Due to reasons that cannot be avoided, I have to setup an entity or company in Malaysia to receive my remuneration. It is a lot of work but same time gives me an opportunity to learn various matters related to business such as account, tax planning, payrolls etc. I would to share the findings here for knowledge purpose.
There are 3 types of setup in Malaysia. They are as follows:
- Sole Proprietor / Pemilik Tunggal
- Limited Liability Partnership (LLP) / Perkongsian Liabiliti Terhad (PLT)
- Private Limited / Sendirian Berhad.
The differences of these 3 setups can be listed as follows:
- Registration Setup
- Liability
- Tax planning
- Compliance
- Cost
- Strike off / winding up
Table below is a simple summary of different setup.
SSM website provide a good comparison of the setup. You may visit their website below:
https://www.ssm.com.my/Pages/Register_Business_Company_LLP/Business/Before-Starting-Business.aspx
Depending on your business size, you may choose the setup that suits you. For example, if a small trader may opt for Sole Proprietorship at the beginning. If the bussines is doing well and consistent, it is best to switch to the private limited. The reasons are as follow:
- Lower tax rate
- Limited liability
- Better compliance to authority
Although the maintenance cost of a private limited is much higher than sole proprieter, the lower tax rate for private limited will balance out. We can look intot the tax rate of each setup in my next article for better understanding.
PLT is more for professional services such accountants, lawyer, auditors, company secretary and etc. This is purely my personal opinion as services does not required stock/product.
Although PLT seems attractive in terms of tax rates, the complicate procedures to register and strike off is a hindrance. Besides most banks are still not favourable to PLT in terms of providing loan.
Another point to consider here is the tax compliance. Since the account of sole proprietor and PLT does not required audit, many mistakes will occur if the owners are not knowledagble on tax compliance. There will be heavy penalty to pay if mistakes are made.
Note : A private limited company now can have single director.
