In Malaysia, a private limited company is known as “Sendirian Berhad” or Sdn Bhd. It’s a top choice for small and medium-sized businesses. It gives many benefits like protecting the owners from big debts and helping the company’s brand. The law says a Sdn Bhd must have at least one shareholder and one director who lives in Malaysia. This setup means business owners pay less tax. It also means the company can keep running even if the owners change. This makes it a great choice for a lasting business.
Key Takeaways
- To start a Private Limited Company (Sdn. Bhd.) in Malaysia, you need at least one shareholder and one director who lives in Malaysia.
- Private Limited Companies in Malaysia pay income tax as low as 17%.
- Sdn Bhd has its own legal identity, which protects owners from personal debts of the company.
- This structure lets the company keep going even if the owners change.
- Having control over property and being able to borrow money makes Sdn Bhd attractive to investors and banks.
Overview of Sdn Bhd
In Malaysia, Private Limited Companies (Sdn Bhd) are the top choice for many entrepreneurs. They are loved for their benefits. Let’s dive into what makes an Sdn Bhd business special.
What is an Sdn. Bhd.?
Sdn Bhd stands for “Sendirian Berhad,” which is a Malay term that translates to “Private Limited.” This business structure is the most common form of incorporation in Malaysia. It denotes that the company is privately held, and the liability of the shareholders is limited to the amount they invested in the company. In essence, an Sdn Bhd is indeed a Private Limited Company, operating under the regulations of the Companies Act 2016 in Malaysia.
Is Sdn Bhd a Private Limited Company?
Yes, Sdn Bhd is a private limited company. In Malaysia, “Sdn Bhd” means “Sendirian Berhad.” It’s a popular choice for entrepreneurs because it offers limited liability and tax benefits. It gives owners privacy and control not found in public companies. This is different from “Berhad” (Bhd), which is a public company listed on stock exchanges. Sdn Bhd is great for investors in limiting personal financial risk.
Key Characteristics of Sdn Bhd
Here are the main traits of an Sdn Bhd company:
- Limited Liability: Owners are only on the hook for what they put into the company.
- Separate Legal Entity: The company stands on its own, keeping going even if owners change.
- Transferability of Ownership: Shares can move easily, helping the business grow.
- Perpetual Succession: The company keeps going no matter who owns it or runs it.
- Compliance Requirements: These companies follow the Companies Act 2016 and file yearly with the Suruhanjaya Syarikat Malaysia (SSM).
- Equity Financing: Sdn Bhd companies can use equity financing to grow and expand.
While a Sole Proprietorship might be cheaper to run for small incomes, it risks the owner’s personal stuff. Sdn Bhd companies are safer and can grow bigger. They’re perfect for businesses aiming to get bigger in Malaysia or beyond.
Legal Structure of Sdn Bhd
The Sdn Bhd legal structure is clearly set out in the Malaysian Companies Act 2016. This law covers how to start, run, and end Sdn Bhd companies. It makes sure the company follows strong rules for good management and smooth operations.
Incorporation By Companies Act 2016
In Malaysia, starting an Sdn Bhd company is done through the Companies Act 2016. This law makes the company its own legal entity. It lets the company do business on its own, not just through its owners. The cost to register a Sendirian Berhad (Sdn Bhd) is between RM1,800 and RM2,500 including professional and documentation fees. This covers a wide range of businesses.
Separate Legal Entity
An Sdn Bhd company has its own legal status. This means it can have its own bank accounts, hire staff, and get licenses. It also keeps the owners’ personal stuff safe from company debts. The lowest amount needed to start an Sdn Bhd is RM1, making it easy for new businesses.
Registration Process for Sdn Bhd
Registering a Sdn Bhd is key for entrepreneurs wanting to start a business in Malaysia. It follows a set of steps to meet the SSM’s rules. Knowing how to register an sdn bhd makes the process easier.
Steps to Register an Sdn Bhd
The first step is to suggest a unique business name. This name must follow SSM rules. After approval, you pay RM50.00 for the name. Then, you need RM1,010.00 for incorporation.
You must give detailed info, like:
- Proposed company name
- Type of business
- Registered office address
- Details of shareholders and directors
You can incorporate through direct or name reservation. The company secretary must use the MYCOID system to submit info. It usually takes 3 to 5 working days to register a Sdn Bhd, meeting all rules.
Documents Requirement to register a Sdn. Bhd. Company
For smooth sdn bhd incorporation type, you need these documents:
- Copies of identity cards or passports of all shareholders and directors
- Details of the company’s share distribution
- A description of the company’s business model
- Description of nature of business
- Proof of a locally residing director, who must be at least 18 years old
Additional required information includes:
- Business address and what the business does
- How many shares each shareholder has
- Three possible business types at the start
- It usually takes 3 to 7 days to set up an sdn bhd legal entity if everything is ready. You must appoint a Company Secretary within 30 days of starting.
Advantages of Sdn Bhd
Starting a private limited company sdn bhd has big benefits for entrepreneurs in Malaysia. It’s a smart choice for many.
Limited Liability Protection
A key advantage is the limited liability protection. Shareholders’ personal stuff is safe from the company’s debts. Their risk is only what they put into the business.
