Understanding Business Structures in Malaysia
Starting a business in Malaysia begins with one crucial step – choosing the right business structure. Your choice determines how your company is governed, taxed, and perceived by clients and investors.
Whether you’re an entrepreneur, freelancer, NGO founder, or expanding foreign investor, understanding each structure helps you make an informed decision that supports your goals.
At Amaze Advisory, we’ve simplified the legal and regulatory jargon into a practical guide you can easily understand.
Overview: Types of Business Entities in Malaysia
Here’s a quick overview of the main business structures available in Malaysia, each governed by specific laws and designed for different purposes:
| Business Structure | Governing Law | Legal Entity Status | Ideal For |
| Private Limited Company (Sdn Bhd) | Companies Act 2016 | Separate legal entity | SMEs, startups, and growing businesses |
| Limited Liability Partnership (LLP) | Limited Liability Partnerships Act 2012 | Separate legal entity | Professionals or small teams wanting flexibility |
| Company Limited by Guarantee (CLBG) | Companies Act 2016 | Separate legal entity | Non-profit and charitable organisations |
| Unlisted Public Company (Berhad) | Companies Act 2016 | Separate legal entity | Large private groups, pre-IPO businesses |
| Sole Proprietorship | Registration of Businesses Act 1956 | Not a separate entity | Freelancers, small traders |
| Conventional Partnership | Registration of Businesses Act 1956 | Not a separate entity | Professionals or small groups sharing profits/losses |
In this series by Amaze Advisory, we’ll publish detailed guides for each structure — helping you decide what best fits your goals.
- Private Limited Company (Sdn Bhd)
- Limited Liability Partnership (LLP)
- Company Limited by Guarantee (CLBG)
- Unlisted Public Company (Berhad)
- Sole Proprietorship and Partnership
1. Private Limited Company (Sdn Bhd) – The Most Common Business Structure in Malaysia
If you’re serious about growing your business or attracting investors, a Private Limited Company (Sdn Bhd) is likely the best choice. It is the most popular business structure in Malaysia, offering limited liability protection, credibility, and the flexibility to scale locally and internationally.
Governing Law and Registration
- The Sdn Bhd structure is governed under the Companies Act 2016, and the regulatory authority overseeing company formation and compliance is the Companies Commission of Malaysia (SSM).
To register a company in Malaysia, you need:
- At least one director who is a natural person ordinarily residing in Malaysia
- At least one shareholder (can be the same person as the director)
- A company secretary (licensed by SSM)
- A registered business address in Malaysia
Once approved, the company name will end with the suffix “Sendirian Berhad” (Sdn Bhd).
Key Features
- Separate legal entity – the company exists as a distinct “person” in law. It can own property, enter contracts, and sue or be sued.
- Limited liability – shareholders are only liable for the amount they invested.
- Perpetual succession – the company continues to exist even if shareholders or directors change.
- Tax residency – a Malaysian-incorporated company is generally considered a resident company for tax purposes if management and control are exercised in Malaysia.
Advantages
- Limited Liability Protection
The greatest advantage is personal asset protection. If the company faces debts or legal issues, the shareholders’ risk is limited to their share capital — their personal savings and assets remain safe. - Professional Image and Credibility
Most government agencies, corporate clients, and investors prefer to work with Sdn Bhd companies because they represent a more structured and transparent business setup. - Access to Funding and Investment
Sdn Bhd companies can issue shares to new investors and apply for business loans more easily. This makes it ideal for startups, SMEs, and growing businesses that need funding. - Tax Efficiency
Corporate tax rates in Malaysia are tiered, meaning smaller companies enjoy preferential rates on the first RM150,000 of chargeable income. Additionally, Sdn Bhds can claim business deductions and tax incentives offered by the Malaysian Investment Development Authority (MIDA). - Continuity and Succession
Unlike sole proprietorships, an Sdn Bhd is not tied to the life of its founder. Ownership can be transferred through share transfer, allowing easier succession planning.
Disadvantages
- More Compliance Requirements
- Must appoint a qualified company secretary.
- Must prepare and submit audited financial statements annually.
- Must file annual returns and tax submissions to SSM and LHDN.
These compliance requirements ensure accountability but also mean additional administrative cost.
- Information Transparency
Basic company information such as directors, shareholders, and paid-up capital are available to the public through the SSM database. - Restrictions on Share Transfer
As a private company, Sdn Bhd cannot freely offer its shares to the public. Transfers are subject to board approval, which can limit liquidity for shareholders.
Who Should Choose an Sdn Bhd?
A Private Limited Company is suitable for:
- Entrepreneurs planning to grow or attract investors
- Foreign individuals or corporations wanting to set up a Malaysian entity
- Businesses that require credibility (e.g., in finance, tech, or consulting sectors)
- SMEs looking for tax efficiency and scalability
Even freelancers and small business owners can benefit by upgrading from a sole proprietorship to an Sdn Bhd Malaysia structure once their revenue grows beyond a certain level.
