Type of Business Entity For Me

Which to choose and which is suitable for me?


5/14/20241 min read

SYOB? Congratulation to you.

Here's a breakdown of the different types of business entity to choose.

1. Sole Proprietorship:

  • Simplest and easiest to form.

  • Owned and operated by one person.

  • All profits and losses belong to the sole owner.

  • No distinction between the business and the owner's personal assets. This means the owner has unlimited liability for business debts – if the business can't pay, the owner's personal assets can be seized.

  • Easy to set up and maintain.

  • Good for small, low-risk businesses.

  • Tax - income earn from sole proprietorship to be accounted as Individual Income under Form e-B.

  • Go to https://ezbiz.ssm.com.my/ to register.

2. Partnership:

  • Owned by two or more people (partners).

  • Partners share profits, losses, and management responsibilities according to a predetermined agreement.

  • There are two main types of partnerships:

    • General Partnership: All partners have unlimited liability for the business's debts.

    • Limited Partnership: At least one partner (general partner) has unlimited liability, while others (limited partners) have liability limited to their investment in the business.

  • Relatively easy to form.

  • Good for businesses where partners bring complementary skills and resources.

  • Tax - income earn from partnership to be accounted as Individual Income under Form e-B.

  • Go to https://ezbiz.ssm.com.my/ to register

3. Limited Liability Partnership (LLP):

  • Similar to a general partnership, but with limited liability protection for some or all partners.

  • Partners' personal assets are generally shielded from business debts, except in cases of negligence or malpractice.

  • Offers more flexibility in profit-sharing arrangements than an LLC.

  • More complex to form and maintain compared to a general partnership.

  • Often used by professionals such as lawyers, accountants, and architects.

  • Tax - Income earn in LLP is a corporate tax, simiar to Sdn Bhd, at 15% to 24%.

4. Private Company (Sdn Bhd):

  • Separate legal entity from its owners (shareholders).

  • Offers limited liability protection to shareholders. Their personal assets are not at risk if the company incurs debts.

  • More complex and expensive to set up and maintain compared to other structures.

  • Requires compliance with stricter regulations.

  • Suitable for businesses aiming for growth, attracting investors, or limiting owner liability.

  • Tax - Income generated in Sdn Bhd is a corporate tax, simiar to LLP, at 15% to 24%.

Choosing the Right Structure:

The best ownership structure depends on various factors like:

  • Number of owners

  • Liability preferences

  • Growth potential

  • Management complexity

Consider consulting Your Advisor to determine the most suitable structure for your specific business needs.