Perpetual Succession
Another big plus is the ability to keep going forever. Even if people leave or sell their shares, the company keeps going. This keeps the business stable and going strong.
Tax Benefits
Many like the sdn bhd for its tax perks. In Malaysia, these companies get lower corporate tax rates:
- 17% on the profit up to RM500k
- 24% on the profit exceeding RM500k
Banks also like sdn bhd companies. They offer more loans and lower rates. This makes it easier for startups and growing businesses to get the money they need.
Disadvantages of Sdn Bhd
The sdn bhd company structure has many benefits, but it also has downsides. These include issues with shared ownership and limits on raising money from the public. Knowing these can help business owners deal with the challenges of an Sdn Bhd.
Divided Ownership
One big issue with the sdn bhd company structure is divided ownership. With many shareholders, making decisions can be hard. This often leads to disagreements that can slow down growth. These problems can get worse in big companies. With more shareholders, making decisions becomes even harder.
Restriction on Public Fundraising
The sdn bhd company structure also has a big limit on raising money from the public. Sdn Bhd can’t sell shares to the public and can only have up to 50 shareholders. This makes it hard for them to get a lot of money for growth. Companies might have to use their own money or get money from private investors. This can be less strong than getting money from the public.
Comparison or difference between Sdn Bhd and Berhad (Bhd)
Let’s look at the differences between Sdn Bhd and Berhad (Bhd):
| Features | Sdn Bhd (Private Limited Company) | Bhd (Public Limited Company) |
| Shareholder | Limited to 50 shareholders | No limit on the number of shareholders |
| Public Fundraising | Not allowed to raise funds from the public | Can raise funds publicly by issuing shares |
| Privacy | Higher level of privacy and control | Lower privacy due to public disclosures |
| Regulations and Reporting | Less stringent reporting requirements | Stricter reporting and regulatory compliance |
| Incorporation Fees | MYR 1,010 | Usually higher |
| Sustainability | Perpetual succession | Perpetual succession |
Knowing that Sdn Bhd is a private limited company is key for new entrepreneurs. The process to register is quick, taking only up to three days. This makes it easier to start a private limited company in Malaysia, helping businesses grow.
Annual Compliance for Sdn Bhd
A Sdn Bhd company in Malaysia has liability to submit some compliance submission after a certain period. The details are described as follows:
Annual return: a company has to submit the annual return within 30 days of each anniversary date. Annual return shows all updates taken place past one year in the company. Failure to submit it to SSM on time causes heavy financial penalties.
Audit report: each company has to prepare and circulate the financial statement within 6 months after the financial year end. First year companies will get 18 months of financial year end, while second year onwards will get 12 months. The audit report has to be submitted to SSM within one month after the circulation period. Failure to prepare and circulate to the board of directors and members within 6 months causes financial penalty.
Beneficiary of ownership: Beneficiary ownership (BO) has to submit to SSM within 14 days of change in the ownership of the company. Failure to submit the BO on time causes a financial penalty.
Tax Return : Tax return has to be submitted to the Inland Revenue board (IRB) within 60 days after the financial year end of the company. Failure to submit on time causes a 10% penalty on the tax liability.
Declaration of employment : A company has to declare the employment of the company to the IRB, normally in March of each year. Failure to submit the declaration on time causes a financial penalty.
Conclusion
Understanding how a Sdn Bhd company works in Malaysia is key for future business owners. This type of company offers big benefits like limited liability protection, ongoing business life, and tax perks. The process to start one is easy, thanks to the Companies Act 2016 and the Companies Commission of Malaysia (SSM).
You only need one director and one shareholder to begin. This makes it easy for different kinds of businesses to start but has to maintain the compliance submission on time to avoid any unnecessary financial penalty.
FAQ
Is Sdn Bhd a private limited company?
Yes, Sdn Bhd is a private limited company in Malaysia. It gives limited liability protection and corporate branding. It also has an independent legal status, unlike public companies.
What is Sdn Bhd?
An Sdn Bhd, or Sendirian Berhad, is a type of private limited company in Malaysia. It is a legal entity that can own property and operate with limited liability. It also ensures the business continues forever, no matter who owns it or runs it.
What are the key characteristics of an Sdn Bhd?
Key characteristics include limited liability protection for shareholders, owning property, and having an independent legal status. Sdn Bhd companies also have perpetual succession and easy ownership transfer.
How is Sdn Bhd incorporated under the Companies Act 2016?
Registration of a Sdn Bhd company requires to submit the application form (Section 14) to SSM with all required information such as company name, particulars of directors, shareholders, nature of business and others along with the government fees. Normally, SSM takes 3 to 5 days to provide the notice of successful registration given all provided information are satisfac
incorporated under the Companies Act 2016 includes appointing at least one director who lives in Malaysia, submitting needed documents, and registering with the Companies Commission of Malaysia.
What does it mean that an Sdn Bhd is a separate legal entity?
Being a separate legal entity means an Sdn Bhd can make contracts, own assets, and take on liabilities on its own. This gives legal protection to its members and ensures the company keeps going even if ownership changes.
What are the steps to register an Sdn Bhd?
To register, you need to propose a unique business name, submit identity documents for shareholders, describe the business and its address, and appoint a director and a company secretary who lives in Malaysia.
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