Are you looking to start a business in Malaysia as a foreigner? here is a complete guide along with the legal requirements to start a profitable business in Malaysia without money.
Okay, providing an in-depth analysis of the top 50 small businesses. opportunities in Malaysia and a series of industry specific business plan templates; Now we will analyze the legal requirements, market feasibility, and everything you need to start a business in Malaysia in detail. So put on your entrepreneur hat and let’s move on.
Why start a business in Malaysia?
Malaysia is rapidly gaining ground as one of the favorite destinations for business investment. Ranked 24th in the World Bank’s 2021 Ease of Doing Business Rankings, Malaysia is a favorable playing field for investors looking to enter the market.
Whether you live in Malaysia or are a foreigner intending to migrate to Malaysia In order to take advantage of the widespread business opportunities, we have provided you with a step-by-step procedure on how you can set up a business unit in this country from pristine beaches and tourist shelters.
Starting a Profitable Business in Malaysia as a Complete Guide for Foreigners
- Find out if you are allowed to start an industrial business
The first step if you are considering starting a business in Malaysia if you are a foreigner is to first determine if you will be allowed to start a business in the industry. Although Malaysia has liberalized restrictions on foreign participation in many sectors over the past decade, some specific sectors are still limited or protected for reasons of national policy.
Oil and gas services are examples of industries that use specific licenses and conditions. customs warehouse and freight, ground transportation services, wholesale and retail, tour operators, FB restaurants and cafes, franchises, etc. These areas are generally reserved for non-citizens. It is important from the outset to determine whether the company you wish to operate in Malaysia:
- any specific license or condition,
- any restrictions on foreign capital
- Any minimum paid-up capital requirement or
- Any requirement of Bumiputera (i.e. Malaysian) directors or local social capital.
The above is not exhaustive and can always be difficult to determine as a single activity may require multiple licenses and permits. You need to do extensive research in this area so that you can plan your business structure, working capital, and give yourself a realistic timeline for when your business actually starts.
- Determine the type of business
There are several types of legal entities in Malaysia. Each business entity has its own compliance requirements, tax structure, etc. There are also business entities for citizens and foreigners.
a. If you are a local entrepreneur: You can register your business as a sole proprietor, either a Limited Liability Company (LLP), or a General Partnership and Partnership as these are the usual business structures available in Malaysia.
- Sole Proprietorship / Partnership: This is the easiest and cheapest way to start a business in Malaysia which is owned and operated by one person, with no legal distinction between owner and business. This means that it is subject to owners income tax and not to corporation tax. However, the business owner has little to no protection, so it is advisable to activate LLC instead.
b. If you are a foreign entrepreneur: There are two common business entities for foreign investors: a locally incorporated company or a foreign invested company. Foreign investors can establish a sole proprietorship or partnership in Malaysia, provided they have a permanent residence (“PR”) in Malaysia.
In addition to the mentioned options, foreign investors can also choose to register their business as either a limited liability company, a Labuan company, or a representative office. International companies in the manufacturing or service sector can usually do business in Malaysia without restrictions, as the government wants to stimulate export growth, knowledge transfer and job creation in this sector.
- A limited liability company : Foreigners are allowed to register a Sendrian bendan in Malaysia with 100% foreign ownership, depending on the company, this is the local equivalent of a limited liability company or LLC and is the vehicle most common investment in the country.
Companies in most sectors are allowed 100% foreign ownership and the Malaysian Investment Development Authority (MIDA) maintains a detailed list of companies open to foreign investment in Malaysia.
A law relating to this business entity is that two of the directors of the company must be permanent residents of Malaysia and have a limited liability company. The company must have between two and 50 members. The company must also have at least two shareholders.
You can register as a limited liability company through the Malaysian Companies Commission (SSM).
- Labuan company . Labuan becomes a regional offshore center with a low tax rate jurisdiction. Labuan companies can rent properties in Malaysia, but are not allowed to sell in the country, so they are not suitable for international companies wishing to sell to clients in Malaysia.
However, the establishment of Labuan Company is useful for entrepreneurs in financial services, distribution or international trade. Labuan company is also beneficial for regional distribution companies as import and export to and from Labuan are duty free.
Foreigners can own 100% of the business, and registration is fast and affordable. Expats can apply for a two-year multiple work pass once the business is registered. You can register as a Labuan company through the Labuan International Business and Financial Center (IBFC).
- Name your business
Once you have decided on the entrepreneur that will best suit the business you have in mind, you now need to find a name for your business. Every business needs a name. A good business is more than just a brand name – it is also part of your marketing strategy and your brand identity.
Run the name check after manually selecting the company name. You must then complete the name availability request form and send it to Suruhanjaya Syarikat Malaysia (“SSM”); and you need to pay a fee of RM30.00 for each name you apply. After name verification, register the name with SSM to get approval for company registration in Malaysia.
- Open a bank account
Opening a bank account for an individual or business locally (and preferably near the intended business premises) is one of the first things you should do when making payments, share issues, deposits and fees. , which are usually charged in local currency.
Checking in advance with local or international banks for precise documentation, the requirements and the time required to open a bank account would be reasonable given the anti-money laundering and “Know Your Customer” compliance checks that all banks have. must adhere to before approving a new bank account.
- Protect the premises
Whether in the form of rented or purchased space, virtual office, service office, or even permanent residence, a physical location or mailing address in Malaysia is typically required in others. applications for bank accounts, business start-ups, licenses and work permits, etc.
