Discover the comprehensive guide below, unveiling key insights about Sdn Bhd in Malaysia. A Sendirian Berhad (Sdn Bhd) is a distinguished company type in Malaysia, offering private limited status to both Malaysians and foreigners. Delve into the intricacies and explore the possibilities with this informative resource.
SSM is the regulatory body overseeing all corporations operating in Malaysia, including Sdn Bhd. Therefore, companies must register with the Malaysian Companies Commission (SSM) in order to legally operate within the country.
Content Outline
What Is A Sdn Bhd?
A Sendirian Berhad (Sdn Bhd) is a private limited company in Malaysia that can be established by both locals and foreign investors. The registration process can be carried out through the Companies Commission of Malaysia (SSM). This business structure is widely chosen by entrepreneurs because it provides limited liability protection for shareholders and operates as a separate legal entity which means it can own property, enter into contracts, and conduct business in its own name.
The Sdn Bhd model is one of the most preferred options for setting up a business in Malaysia. Shareholders’ personal assets are safeguarded from company debts, while the separate legal entity status ensures smoother handling of business operations. On top of that, Malaysia’s clear and supportive legal framework makes it easier for entrepreneurs to establish, manage, and grow their companies.
8 Benefits of Establishing a Sdn Bhd in Malaysia
1. Your Personal Assets Stay Protected
One of the key advantages of setting up a Sdn Bhd in Malaysia is limited liability protection. Shareholders are only responsible for the company’s debts up to the amount they invested as share capital. Unless they personally guarantee the debt, their private assets cannot be used to settle company obligations. This ensures that financial risks remain within the business and do not spill over into the shareholders’ personal wealth.
2. Significant Tax Advantages
A Sdn Bhd structure also comes with attractive tax benefits. As part of Malaysia’s SME tax system, companies enjoy progressive corporate tax rates—15% for chargeable income up to RM150,000, 17% for income between RM150,001 and RM450,000, and 24% for higher income brackets. These rates offer meaningful tax savings, particularly for smaller businesses which makes Sdn Bhd one of the most cost-efficient options for entrepreneurs.
3. Better Access to Financing
Banks and investors generally see Sdn Bhd companies as more stable and credible compared to other business structures. This reputation makes it easier to secure funding, whether through bank loans or investment capital. In fact, Sdn Bhd companies may qualify for significantly larger loan amounts—sometimes up to four times higher while enjoying lower interest rates. This makes it an excellent choice for businesses looking to scale or expand.
4. Long-Term Business Continuity
Unlike sole proprietorships or partnerships, a Sdn Bhd enjoys perpetual succession. The company’s existence is not affected by changes in ownership, bankruptcy, resignation, or even the death of a shareholder or director. Shares can be transferred, ensuring that the business continues to operate smoothly without disruption, offering greater stability and long-term security.
5. Simple Requirements for Setting Up a Sdn Bhd
Establishing a Sdn Bhd in Malaysia is straightforward, with only a few basic conditions to fulfill. A company name and business activity must be determined, and the business must have at least one shareholder and one director. The minimum paid-up capital is RM1 (though RM100 is generally recommended). These minimal requirements make Sdn Bhd incorporation accessible and hassle-free for most entrepreneurs.
6. Easier Recruitment of Local and Foreign Talent
A Sdn Bhd structure provides greater flexibility when hiring employees, whether local or overseas. Its stable reputation makes it more appealing to skilled professionals, helping businesses attract top talent. Sdn Bhd companies are also eligible to apply for work visas for foreign staff through Malaysia’s immigration office, simplifying the process of expanding teams with global expertise.
7. Strong Potential for Expansion
The credibility of a Sdn Bhd gives businesses an edge when seeking funding, partnerships, or government tenders. This reliable reputation improves access to financial resources and collaboration opportunities, enabling entrepreneurs to scale their operations and unlock new growth avenues both locally and internationally.
