3 Types of Business Structures to Know About When Starting a Business in Malaysia

Malaysia is considered the gateway to Southeast Asia, and it has one of the most business-friendly policies anywhere in the region. So it’s really no surprise that a lot of foreigners are now starting their businesses in Malaysia, especially those in real estate, tourism, and retail.

Now if you also want to start your own business in the country, the first step to doing so is determining the right business structure for you. Here are three types of business structures that you can choose from in Malaysia:

Private Limited Company

A private limited company (Snd Bhd) is the most common business structure, especially for foreigners doing business in Malaysia because it’s a completely separate legal identity. It’s also the most recommended by firms specialising in company formations because of its benefits. When you opt for a private limited company, you can get up to fifty stakeholders in your business, and each of them will have limited liability. This means that if a company incurs debt, they’ll only be liable up to the amount that they invested in that business.

A private limited company can also operate in perpetual succession, which means that they can continue to do business even if shareholders and directors die or change.  

Foreign Branch Office

If you already have an existing business abroad and you want to expand in Malaysia, you can go for a foreign branch office that allows you to operate in the country for a determined time frame. With this option, you’ll still be the same legal entity as your parent company, which also means that all your business activities should also be the same. A foreign branch office also means that your parent company will be accountable for all liabilities and debts. Furthermore, you will be required to have at least one Malaysian resident in your branch office to take on different tasks on behalf of your company.

Representative Office  

If you want to do business in Malaysia as a foreign business with a foreign employee, you should go for a representative office.

This non-trading entity allows you to set up an office in the country for up to 5 years, so you can test the waters and see if the Malaysian market can work for you. With a representative office, you can do market research, gather data and look for possible investment opportunities, all without being subject to tax.

When you get approved by the Government of Malaysia, you can send up to five foreign entities to be in your representative office throughout the entire duration of your agreement. But you must remember that you cannot do any commercial activities if you’re under a representative office, and you need to be specific about the purpose of setting up your office in Malaysia so you can get approval from the government.

No matter what business structure you choose, make sure that it’s the right fit for your purpose. And when you start running a business in Malaysia, make sure to manage your finances wisely to get the most returns.