What is Sdn Bhd?
A Sendirian Berhad (Sdn Bhd) is a private limited company structure that locals and foreigners in Malaysia can incorporate. Sdn Bhd should be registered through Suruhanjaya Syarikat Malaysia (SSM). Entrepreneurs in Malaysia and other countries commonly use this business entity. It provides limited liability protection for shareholders and has a separate legal entity, allowing it to enter into contracts, own assets, and conduct business transactions in its name.
Due to its benefits and protections, Sdn Bhd structure is a popular option for entrepreneurs seeking to establish a business in Malaysia. With limited liability protection, entrepreneurs can protect their assets from the company’s liabilities, while having a separate legal entity allows for easier management of business transactions. Additionally, the legal framework in Malaysia is relatively business-friendly, with well-defined rules and regulations that make it easier for entrepreneurs to start and run a business in the country.
Opportunities don’t happen.
You create them!
“
– Chris Grosse
What are the benefits of establishing a Sdn Bhd in Malaysia?
1. Company Debt isn’t Your Debt
One of the benefits of forming a Sdn Bhd in Malaysia is that shareholders are not personally responsible for the company’s debts beyond the amount of the share capital they have invested. If the company incurs debt, the shareholders are not obligated to pay it off with their personal assets, provided they have not guaranteed the debt as a shareholder or director. In other words, the company’s obligations do not become the private debts of the shareholders, thereby protecting their assets from potential losses incurred by the company.
2. Maximized Tax Savings
Other than that, setting up a Sdn Bhd has the potential for more significant tax savings. The tax rate for small and medium-sized enterprises (SMEs), which includes Sdn Bhd, can be up to 24% based on their chargeable income. The tax rates vary depending on the level of chargeable income, with rates ranging from 15% for incomes up to RM150k, 17% for incomes between RM150k to RM450k, and 24% for incomes exceeding RM650k. This offers potential tax savings for Sdn Bhd companies, particularly those with lower chargeable incomes.
3. More Accessible for a Bank Loan
Another advantage of establishing an Sdn Bhd company is that it may have better access to bank loans and capital investments. Banks tend to view Sdn Bhd as a reliable corporate structure, which makes it easier for companies to obtain loans at lower rates. Compared to other corporate forms, such as an Enterprise, Sdn Bhd may be eligible for higher loan amounts (up to 4x times more)! This makes Sdn Bhd an attractive option for entrepreneurs seeking funding to start or expand their businesses.
4. Continuous Company Continuity
Forming a Sdn Bhd means that the ownership is transferable, meaning that changes in ownership status, such as bankruptcy, death or resignation, will not result in the company’s dissolution. Unlike an Enterprise, Sdn Bhd companies can continue to exist and operate through the transfer of shares, providing more excellent continuity and stability for the business.
5. Simple Required Conditions for Sdn Bhd Establishment
Setting up a Sdn Bhd is a relatively simple process as it only requires a few conditions to be met. Firstly, a company name must be determined, followed by the business’s nature. The company must also have at least one shareholder and one director, and a minimum paid-up capital of RM1 is required (although RM100 is recommended). Overall, the requirements for establishing a Sdn Bhd company in Malaysia are straightforward and can be easily fulfilled by most entrepreneurs.
6. Ease in Employee Recruitment (Local/Overseas)
Next, by forming a Sdn Bhd, it is easy to recruit local or overseas employees. The stability of Sdn Bhd structure is attractive to potential talents, making it easier for companies to attract high-quality employees. Additionally, Sdn Bhd employers can apply for Malaysian working visas for foreign employees at the immigration office, further streamlining the recruitment process. Overall, Sdn Bhd structure offers entrepreneurs greater flexibility in hiring and managing employees, which can ultimately help drive business growth.
7. Great Expansion Potential
Due to the favourable reputation of Sdn Bhd structure, companies can enjoy better access to capital funding, tenders, and potential partners. This enables Sdn Bhd companies to secure a reliable supply of financial resources, ultimately increasing the potential for business growth and expansion. With greater access to resources and funding opportunities, entrepreneurs can seize new opportunities and take their businesses to new heights.
8. Enjoy Tax Incentive Exclusive to Sdn Bhd Companies
Sdn Bhd companies in Malaysia can benefit from various tax incentives and grants specific to their industry. For instance, technology companies can apply for the Malaysia Digital Status program with the Malaysia Digital Economy Corporation (MDEC) and receive 5+5 years of tax incentives and grants. These tax incentives and grants are only available to Sdn Bhd companies, giving them a competitive edge and potentially helping them save on taxes. With access to these incentives, entrepreneurs can better position their businesses for long-term success and growth.
Want to know more about starting a Sdn Bhd? What’s the best way to start one, and what should you be mindful of? Register and find out in our upcoming webinar!
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