8. Exclusive Access to Tax Incentives
Sdn Bhd companies in Malaysia enjoy unique tax benefits and government grants that are not available to other business structures. For example, technology firms can apply for the Malaysia Digital (MD) Status via MDEC, which offers tax exemptions of up to 10 years. These exclusive incentives reduce costs, enhance competitiveness, and position businesses for long-term success.
Key Features of an Sdn Bhd in Malaysia
A Sendirian Berhad (Sdn Bhd) is one of the most widely used business structures in Malaysia because of its strong legal framework and credibility. Below are the defining features that make it distinct from sole proprietorships, partnerships, and public limited companies:
Private Limited Status
An Sdn Bhd is recognized as a private limited company under the Companies Act 2016. Unlike a sole proprietorship or partnership, it has its own legal identity. Unlike a public limited company (Berhad), it cannot sell shares to the public or list on the stock exchange. This makes it suitable for small to medium-sized enterprises (SMEs) that want credibility without the complexity of a public listing.
Separate Legal Entity
A key feature of an Sdn Bhd is that it is treated as a separate legal person. This means the company itself — not its owners — can own property, enter into contracts, open bank accounts, borrow money, and sue or be sued in court. For example, if the company defaults on a loan, the liability belongs to the company, not its individual shareholders.
Limited Liability
The liability of shareholders is limited to the amount of capital they have invested. Their personal assets (such as houses, cars, or savings) are protected if the company is in debt or faces legal claims. For instance, if a shareholder contributes RM50,000 in paid-up capital, their maximum loss exposure is capped at that amount.
Shareholder Structure
An Sdn Bhd requires a minimum of one shareholder and allows up to 50 shareholders. Shareholders can be individuals or corporate entities. This provides flexibility in ownership while keeping the company private. In practice, many SMEs in Malaysia start as family-owned businesses and later invite partners or investors to take up shares.
Perpetual Succession
The company’s life is not dependent on its owners or directors. Even if shareholders resign, pass away, or transfer their shares, the company continues to exist until it is formally wound up. This ensures long-term stability and business continuity, which is attractive to investors, lenders, and employees.
Transferability of Shares
Ownership in an Sdn Bhd is represented by shares. These shares can be transferred or sold to another party, subject to approval by the company’s board or other shareholders. This flexibility makes it easier to bring in new partners, exit the business, or reorganize ownership. However, unlike public companies, Sdn Bhd shares are not freely tradable on the open market.
Compliance and Governance
Sdn Bhd companies are governed by the Companies Act 2016 and must meet specific compliance requirements. This includes:
- Appointing at least one licensed company secretary within 30 days of incorporation.
- Filing annual returns and audited financial statements with the Companies Commission of Malaysia (SSM).
- Maintaining statutory registers and proper accounting records.
While these requirements create additional costs compared to simpler structures, they also enhance the company’s credibility and transparency.
Capital and Fundraising Flexibility
An Sdn Bhd can issue different classes of shares, allowing flexibility in fundraising and profit-sharing arrangements. It can also raise funds through bank loans, private investments, or venture capital. Compared to a sole proprietorship or partnership, lenders and investors generally view Sdn Bhd companies as less risky and more structured.
Management Structure
An Sdn Bhd must have at least one director who is ordinarily resident in Malaysia. Directors are responsible for managing the company’s affairs and ensuring compliance with the law. The separation of ownership (shareholders) and management (directors) makes the company more organized and professional in decision-making.
What sets SDN BHD apart from Berhad and a partnership?
Their difference can be seen in the suffixes of their respective names – ‘Berhad’ (BHD) refers venturing into a Malaysian public limited company PLC, on the other hand, ‘Sendirian Berhad’ (SDN BHD), is used for an Malaysia Company that is private limited. A note to be taken is that; the number of shareholders in an SDN BHD firm, usually ranges from 1 to 50 while a BHD corporation can have many shareholders.
