Understanding Sdn Bhd (Sendirian Berhad) in Malaysia

A Sendirian Berhad (Sdn Bhd) company is a private limited business entity (limited by shares) in Malaysia that can be founded by locals and foreigners. A Sdn Bhd’s company has to be registered with the Companies Commission of Malaysia (SSM) to operate as a legal entity in Malaysia. SSM is the government body of Malaysia that regulates all companies and businesses operating in Malaysia. 

Key Characteristics of a Sendirian Berhad Company 

1. Limited Liability

The limited liability of Sdn Bhd companies is how the personal wealth of all directors or shareholders is protected. Therefore, the directors or shareholders will only be liable for debts based on their investments. 

2. Legal Entity Status

The Sdn Bhd legal entity is independent as it operates as a separate legal entity from the directors of the company. This means that if anything were to happen to the company such as lawsuits, the directors or owners of the company would not be directly sued. 

In any case where the director, owners or shareholders retire or experience death, it will not affect the Sdn Bhd company and will operate as usual. 

3. Ownership and Management Structure

A Sdn Bhd in Malaysia is typically owned by the shareholder(s) and managed by the board of directors. The shareholder(s) of a Sdn Bhd company can sell or transfer their shares to another body corporate or individual provided the individual can afford to buy the shares. 

4. Profit Distribution 

The profit of a Sdn Bhd company can be distributed by the shareholder(s) accordingly. The shareholders and owners also decide the director’s fees, salaries, bonuses, and so on.

Key Roles in a Sdn Bhd Company

1. Shareholder

The shareholders are investors and owners of a Sdn Bhd in Malaysia. They aren’t involved in the daily operations of the company as the responsibility falls on the directors. The shareholders typically host meetings to discuss important issues such as the auditor or the business direction. 

2. Director 

Directors are in charge of the operations and management of the Sdn Bhd company. Most small medium-sized (SME) Sdn Bhd companies tend to have the same people as directors or shareholders.

3. Company Secretary 

A company secretary is a must for all Sdn Bhd companies in Malaysia. They are in charge of advising directors to follow legal practices aligned with the Companies Act 2016. 

Advantages of Registering a Sdn Bhd in Malaysia

Here are several main advantages of registering a Sdn Bhd in Malaysia: 

1. Foreigners Can Fully Own the Company: A foreigner can own the company 100% as long as they have a local address.
2. Tax Rates are Low: The corporate tax rate for Sdn Bhd companies is generally lower than the personal tax rate. 
3. Separate Legal Entity: The company can be sued or sued independently. 
4. Good Reputation: Sdn Bhd has a better market value as it’s known to be credible and reliable for a stable corporate structure.
5. Potential of Succession: An Sdn Bhd company can exist and continue to run as usual even if changes are made to the directors or shareholders team. 
6. Ability to Raise Capital or Receive Investments: Sdn Bhd companies have higher chances of seeking funding such as through financial institutions or investments. 
7. Flexibility of Ownership: The shares within a Sdn Bhd company can easily be sold or transferred to another individual, making it easier for potential business expansion or changes. 
8. Ability to Distribute Revenue: Owning an Sdn Bhd company in Malaysia enables you to make salaries, bonuses, and other financial decisions within the company without any restrictions. 
9. Able to Pitch for Contracts: A Sdn Bhd company has a higher chance of winning big contracts such as those from the governments as they prefer to engage with Sdn Bhd companies. 

Eligibility Requirements for Incorporating a Sdn Bhd

The Sdn Bhd requirement requirements to register a Sdn Bhd in Malaysia are: 

A minimum paid-up capital of RM1 while registering

Minimum 2 shareholders and a maximum of 50 shareholders

A company secretary is to be appointed within 30 days of incorporation

At least one Malaysian Director above the age of 18 years old

A registered office address based in Malaysia.

How to Register a Sdn Bhd Company Online in Malaysia

Here’s how to register a Sdn Bhd company in Malaysia:

Step 1: Create an Account on MyCoID

Visit the MyCOID online portal and create your account. 

Step 2: Verify Your Account 

Then, you’ll need to verify and activate your account at an SSM counter. Once your company has been successfully verified and activated, you’ll receive the login details via email. 

Step 3: Search Your Preferred Company Name 

Login to the MyCoID online portal and click on ‘Direct Incorporation Application’. Search for your preferred company name to check if it’s available or not. If it’s unavailable, then you need to search and use another company name. 

Step 4: Fill Out the Super Form 

This step is where you need to complete the Super Form with all your company details. Choose the correct business code that matches the nature of your business. 

Step 5: Key in the Details of Shareholders and Directors

After that, fill up the necessary details of all shareholders and directors involved. 

Step 6: Review all the Details 

Do review the details thoroughly before submitting the form. Once you’ve confirmed the details, proceed to submit. 

Step 7: Pay the Fixed Registration Fee 

Once you’ve submitted the form, you’ll be led to the transaction page where you’ll need to pay the registration fee of RM1,010. When your application is submitted successfully, you’ll receive a transaction receipt of payment.

Post-incorporation Obligations

Maintaining a Sdn Bhd requires several obligations. Here are the important factors that need to be followed: 

1. File the annual returns and financial statements to SSM
2. Register the company for corporate taxes 
3. Ensure all company records are kept accordingly

Statutory Compliance Requirements of Owning a Sdn Bhd Company

As for the statutory compliance requirements of owning a Sdn Bhd company, below are the factors that must be followed in Malaysia: 

1. File the corporate tax returns annually and register for GST or SST if necessary
2. Annual auditing of financial statements is required by an Auditor
3. Ensure EPF, EIS and SOCSO requirements are in place for all employees
4. The timelines to submit statutory documents needed to be followed by the Company Secretary

Disadvantages of Sdn Bhd Companies in Malaysia

Though a Sdn Bhd company has its perks, there are several downsides to owning it too. Here are some disadvantages of Sdn Bhd company:

• Access to Financial Records: The public can access the company’s financial records easily online by purchasing them. 
• Higher Cost in the Long Run: The cost is higher as there are several services required, such as an auditor and company secretary. 
• Less Personal touch or Control: Since owners or directors don’t have direct control of the business, it lacks a personal touch on customers. 
• Tax is Compulsory: Sdn Bhd companies are required to submit or pay tax even though the company is facing financial losses. 

Sdn Bhd vs Enterprise: Which One Should You Choose?

When choosing between Enterprise vs Sdn Bhd, both serve different purposes and it depends on your overall business goals. Here are the key differences between the two:

You should go for Sdn Bhd if you wish to expand and run a large business which requires liability protection. You should opt for enterprise if you wish to start a small business and wish to fully own the company.

Sdn Bhd vs Sole Proprietorship: Which One Should You Choose

Choosing a Sdn Bhd and a sole proprietorship depends on your business goals and objectives. Here are the several key differences between the two: 

You should go for Sdn Bhd if you want to scale your business and get investors on board. However, if you wish to just be a small business owner without much risk and run a simple business, go for sole proprietorship. 

Conclusion

A Sdn Bhd is overall a great choice for those who wish to build and scale a business to greater heights. Just ensure you find out all the potential risks and follow the requirements accordingly to run a successful Sdn Bhd company in Malaysia.

You can check out trusted partners like BDO that provides various services such as company secretarial services and payroll and treasury services for companies in Malaysia.