5 Benefits to Start your Business with Sdn. Bhd. (Private Limited Company)

As we know, many SMEs businesses started the business by setting up an enterprise/partnership at the beginning of their business journey, due to the lower cost of setting up and compliance requirements. Nevertheless, setting up a private company (Sdn. Bhd.) remain one of the most popular business vehicles. Starting your business as an Sdn. Bhd. company offers several advantages that contribute to its long-term growth, sustainability, and success. The limited liability protection, enhanced credibility, easier access to funding, business continuity, and tax benefits make it a preferred choice than other types business entity for many entrepreneurs and business owners in Malaysia. If you decide to incorporate a Sdn. Bhd. you can do so yourself using the MyCoID platform or hire our company secretary.

Benefits of Start Sdn. Bhd. in Malaysia

1. Separate legal entity for Sdn. Bhd. (Private Limited Company)

This sort of corporation is a separate legal entity from its prospective business owners. This implies that the firm is regarded a legal 'person,' with the ability to acquire and sell property, engage into legal contracts, and sue and be sued in court. 

This implies that if a director or founder of the firm dies or retires, the Sdn. Bhd. companies (private limited company) will continue to operate. The firm would remain in operation until it was disbanded. This separate legal entity feature separates Sdn. Bhd. companies (private limited company) from business entity sole proprietorships and partnerships. 

Personal assets are generally protected from business debt, business entity and legal liabilities, providing a safeguard for shareholders. A business entities is a voluntary company founded to carry out activities such as providing goods or services to consumers for profit or charity. As a result, Sdn. Bhd. companies is a more solid business. The firm can acquire assets, sue or be sued, and enter into contracts.

2. To enjoy tax rebate up to RM60k

Sdn. Bhd. can enjoy benefit from certain tax incentives, income tax and tax advantages offered by the Malaysian government. These may include lower corporate tax rates, tax deductions for business expenses, lower rates tax, investment allowances, and various tax exemptions, income tax, stimulating business growth and profitability.

According to the Short-term Economic Recovery Plan (Penjana), newly established SMEs (or incorporated Sdn. Bhd.) can receive a tax rebate of up to RM 20,000 for the first three years. 

New companies or LLPs registered between July 2020 and December 2022 are eligible for a tax rebate of up to RM 60,000 in total. To qualify for this tax rebate, the firm must be a SME that is newly established. This means that if you convert your business from any kind to Sdn. Bhd. company or Limited Liability Partnership, you will not be eligible for the tax rebate.

Furthermore, in order to qualify for this tax rebate, you should not transfer any existing employees or firm assets (such as plant, equipment, and facilities) from your present company to your new Sdn. Bhd. company. 

Income tax (Conditions for the Grant of Rebate under Subsection 6D(4)) Order 2021. The order was gazette on 31 December 2021 and has effect from Year Assessment 2021. 

Tax rebate under Section 6D(4):

  • A resident company or limited liability partnership (LLP) incorporated/ registered in Malaysia
  • Paid-up capital or contribution of capital not exceeding RM2.5 million at the beginning of the basis period for a Year Assessment.
  • Commenced operation on or after July 2020 but not later than 31 December 2021
  • Gross income from a business not exceeding RM50 million for the basis period for a Year Assessment. 

Nevertheless, even if you don't qualify for the tax rebate. You can still enjoy the scale tax rate  and tax advantages of company as follow: 
Tax rate %
Company with paid up capital not more than RM2.5 million
  • On first RM600,000 chargeable income
  • Subsequent balance

Company with paid up capital more than RM2.5 million or gross income exceeding RM50 million224%

3. Issue of new shares or transfer of share ownership

The minimum paid-up capital to create a Sdn. Bhd. company is RM1 upon your company incorporation, depending on your share capital. This  stated at the time of company formation might be amended later. As a result, it is best to set the paid-up capital at RM10,000 and increase it once you have the funds after the company is formed to make it easier to transfer shares. Declaring a paid-up capital amount that you do not yet have is prohibited.

Being a shareholder of an Sdn. Bhd. company (private limited company), you will be fully authorized to transfer or sell the shares to any person. You can’t avail of this feature while running a sole proprietorship or partnership. A transfer of shares is prescribed under Section 105(1) of Companies Act 2016. 

The section states that, subject to other written laws, any shareholder may transfer all or any of his shares in the company by a duly executed and stamped instrument of transfer and shall lodge the transfer with the company.

In essence, you may offer shares in a (Sdn. Bhd.) private limited company in return for capital to help your business develop. The best thing is that investors are also covered if the firm fails or gets into difficulties. This is also one of the reasons why many investors prefer to invest in a private limited company rather than a sole proprietorship.

• Issuing new shares to potential investors

In general, the prior approval of a majority of existing shareholders via resolution is required for allotment of new shares of a private company to new identified investors in order to increase its issued and invested capital, so that the shareholders authorize the board of directors to allot and issue new shares to identified investors. The board of directors shall establish the issue or subscription price per share in the best interests of the firm.