📩 Free Consultation: Email salesteam@amazeadvisory.com or call +6013-284 7678 / +6013-323 7678 to start your Malaysia company setup today.
2. Limited Liability Partnership (LLP)
The Limited Liability Partnership (LLP) is a relatively new and flexible business structure introduced in Malaysia in 2012 under the Limited Liability Partnerships Act 2012. It was designed to combine the flexibility of a traditional partnership with the limited liability protection of a company.
This structure has become increasingly popular among professionals, startups, and small business owners who want a simple, low-cost business entity with legal protection for its partners.
Governing Law
- Governing Law: Limited Liability Partnerships Act 2012
- Regulatory Body: Companies Commission of Malaysia (SSM)
- Annual Compliance: Annual declaration submission (instead of audit)
All LLPs in Malaysia are registered and regulated by SSM, similar to companies. However, the reporting and compliance requirements are lighter compared to a private limited company (Sdn Bhd).
Key Features
- Hybrid between a partnership and company.
- Separate legal entity — partners not personally liable for business debts.
- Requires at least two partners and one compliance officer.
- Flexible capital contribution — can be in cash, property, or services.
- The LLP continues to exist even if partners change or pass away.
Advantages
- Limited Liability Protection
Partners are not personally liable for the LLP’s debts or actions of other partners, giving peace of mind similar to an Sdn Bhd. - Separate Legal Entity
The LLP can own assets, sign contracts, and operate independently of its partners. - Flexible Management Structure
No strict corporate formalities — partners can decide their internal rules through an LLP agreement. - Simple Compliance
LLPs are not required to conduct annual audits or hold AGMs, making them cost-efficient for small businesses. - Tax Efficiency
Profits are taxed once at the LLP level, not again when distributed to partners.
Disadvantages
- Limited Public Perception
Many banks, investors, and clients still prefer dealing with Sdn Bhd companies as they appear more “corporate.” - Limited Fundraising Options
LLPs cannot issue shares, making it harder to attract equity investors compared to an Sdn Bhd or Berhad. - Partner Disputes
Without a clear LLP agreement, disagreements among partners can cause operational issues. - No Audit Requirement (Double-Edged Sword)
While this reduces costs, it can also make financial transparency harder to prove when applying for loans or government tenders.
Suitable For
- Professional firms (e.g. accountants, lawyers, consultants) who want limited liability without complex company compliance.
- Small and medium-sized enterprises (SMEs) seeking a simple structure with some corporate protection.
- Family businesses or partnerships where owners want to protect personal assets but maintain internal flexibility.
- Startups and service providers that do not plan to raise venture capital in the short term.
📩 Free Consultation: Email salesteam@amazeadvisory.com or call +6013-284 7678 / +6013-323 7678 to start your Malaysia LLP setup today.
3. Company Limited by Guarantee (CLBG)
A Company Limited by Guarantee (CLBG) is a unique type of company in Malaysia that is not driven by profit but by purpose. It’s often used by charities, foundations, professional associations, and non-governmental organisations (NGOs) that want to operate formally, manage funds transparently, and gain credibility with donors and regulators.
In a CLBG, there are no shareholders — only members who act as guarantors, and these members do not receive dividends or profit distributions. Instead, all income must be reinvested to achieve the organisation’s objectives.
Governing Law
- Governing Law: Companies Act 2016
- Regulatory Body: Companies Commission of Malaysia (SSM)
- Supervisory Authority (for charitable CLBGs): Registrar of Companies (ROC) and, if applicable, the Ministry of Domestic Trade and Cost of Living (KPDN)
A CLBG is registered under Section 45 of the Companies Act 2016, and it operates much like a company but without shares or shareholders.
How a CLBG Works
A CLBG is formed to promote a cause or serve a public purpose, not for personal financial gain. Typical examples include:
- Professional bodies (e.g. accounting, engineering, or legal associations)
- Charitable foundations and NGOs
- Educational or research organisations
- Community and welfare institutions
- Industry associations and chambers of commerce
Unlike a Sdn Bhd, there are no shares to issue or dividends to pay. The focus is on sustainability, accountability, and social impact.
Key Features
- Separate legal entity — can own property, sue or be sued in its own name.
- Non-profit entity without share capital.
- Members act as guarantors, not shareholders.
- All profits are used for social or charitable purposes.
- CLBGs can apply for tax-exempt status under Section 44(6) of the Income Tax Act 1967 if approved by the Inland Revenue Board (LHDN).
- Mandatory annual audit by an approved auditor.
Advantages
- Separate Legal Entity
The CLBG can own assets, manage funds, and enter into contracts in its own name — separate from its members. - Limited Liability
Members’ liability is capped at their guarantee amount, offering protection from financial risks. - Professional Image
Being registered as a CLBG enhances credibility with regulators, donors, and sponsors — ideal for grant applications or fundraising. - Perpetual Succession
The CLBG continues to exist regardless of changes in its members or directors. - Tax Exemption Opportunity
CLBGs that qualify under Section 44(6) may enjoy full tax exemption, making it easier to attract donors and manage funds effectively.