A public limited company should have publicly disclosed its financial statement; Bhd is more complicated than SDN BHD regarding financial reporting.
Another strength of BHD firms includes better sources of capital, which refer to the fact they are in a position to raise fund from being equity or debt financed publicly. Both types of company incorporation are subject to the same procedure while companies formation as SDN BHD have stricter requirements delineated in their Articles for the Association.
These include a number of restrictions on its operations useful as; the maximum number of shareholders should not be above 50, limitation to pledge shares or indemnities publicly and also prohibition to accept deposits from public. We should point out that such limits are not mandatory; other BHD companies choose dual listing and sell their shares in stock exchanges. To conclude, BHD organizations are eligible to remain unquoted if they will.
Pros and Cons of an Sdn Bhd: Weighing the Benefits and Drawbacks
Advantages of an Sdn Bhd
100% Foreign Ownership
Foreigners can be shareholders and own 100% of the Sdn Bhd. Alternatively they can act as directors if there is a local director on the board. Nonetheless, it should also be noted that this doesn’t apply to all businesses since some industries require a minimum of Malaysian participation.
We can create a single shareholder/single-person company (“SPC”). If the company gets an exception from the Foreign Investment Law, then a SPC subsidiary can be established.
Lower Tax Rate
A corporate tax rate of 17% is applicable to the initial RM600,000 if it is a resident company who has less than RM 2.5 million paid-up capital or gross income from operations are lower than RM 50 million. On the contrary, those corporations that do not meet these requirements will be taxable to a general tax rate of 24%.
Dividends Are Tax Exempted
In comparison to other variety of corporate structures, companies in Sdn Bhd enjoy a better tax benefit including pioneer status and investment tax allowance. Having a profit-based tax nature, an Sdn Bhd does not have to pay additional taxes on the distributed dividends: Additionally, residents in Malaysia that receive dividend income are also not taxed on the dividends as individual taxes.
Holding Company Structure
Real estate and other assets can be held by a corporation as holding company. This creates a company setup for property investors to help in asset management. If asset protection was the goal of a parent corporation, it could organize itself as a holding company and establish subsidiaries for each business line. Another subsidiary may be responsible for the brand name and trademarks of the parent corporation, while another one will hold various real estates owned by the parent corporation.
This strategy is aimed at limiting the financial and legal obligations risk of the holding company as well as those of its many subsidiaries. It may also help to minimize the total tax burden of a corporation by placing certain parts of its operation in countries with favorable taxes.
The legal maximum number of shareholders for a Sdn Bhd company is 50, which is sufficient for any modest to medium sized firm. In case there are more than 50 investors, a Berhad would serve as an alternative company structure. A shareholder of a company can be an individual or corporate body.
Reputable Option
As a result of reporting standards that it must comply, these Sdn Bhd companies have also become more favorable in the market that solidifying them as sound and dependable corporate structure.
Disadvantages of an Sdn Bhd
Legal and Compliance Obligations of a Sdn Bhd
A Sdn Bhd must file annual returns and audited financial statements with the Companies Commission of Malaysia (SSM). While these filings are not fully public, they can be accessed by regulators, shareholders, or purchased through SSM’s online portal.
In addition, Sdn Bhd companies are governed by the Companies Act 2016, which requires a higher level of compliance compared to a sole proprietorship or partnership. This includes statutory filings, appointment of a licensed company secretary, and adherence to audit and reporting obligations.
Conducting annual audits of the company’s financial accounts is a mandatory requirement.
The role of a company secretary in Malaysia is to administer the statutory returns and submissions for a firm, as well as attend board and shareholder meetings and provide minutes.
The firm will be subject to recurring costs including audit, accounting, secretarial, and tax charges that have to be paid annually.To set up an Sdn Bhd in Malaysia, you have to hire a professional firm like FastLane Group for the Sdn Bhd setup. Contact FastLane Group for a free consultation on Sdn Bhd company incorporation.