According to the company's Constitution, the new shares to be issued to investors rank similarly to existing shares in terms of voting or distribution rights, such shares should first be offered and issued to holders of existing shares in proportion to such holders' holdings.

The corporation shall issue the number of shares designated to each investor upon payment of the issue or subscription price by the specified investors. 

On request, each investor will get a share certificate for the allotted shares. A return of allocation of shares must be filed with the SSM(suruhanjaya syarikat malaysia), and the company's register of members must be revised correspondingly.

You may get help from Company Secretary on how to transfer shares or how the process will going. Our Altomate team company secretary also can help if you need more question and inquiries.

4. Continuing existence and Credibilty as Sdn. Bhd. (Private Limited Company)

A company in Malaysia has the same rights and duties as a natural person, including the ability to acquire assets, engage into contracts, and sue or be sued. Its distinct legal status allows it to continue to exist even if the founder, one or more shareholders, or directors sell their shares, die, or quit the business, until the company is dissolved.

While a partnership or sole proprietorship ceases to exist at the death of its owners, the continued existence of a company provides more stability and the capacity to prepare for long-term economic objectives.

As business entity Sdn. Bhd in Malaysia is allowed to continue business operations even as the owners change since it is a legal entity with the ability to purchase and sell property. Until they are terminated by a court of law, private companies remain in existence. 

This implies that an investor can realize a long-term commercial vision through a company, secure in the certainty that his objectives will be realized by others who come after him. On the other hand, under a sole proprietorship or partnership, the company ends with the departure of one of the owners.

5. Limited Liability Protection for Shareholders

Limited liability businesses are protection for the shareholder's personal assets. The liability of each shareholder is limited to the amount of their respective shareholdings. Due to the fact that the shareholder has not guaranteed any liabilities the company may have, the shareholder is not accountable for any obligations the Sdn. Bhd. company may have.  Sdn Bhd companies are also able to borrow money from financial institutions at lower rates in comparison to other types of businesses.

Due to the financial stability that such an agreement provides, starting a Sdn. Bhd. companies may therefore appeal to business owners. Unlike other business structures like sole proprietorships or partnerships where owners bear greater responsibility for the debts incurred by the Sdn. Bhd. company, shareholders do not need to risk their own money or assets.

Sdn. Bhd. companies (private limited company) also makes it easier for the company to raise capital as investors are more willing to invest in a company where their personal assets are not at risk. Moreover, can provide a level of protection to directors of the Sdn. Bhd. company as well, shielding them from personal liability for the company's debts or liabilities. 

However, this protection is not absolute, and directors can still be held liable for certain actions taken on behalf of the company, such as wrongful acts or fraudulent activities.

The limited liability of Sdn. Bhd company in Malaysia provides a degree of protection and stability for investors and business owners, making it an attractive option for those looking to start or expand their business.

6. Greater Access to Capital Funding as Sdn. Bhd. 

Sdn. Bhd. typically have better access to financial security and sources than other business structure. Due to the apparent stability and formal structure of registered businesses, financial institutions, investors, and venture capitalists are more likely to fund them. This makes it possible for you to obtain money for projects like business growth, R&D, and expansion. It is considerably easy for a Sdn. Bhd. Company to raise a capital than Enterprise.

This is typically accomplished by issuing share certificates or bonds to interested investors. As a result, businesses begin to bloom and expand at a quick speed. Furthermore, a Sdn. Bhd. Company is qualified for lower-interest bank loans. This is true because Sdn. Bhd. Companies are viewed by financial institutions as being less risky than other kinds of companies.


7. Credibility and Perceived Professionalism

Operating as a Sdn. Bhd. company can enhance your business's credibility and perceived professionalism. Having "SDN BHD" as part of your company name gives a professional image and instills confidence in customers, suppliers, and potential business partners. It demonstrates that your business is registered, compliant with legal requirements, and adheres to corporate governance standards.


8. Business Continuity and Succession Planning

A Sdn. Bhd. company provides a structured framework for business continuity and succession planning. The company's separate legal existence ensures that it can continue operating even if there are changes in shareholders or management. This facilitates long-term planning, smooth transition of ownership, and enables the business to thrive beyond the lifespan of individual shareholders.

Contact us today to learn how we can help you get started fully online with our digital company secretary. 

To subscribe company Incorporation, payrollbookkeeping, taxation service, company secretary services, company registration fee from Altomate, contact info@altomate.io

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If you're looking to form an Sdn. Bhd. in Malaysia, or have any other questions on starting your business, contact the team at Altomate.

We're here to answer any questions, provide resources, and give you the exact answers you need to get your business to the next level. We thank you for reading this article and hope it gave you some new thoughts and business ideas to move forward with. Click here for common questions in Company Incorporation FAQ.