Sdn Bhd vs Sole Proprietorship: Which Is Better for Your Business in Malaysia?

If you’re starting a business in Malaysia, one of the first and most important decisions is choosing the right business structure. Should you go for a Sole Proprietorship, or is a Private Limited Company (Sdn Bhd) the better choice?

This article breaks down the pros, cons, and legal differences to help you make an informed decision.

Quick Comparison Table

What is a Sole Proprietorship?

A Sole Proprietorship is the simplest and most affordable form of business in Malaysia. It’s registered under the owner’s personal identity (IC) and is ideal for freelancers, micro-businesses, and low-risk trades.

✅ Advantages:

• Easy to set up and operate
  
  
• Low startup cost (as low as RM60/year)
  
  
• Minimal paperwork
  
  

❌ Disadvantages:

• Owner is personally liable for all debts
  
  
• Cannot bring in partners or investors
  
  
• Limited to Malaysian citizens and permanent residents
  
  

What is an Sdn Bhd (Private Limited Company)?

A Sdn Bhd, or Private Limited Company, is the most common business entity for startups, SMEs, and foreign investors in Malaysia. It is a separate legal entity, meaning it can own assets, sue, and be sued independently of its owners.

✅ Advantages:

• Limited liability protection
  
  
• Higher credibility and professional image
  
  
• Eligible for tax incentives and grants
  
  
• Can be fully foreign-owned (with conditions)
  
  

❌ Disadvantages:

• Higher setup and compliance costs
  
  
• Requires a licensed company secretary in Malaysia
  
  
• More complex regulatory requirements
  
  

📌 Tip: By engaging reliable corporate secretarial services, you can easily stay compliant and focus on growing your business.

When to Choose a Sole Proprietorship

• You’re testing a small business idea
  
  
• You operate on your own without employees
  
  
• You don’t need external funding
  
  
• You want low startup and maintenance costs
  
  

When to Choose an Sdn Bhd

• You plan to scale or bring in investors
  
  
• You want to limit personal liability
  
  
• You’re a foreign investor
  
  
• You want to build a trusted brand image
  
  
• You need corporate tax advantages
  
  

Legal Compliance: Why a Company Secretary Matters for Sdn Bhd

Incorporating a Sdn Bhd in Malaysia comes with strict legal responsibilities. You’re required to:

• Appoint a qualified corporate secretary in Malaysia within 30 days
  
  
• Maintain statutory registers and file annual returns
  
  
• Hold board and shareholders meetings
  
  
• Ensure regulatory compliance with SSM and tax authorities
  
  

Learn more about our trusted Company Secretary Services to keep your business compliant.

Incorporation in Malaysia: Cost Comparison

FAQ: Sdn Bhd vs Sole Proprietorship

Q1: Can foreigners register a Sole Proprietorship in Malaysia?
No. Sole Proprietorships are limited to Malaysian citizens and PRs.

Q2: Is a Company Secretary mandatory for Sole Proprietorships?
No. But it is mandatory for a Sdn Bhd.

Q3: Which is more tax-efficient?
Sdn Bhd is often more tax-efficient for higher-income businesses due to flat corporate tax rates and incentives.

Start Your Business the Right Way

At iComSec, we help entrepreneurs and investors with every step of incorporation in Malaysia, from paperwork to post-registration compliance. Our expert corporate secretary services ensure your company stays compliant and investor-ready.

👉 Contact us today to find out which business structure suits you best.