5 Advantages of Establishing A Sdn Bhd in Malaysia

What is a Sdn. Bhd.?

A Malaysian Private Limited Company, or Sendirian Berhad Company (Sdn. Bhd.), is one of two types of companies limited by shares. In Malaysia, Sdn Bhd companies are regulated by the Companies Act 2016. Under the Companies Act 2016, it is mandatory for Sdn Bhd companies to appoint one or more company secretaries to work with or outwith the company.

Prospective business owners interested in starting a business in Malaysia may choose to set up a Sdn Bhd as their primary choice due to the range of advantages that this model of business ownership presents. The advanatages to a Sdn Bhd company include:

1. Limited Liability

The idea of limited liability companies safeguards the shareholder’s personal wealth. The shareholder is not liable for any liabilities of the company on the grounds that the shareholder has not given guarantee to any liabilities faced by the company. Therefore the establishment of a Sdn Bhd company can be seen as an appealing option to business owners due to the financial security offered by such an agreement. Shareholders need not risk their personal wealth or assets – unlike other business models such as sole proprietorship or partnership models where owners hold greater responsibility for the debts accrued by the company.

2. Status as Separate Entity & Continuous Existence

A Sdn Bhd company exists as a separate legal entity from its owners, meaning it possesses the legal rights as a natural person. This equates to the company’s ability to acquire assets, enter and leave contracts, sued or be sued. Furthermore, existing as a separate entity from its owners allows the Sdn Bhd company to continue on regardless of the status of its owners, shareholders or directors unless legally dissolved. The stable nature of a Sdn Bhd company may pose as a great advantage for many business owners in terms of long term business growth.  

3. Ease In Transfer of Ownership

Ownership in a Sdn Bhd company is held amongst 2 or more shareholders and these shareholders are at liberty to transfer or sell shares to one another or third parties who consequently become shareholders of the company. The Sdn Bhd company can continue business operations as usual despite changes in ownership, therefore potential business owners may view this aspect of flexibility and ease true to Sdn Bhd companies as a great benefit.

4. Greater Access to Capital Funding

Sdn Bhd companies may raise capital funding via issuing bonds or shares which will protect buyers against debt. Sdn Bhd companies are also able to borrow money from financial institutions at lower rates in comparison to other types of businesses. Finally, more capital can be accessed by Sdn Bhd companies through the stock exchange by issuing an initial public offering (IPO). The availability of these options for capital funding proves a stark difference to sole proprietorship or partnerships where these alternatives are stifled.

5. Tax Advantages

The corporate tax rate for a Sdn Bhd company is typically lower than the individual tax rate as Sdn Bhd companies are taxed based only on their profits. The corporate tax rate for Sdn Bhd companies are:

  1. First MYR 500,000 profit: 20%
    1. Above MYR 500,000 profit: 25%
    1. Maximum tax rate of 26%

In comparison, individual tax rates can go up to 30% and more.

The advantages of establishing a Sdn Bhd company in Malaysia in a nutshell lies in the ease, flexibility and security that this business model offers. Deciding upon the most suitable type of company registration for your business ultimately depends on your business needs and wants. Make it the most with Quality Oracle.

We are proud of our 28 years of successes at incorporating companies in Malaysia. Quality Oracle strives to assist you in setting up your business in the most efficient and streamlined way possible. Get in touch with our corporate professionals today to enquire about our company secretary services.

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