Disadvantages
- Cannot Distribute Profits
All income must be reinvested for the organisation’s objectives — no personal profit allowed. - Higher Compliance Requirements
Annual audits, board meetings, and submission of financial statements are mandatory. - Longer Incorporation Process
Registration typically requires approval from SSM and sometimes additional ministerial approval, which can take a few months. - Restricted Business Activities
A CLBG cannot conduct activities for profit unless it directly supports the non-profit objectives stated in its constitution.
Suitable For
A CLBG is ideal for individuals or groups who want to establish a formal, credible, and sustainable non-profit organisation.
Best suited for:
- Charities and foundations (education, health, poverty relief, environment)
- Professional associations (law, engineering, accounting)
- Clubs or societies transitioning to a more formal corporate structure
- NGOs or advocacy groups seeking better governance and funding transparency
- Social enterprises aiming for long-term impact while reinvesting profits
👉 Read more: Amaze Advisory’s Trusted Guide: Understanding Company Limited by Guarantee (CLBG) in Malaysia
📩 Free Consultation: Email salesteam@amazeadvisory.com or call +6013-284 7678 / +6013-323 7678 to start your Malaysia CLBG setup today.
4. Unlisted Public Company (Berhad)
Governing Law
- Companies Act 2016, governed by SSM.
Key Features
- Can offer shares to the public (but not listed on Bursa Malaysia).
- Must have at least two directors and a qualified company secretary.
- Required to hold Annual General Meetings (AGMs) and submit audited financial statements.
Advantages
- Ability to raise capital from public investors.
- Enhanced corporate image and transparency.
- Pathway to becoming a listed company in the future.
Disadvantages
- More stringent reporting and audit requirements.
- Requires stronger governance and management controls.
Suitable For
Large private companies, investment groups, or those preparing for IPO listing.
📩 Free Consultation: Email salesteam@amazeadvisory.com or call +6013-284 7678 / +6013-323 7678 to start your Malaysia Berhad Company setup today.
5. Sole Proprietorship
Governing Law
- Registration of Businesses Act 1956, under SSM.
Key Features
- Owned and run by one individual.
- No legal separation between owner and business.
- Easy and affordable to register and manage.
Advantages
- Simple setup and minimal paperwork.
- Full control and decision-making power.
- Low registration and annual renewal cost.
Disadvantages
- Unlimited personal liability — owner responsible for all debts.
- Harder to raise funds or get investors.
- Business continuity ends when the owner retires or passes away.
Suitable For
Freelancers, small traders, online sellers, or side hustlers.
6. Conventional Partnership
Governing Law
- Registration of Businesses Act 1956, under SSM.
Key Features
- Two or more persons carry on business with shared profits/losses.
- No separate legal entity — partners personally liable for debts.
- Partnership agreement strongly recommended.
Advantages
- Simple and cost-effective setup.
- Combined resources and shared expertise.
- Flexible internal management.
Disadvantages
- Unlimited personal liability for partners.
- Disagreements can affect business operations.
- Dissolves when a partner leaves or passes away.
Suitable For
Small professional practices, family businesses, or traders sharing resources.
Summary Comparison Table
| Structure | Separate Legal Entity | Liability | Ideal For | Regulatory Burden |
| Sdn Bhd | ✅ Yes | Limited | Growing SMEs, startups | Medium |
| LLP | ✅ Yes | Limited | Professional partnerships | Low–Medium |
| CLBG | ✅ Yes | Limited (Guarantee-based) | NGOs, charities | High |
| Unlisted Berhad | ✅ Yes | Limited | Large enterprises | High |
| Sole Proprietorship | ❌ No | Unlimited | Freelancers, traders | Low |
| Conventional Partnership | ❌ No | Unlimited | Small joint businesses | Low |
Conclusion: Choosing the Right Structure
There’s no “one-size-fits-all” structure — your choice depends on your business goals, risk appetite, funding needs, and growth ambitions.
Here’s a quick guide:
- Starting small? → Go for Sole Proprietorship or Partnership
- Professional team? → Try LLP or Sdn Bhd for flexibility and protection
- Looking to scale or attract investors? → Sdn Bhd is your best choice
- Running a non-profit? → Consider a CLBG
Expanding to large-scale operations? → Berhad might suit you
Get Started with Amaze Advisory Today!
Choosing and setting up the right business structure in Malaysia can be complex — that’s where we come in.
At Amaze Advisory, we simplify incorporation, compliance, accounting, and tax advisory for local and foreign businesses alike.
✔️ Email: salesteam@amazeadvisory.com
✔️ Phone: +6013-284 7678 / +6013-323 7678
Let’s build your business foundation the right way — from incorporation to growth and beyond.
Contact Amaze Advisory today and take the first step toward building your business in Malaysia.
