One of my readers recently emailed in a question which I had heard about but it never really concerned me much, because it doesn’t affect me directly.
His question was:
I would like to know if a foreigner can become a Sole Proprietor of a business in Malaysia.
I get lots of conflicting answers to this. Just this morning I had an email from a Secretarial firm, informing me that it is impossible. And yesterday I had a meeting with another firm who told me that it is possible.
Can you please shed some light on this for me?
I recently called my Corporate Secretary, who are doing my business taxes for me to clarify this question.
Sole Proprietor and Partnerships
For foreigners, they can’t setup a simple Sole Proprietor or Partnership in Malaysia. I asked if having 51% or above ownership by a Malaysian or a Bumi Putera would make any difference and they told me that it would not.
The rule is that Foreigners can’t setup a simple business through ROB.
Sdn. Bhd (Private Limited)
However, if a foreigner would like to register a business in Malaysia, they can do so by setting up a Sdn. Bhd. or a private limited company. I am not sure if Malaysia has the simpler LLC (Limited Liability Coroporation) or the Limited Partnership corporation available yet, but a Sdn. Bhd. would be sufficient.
I wrote an article on the pros and cons of a Sdn. Bhd. in an earlier post and taking from that, the minimum requirements are:
- You must have 2 directors
- It doesn’t matter if the directors are from Malaysia or not
- You must declare your starting capital – RM1 per director is enough, so a RM2 company is allowed
- You will need to register through a company secretary – just Google ‘company secretary Malaysia’ and you should get some businesses to help you out
Keep in mind that the registration fee for a Sdn. Bhd. is around RM2000++ depending on your company secretary’s services.
Also, all meetings between the directors are meant to have ‘minutes of the meeting’ and at the end of every year, there are much more documents for accounting and tax purposes than an ROB.
Yes there are more barriers to starting a business in Malaysia as a foreigner, but no, it’s not impossible.
Hope that helps!
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For a foreigner the cons of starting a sdn bhp are slightly worse than stated. One of the key things that entrepreneurs are interested in is control. In Malaysia if you are a foreigner control comes as a huge cost.
A 100% foreign owned sdn bhd has to have RM500k of paid up capital. This is either a requirement of Bank Negara or CCM.
Now this is one of the many requirements that the Malaysian government imposes on foreign investors in order to ‘help’ grow the Malaysian economy.
However it is totally counter productive. In a lot of cases RM500k is a totally inappropriate amount of capital to invest in a small startup – and taking Malaysian partners begs the question – what for?
So th result is lots of small foreign owned startups do not start up in Malaysia and they are the major source of job generation.
I did have a company in Malaysia. I was badly advised by my corporate secretary and as a result got into the position where i had to capitalize the company as required by CCM. After some disucssion we closed the company and 6 Malaysians lost their jobs as the roi that we were looking for could not be achieved by having so much spare cash sloshing around inside the company.
I’ve also recently started up a new tech company – but in thus case we
Hi Denis!
Thanks for the information, had no idea that the Malaysian goverment was so harsh on foreign owned businesses (although I’m not surprised).
The information that I gave above was provided by a company secratary that I know, but I’m also not surprised that they left out those details… After all, they make a hefty service charge for every business they incorporate.
Thanks for sharing with my readers, but I think your comment was cut off at the end