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INSTRUCTIONS

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1.

Introduction on types of business entities in Malaysia

There are three (3) different types of business entities to choose from:
1. Sole proprietorship (also known as sole trader)
2. Partnership business entity
3. Limited company (Sdn. Bhd. Or Sendirian Berhad or Bhd. Or Berhad)

Sole proprietor (or sole trader)

Like many other countries out there, the sole proprietorship business entity in Malaysia is
owned solely by one individual, as his/her liability is unlimited. What unlimited liability
means is: if a business fails or is declared bankrupt, creditors can sue the sole proprietors
owner for all debts owed to respective merchants. This means personal assets, personal
income and employment income are all liable.
Advantages of a sole proprietorship business entity
- Less paperwork & additional formalities (registration is easy, fast and fewer documents
are needed)
- Price of entity formation is much cheaper and is not required by the Malaysian
government to be audited.
- Not required to disclose financial statements to the public.
- Easy to convert into limited company (Sdn.Bhd.)

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Partnerships

The partnership business entity is a joint-entity holder with two or more persons to
carry out a legal business in Malaysia. The companies commission of Malaysia requires
that partnership entities must comprise of at least two (2) members and a maximum
twenty (20) members. Partners in a partnership business entity are also bounded by
unlimited liability.
Differences
Generally, the sole proprietorship & partnership business entity is similar to each other in
many ways. Some of the differences include:
Own partnership agreements are to be made or set to default, governed by malaysias
partnership act 1961.
Sole proprietors are owned by one (1) owner whereas partnerships are owned by two (2)
or more.

Limited company (sdn bhd or bhd)

Sendirian berhad (sdn bhd) is a private limited company, where it prohibits any invitation
to the public to subscribe to any of its shares, deposit money with the company for
investment or subscription. Minimum members in a private limited company is two (2)
and maximum is fifty (50).
Berhad (bhd) is a public limited company where its shares can be offered to the public for
fixed periods and any other forms of subscription. The minimum amount of members
(shareholders) are two (2) and maximum of unlimited amount of members.
There are three (3) types of limited companies in malaysia:

Limited by shares

Limited by guarantee

Unlimited company with/without share capital

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ATTACHMENT

REFERENCES
Authors name (year). Book, Title, Publication