Malaysia is an economic hotspot in Southeast Asia where both the governmental and private sectors participate equally. According to the World Bank's Ease of Doing Business Survey, Malaysia ranks among the most business-friendly countries in the world. Over the course of the 1970s, Malaysia's economy saw a significant transformation, emerging from a predominantly resource-based economy to one of the most resilient, diverse, and quickly growing economies in Southeast Asia. Malaysia has an abundance of natural resources, which significantly increase the GDP of the nation. All these factors contribute to making Malaysia a preferable destination for entrepreneurs to start their businesses.
Malaysia offers a wide range of benefits to businesses operating on its mainland, such as:
Tax Benefits: Malaysian governments have laid down corporate tax rates at quite low rates to make it feasible for businesses to expand and grow. If a resident company has paid-up capital of less than RM 2.5 million, income of less than RM 50 million, and does not directly or indirectly manage another company with paid-up capital of more than RM 2.5 million, it is liable to pay corporation tax at the rate of 17%. Other than the businesses mentioned above, resident companies and non-resident enterprises pay taxes at a CIT rate of 24 percent.
Skilled Workforce: Because the government encourages the development of human resources across all industries, the majority of Malaysian workers have advanced degrees. With lower expenses than other countries in the region, Malaysia has one of the best workforces in all of Asia. Education and training are highly valued in Malaysia, where a growing number of public training institutions, including technical schools, polytechnics, industrial training institutes, and skill development centers, have been established to meet the industry's increasing demand for specific qualifications.
Trade Agreements: Malaysia holds free trade agreements with many countries to offer an advanced economic atmosphere for businesses. Some of these agreements include the Malaysia-Japan Economic Partnership Agreement (MJEPA), Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA), Malaysia-New Zealand Free Trade Agreement (MNZFTA), Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA), Malaysia-Chile Free Trade Agreement (MCFTA), Malaysia-Australia Free Trade Agreement (MAFTA), and Malaysia-Turkey Free Trade Agreement (MTFTA).
Healthy Economy: According to The Heritage Foundation's Index of Economic Freedom, Malaysia has the 24th-freest economy in the world. According to the World Economic Forum's 2019 Global Competitiveness Report, Malaysia's economy ranks 27th in the world for competitiveness. When it comes to minority shareholder protection, Malaysia ranks second globally. Therefore, Malaysia tends to offer a healthy economic environment for businesses to flourish and grow, consequently attracting investors and businesspeople from all over the world.
Government Policies: Malaysian government schemes and policies offer a premium environment for businesses to nurture and grow. Many of these schemes are for startups, such as Skim Usahawan Permulaan Bumiputera (SUPERB), Digital Content Grant (DCG), Malaysia Digital X-Port Grant (MDXG), and Malaysia Digital Catalyst Grant (MDCG).
Following are certain forms of company structures available under Malaysian Legislation:
1. Sole Proprietorship: In this form of business, operations are run by one person—the sole proprietor—who is not considered separate from the business entity. The sole proprietor is responsible for all business activities and resulting profits and losses, meaning their personal assets can be subject to liability. Only permanent residents and Malaysian citizens can register this form of business. An annual renewal fee must be paid to Suruhanjaya Syarikat Malaysia.
2. Partnership: A partnership requires between two and twenty partners. The partnership deed, agreed upon by all partners, establishes operating rules, obligations, liabilities, and profit-and-loss sharing arrangements. While the firm itself isn't taxed, partners pay taxes on their individual income. This structure functions as an extension of sole proprietorship, with multiple people joining to conduct business.
3. Companies Limited by Shares: A company limited by shares can be either private or public limited, with a maximum of 50 shareholders. It cannot offer shares to the public, and share transfers require board approval. Consequently, these companies do not list on the stock exchange.
4. Companies Limited by Guarantee: Similar to a limited liability company, members have limited responsibility but maintain guarantee-bound restricted liabilities. In other words, guaranteed contributions must exceed fixed obligations. This structure is commonly used by non-profit organizations, including charities and foundations.
5. Unlimited Companies: Members and shareholders of unlimited companies have unlimited liability. They bear personal responsibility for any company losses or debts. An unlimited company can convert to a limited company by passing a special resolution and filing a conversion notice with the SSM.
6. Limited Liability Partnership: An LLP combines features of partnerships and companies, requiring two or more partners. Partners' liability is limited to their contributed amount. They are legally separate from the company and cannot be held liable for business debts beyond their contribution.
7. Cooperative: A cooperative organization aims to enhance its members' economic interests while following cooperative principles. Groups interested in forming a cooperative should contact the Suruhanjaya Koperasi Malaysia (SKM) in their region for guidance on establishment and registration.
The following are certain mandatory prerequisites to be fulfilled for company registration in Malaysia:
Directors: For a private limited company, there must be at least one director who is a Malaysian resident. For a public limited company, a minimum of two resident directors is required.