietorship to the more formal Sdn Bhd. This guide walks through every type of business entity in Malaysia so you can make an informed decision before you register.
Types of Business Entities in Malaysia at a Glance
Before we dive into each structure in detail, here is a quick list of the six types of business entities in Malaysia that SSM recognises:
- Sole Proprietorship (Enterprise) — owned by one individual, with unlimited liability.
- Partnership — 2 to 20 partners, with shared unlimited liability.
- LLP — a hybrid between a partnership and a company, with limited liability.
- Sdn Bhd — a separate legal entity with limited liability, the most popular choice for businesses that want to grow.
- Berhad (Bhd) — for larger companies that want to offer shares to the public.
- Foreign Company Branch/Representative Office — for overseas companies that want to operate in Malaysia.
Sole Proprietorship (Enterprise)
A sole proprietorship, or “Enterprise”, is the most basic form of business in Malaysia. Owners register it under the Registration of Businesses Act 1956 (ROBA 1956). One individual — a Malaysian citizen or permanent resident — owns and runs the business alone, and it is not a separate legal entity from its owner.
This means the owner carries unlimited liability. Creditors can claim business debts against the owner’s personal assets, including their home and savings. However, registration is simple and low-cost, and the government taxes the business under the owner’s personal income tax, not corporate tax. This structure suits small traders, freelancers, and founders testing a business idea before scaling to a more formal structure.
Partnership
A partnership involves 2 to 20 partners who share ownership, capital, and business profits. Partners register the business name under ROBA 1956, just like a sole proprietorship. However, the Partnership Act 1961 governs the relationship and responsibilities between partners.
Like a sole proprietorship, an ordinary partnership is not a separate legal entity. Therefore, each partner carries unlimited liability, jointly and severally, for business debts — including debts caused by another partner. Small professional firms, such as family-run clinics or retail shops, commonly use this structure because it lets them share operational responsibility without the formality of a company.
Limited Liability Partnership (LLP)
The Limited Liability Partnerships Act 2012 (Act 743) introduced the LLP as a hybrid between a partnership and a company. It is a separate legal entity from its partners, requires at least two partners with no maximum limit, and must appoint a compliance officer who resides in Malaysia.
Each partner’s liability is limited to their capital contribution. For tax purposes, the LLP pays corporate income tax like a company. In short, an LLP offers the management flexibility of a partnership together with the liability protection of a company, plus lighter compliance requirements than a Sdn Bhd, since it does not require a mandatory statutory audit. This makes it well suited to professional firms such as lawyers, accountants, and consultants.
Private Limited Company (Sdn Bhd)
The Sdn Bhd is the most popular type of business entity in Malaysia for businesses that are serious about growing. The Companies Act 2016 governs its registration. It is a fully separate legal entity from its shareholders and directors, and just one person can own it — a minimum of one director and one shareholder, who can be the same person — up to a maximum of 50 shareholders.
Read our guide on What Is a Sdn Bhd? to understand this structure in more depth. Shareholder liability is limited to the amount of unpaid shares. A Sdn Bhd must appoint a licensed company secretary and comply with SSM’s annual reporting requirements, including beneficial owner reporting following the 2024 amendment to the Companies Act 2016. This structure suits founders who want corporate credibility, access to financing or investment, and long-term liability protection.
Public Limited Company (Berhad / Bhd)
A public limited company, also registered under the Companies Act 2016, suits companies that want to offer shares to the public or list on a stock exchange such as Bursa Malaysia. It requires at least two directors and at least one shareholder, with no maximum limit.
Like the Sdn Bhd, a Bhd is a separate legal entity with liability limited to share value. However, it faces much stricter compliance, governance, and disclosure requirements. This structure usually suits large, mature companies that want to raise capital from public investors.
Foreign Company Branch and Representative Office
Foreign companies that want to operate in Malaysia can register a branch under the Companies Act 2016. This is not a separate entity; instead, it is a direct extension of the parent company overseas, and it must appoint at least one resident agent in Malaysia. Alternatively, a company can set up a Representative Office, which MIDA approves for market research activities only. Both options suit multinational companies that want to test or monitor the Malaysian market before fully establishing a Sdn Bhd subsidiary.
Comparison Table: Types of Business Entities in Malaysia
| Structure | Liability | Legal Basis | Min. Owners |
|---|---|---|---|
| Sole Proprietorship | Unlimited | ROBA 1956 | 1 |
| Partnership | Unlimited (joint) | ROBA 1956 & Partnership Act 1961 | 2 (max. 20) |
| LLP | Limited to capital | LLP Act 2012 | 2 (no max.) |
| Sdn Bhd | Limited to shares | Companies Act 2016 | 1 director, 1 shareholder |
| Berhad (Bhd) | Limited to shares | Companies Act 2016 | 2 directors, 1 shareholder |
| Foreign Branch | Parent company liability | Companies Act 2016 | 1 resident agent |
Further Reading on Types of Business Entities in Malaysia
Have you already identified the right structure? Read our article on Sdn Bhd vs Enterprise vs LLP for a detailed comparison. If you are comparing the two most basic options, see Sole Proprietorship vs Sdn Bhd. When you are ready to start the registration process, check out How to Register a Sdn Bhd in Malaysia. You can also refer to the official SSM business registration page for the latest official information.
How Can SASCO Help With These Types of Business Entities?
Choosing the right type of business entity in Malaysia depends on your business goals, how much risk you are willing to take on, and your long-term growth plans. As a company secretarial and accounting firm, the SASCO company secretarial team can help you understand the implications of each structure. We explain the relevant SSM compliance requirements and guide you through registration and ongoing compliance.
Our services include:
- Sdn Bhd Company Incorporation
- Company Secretarial Services
- SSM Compliance Advisory
- Accounting and Tax Services for All Business Structures
Not sure which type of business entity in Malaysia suits your company?
Contact SASCO to discuss the structure that best fits your business situation and goals.
Frequently Asked Questions About Types of Business Entities
What are the main types of business entities in Malaysia?
The six main types of business entities in Malaysia are sole proprietorship, partnership, LLP, Sdn Bhd, Berhad, and foreign company branch/representative office.
Which type of business entity is easiest to register in Malaysia?
A sole proprietorship is the simplest and fastest structure to register with SSM under ROBA 1956, making it suitable for small business owners just starting out.
Is a Sdn Bhd better than an Enterprise?
It depends on your needs. A Sdn Bhd offers liability protection and corporate credibility, while an Enterprise (sole proprietorship) costs less and is simpler to run but offers no liability protection. Read our comparison article for more detail.
What is the difference between an LLP and a Sdn Bhd?
Both are separate legal entities with limited liability. However, an LLP has lighter compliance requirements (no mandatory statutory audit) and a more flexible management structure, while a Sdn Bhd faces stricter requirements under the Companies Act 2016, including the appointment of a company secretary.
Can foreigners own a business entity in Malaysia?
Foreigners cannot own a sole proprietorship or an ordinary partnership. However, they can fully own a Sdn Bhd in most sectors, or set up a branch or representative office of a foreign company.
How many minimum owners do you need to set up a Sdn Bhd?
Just one. The Companies Act 2016 allows a Sdn Bhd to be incorporated with only one director and one shareholder, who can be the same individual.
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