Foreigners may consider subscribing to virtual offices or renting office or collaboration spaces, often located in prestigious offices, for a quick and inexpensive “temporary work address” before committing to a lease. longer or a real estate purchase.
Please note that some corporate secretarial service providers may provide their existing business address as a temporary registered and / or business address.
- Register your office address
In Malaysia, every business must have a legally registered local office address. Once you have chosen a location for your business, you need to proceed with its registration. Without it, the process of registering your business will not be complete.
7. Immigration permits and secure visas (if you are a foreigner)
Although there are many possibilities for foreigners to enter and stay in Malaysia, different types of work permits and visas may apply depending on the type of activity and the length of stay in Malaysia. Examples:
- visitor (single or multiple entry visa),
- spouse (long-term spouse visa / social visiting card),
- migration (as part of the “My second home in Malaysia” program),
- employee (pass types may vary based on skills and salary),
- short-term contracts and assignments (professional card),
- shareholder or director of a newly registered company (work permit),
- or when setting up a regional office / representative office where the company was already established in an original company (work permit).
The special requirements and procedures for obtaining the correct work permits or visas can be confusing for many foreigners, not to mention the representations and actual ties to the immigration service. Different work permits may also have different requirements for the minimum paid-up share capital of the applicant company.
It would also be prudent to anticipate the number of work permits / visas that a business will need if it intends to hire foreigners as employees. Certain government incentives should be considered, such as obtaining Super Corridor Multimedia (MSC) status, which can facilitate the recruitment of foreigners / expatriates for a company.
8. Prepare the incorporation documents
Once you have determined the office address and visa, the next step is to start collecting the incorporation documents. Please note that all of these documents must be ready before you can think about inclusion. The documents you need for this include:
- Memorandum and Statutes / Statutes
- Official declaration of the director or organizer before the appointment
- Declaration of conformity
- Letter of Approval of Company Name from SSM (one copy).
- Proof of identity of each director and secretary of the company (one copy).
9. Register your business
You must apply to register with SSM within three months of the date of approval of the SSM Company Name. You will need to request a new name search if you fail to submit your incorporation documents to SMM within 3 months.
The Malaysian Business Commission (SSM) serves as the agency for company registration and business registration in Malaysia. To register your business, you need to follow these steps.
You should perform a name search to determine if your proposed business name is available for registration. The name must match the name registered in your company’s home country. To request a name search, you will need to submit a completed CA 13A (Name Availability Request) form to SSM and pay RM 30 for each name applied.
After receiving accreditation on behalf of your company, you have three months to submit the following registration documents.
- A certified copy of the registration or registration certificate of a foreign company.
- A certified copy of the articles of association, statutes or articles of association of a foreign company or other document defining its constitution.
- Form 79 (declaration by a foreign company with information on directors and changes of information).
- Memorandum of Appointment or Power of Attorney authorizing the Malaysian resident (s) to accept on behalf of the foreign company any notice to be sent.
- Form 80 (Statutory declaration of an agent of a foreign company).
- Original copy of Form 13A and copy of a letter from SSM confirming the name of the foreign company.
A certificate of registration will be issued by SSM if you have met all of these requirements.
10.Payment of registration fees
After registering your business, you need to think about ways to pay the registration fee. The company registration fee is 1000 RM.
11. Issuance of registration certificate
You will receive a certificate of registration of the new business within one hour of paying the registration fee.
12. Understanding tax registration
Tax implications and compliance requirements should never be late. At an early stage in deciding which type of commercial vehicle to use, due consideration should be given to different income tax rates, allowable tax deductions, availability of tax breaks, burden of tax reporting and compliance, which may vary depending on the business that uses the business with limited liability company, limited liability company, partnership or sole proprietorship.
The main taxes that most businesses will struggle with are income tax, income tax, real estate gains tax, stamp duty, goods and services. tax (GST).
Leaving GST registration after the fact could lead to missed opportunities to claim valuable head tax credits on the high ticket setup costs incurred. Likewise, knowing what upfront and upfront business costs are taxable versus Malaysian income tax can give you instant tax savings for your business.
13. Hire employees
Malaysia offers a significant amount of educated and skilled human resources for relatively affordable salaries, many of whom can speak multiple languages or dialects (mainly English, Malay, Chinese, Tamil, Cantonese, Hokkien). There is also a high mobility of talent from small towns in Malaysia looking for opportunities to improve their careers.
Every business owner should be aware of their obligations as an employer with regard to contributions and statutory contributions related to employees (such as the staff support fund, the organization of social security, the development fund human resources and monthly tax deductions) before hiring the first employees.
14. Seek the advice of a local professional
While not everything is impossible to do on your own, some critical applications, applications, or demands can be complex without involving local service providers, agents, or contributors familiar with the nuances. and the specific characteristics of the system.
Examples of critical steps that can be difficult without the help of these service providers include acquiring business premises and signing city council licenses, work visas and immigration clearance, and filing . documents in state land offices for real estate-related transactions, registration and filing of tax documents, etc.
The national language of Malaysia (Bahasa Malaysia) is the default language used in government offices and for official documents, often without an easily accessible English translation. Foreigners may also have difficulty obtaining accurate information or updated documents online or over the phone, and may often find that certain processes are best performed “over the counter”.
Hence, screen and hire professional services like accountants, auditors, tax agents, business secretaries, lawyers, work permit and visa agents, intellectual property agents, real estate agents, etc. These specialists will also be able to connect you with other technicians or service technicians, saving you precious time, money and ultimately frustration.