# Malaysian Business Structures Compared

> Enterprise, partnership, LLP, Sdn Bhd, Berhad, foreign branch and Labuan company, compared on liability, tax, audit, officers, cost, foreign ownership and exit.

- Category: business
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/business/business-structures-malaysia

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Every other guide walks you through seven structures in seven sections of prose,
and you finish it unable to compare any two of them. This page is the table those
guides should have led with.

One decision dominates all the others: **is there a legal person between you and
the creditors?** Three of the seven structures below say no.

## The comparison

| | Enterprise (sole prop) | Conventional partnership | LLP | Sdn Bhd | Berhad | Foreign branch | Labuan company |
| --- | --- | --- | --- | --- | --- | --- | --- |
| **Governing law** | Registration of Businesses Act 1956 | Partnership Act 1961 | LLP Act 2012 | Companies Act 2016 | Companies Act 2016 | Companies Act 2016, Part XI | Labuan Companies Act 1990 |
| **Registry** | SSM (ROB) | SSM (ROB) | SSM (MyLLP) | SSM (ROC) | SSM (ROC) | SSM (ROC) | Labuan FSA |
| **Separate legal person** | No | No | Yes (s.3) | Yes | Yes | No — it *is* the parent | Yes |
| **Liability** | Unlimited, personal | Unlimited; joint for debts (s.11), joint and several for wrongs (s.14) | Limited; own tort survives (s.21(3)) | Limited to capital | Limited to capital | Parent carries everything | Limited to capital |
| **Owners** | 1 | 2–20 (CA 2016, s.13) | 2 or more (s.6) | 1–50 (s.42) | 1, no maximum | n/a | 1 or more |
| **Tax point** | Owner, personal rates | Each partner, personal rates | The LLP; distributions exempt (Sch 6 para 12C) | The company, single tier | The company, single tier | Generally non-resident; turns on management and control | LBATA regime, subject to substance |
| **Statutory audit** | No | No | **No** (s.69(5)) | Yes unless PD 10/2024 criteria met | Yes, always | Yes — foreign companies are excluded from PD 10/2024 | Only if law, articles or a public offer require it (s.113(1)) |
| **Required officer** | None | None | Compliance officer (s.27) | Company secretary (s.236) | Company secretary | Resident agent, personally liable (s.563) | Resident secretary from a Labuan trust company (s.93) |
| **Local presence rule** | Owner | Partners | Compliance officer must be citizen or PR and ordinarily resident | Minimum directors ordinarily resident (s.196(4)) | Same, minimum 2 directors | Registered office plus resident agent | Registered office at a Labuan trust company (s.85) |
| **Setup fee (SSM)** | RM30 personal name, RM60 trade name, per year | Same as enterprise | RM500 incl. name | RM1,000 | RM1,000 | See `verificationNeeded` | See `verificationNeeded` |
| **Annual filing fee** | RM30 or RM60 renewal | RM30 or RM60 renewal | RM200 annual declaration | RM150 annual return | RM500 annual return | Annual return under s.576 | Annual return under s.109 |
| **Annual filing clock** | Renewal on expiry | Renewal on expiry | 90 days from FYE (s.68(2)) | 30 days after incorporation anniversary (s.68) | Same | 30 days after registration anniversary (s.576(3)) | 30 days **before** incorporation anniversary (s.109(3)) |
| **Foreign ownership** | Restricted — see `verificationNeeded` | Restricted — see `verificationNeeded` | Bodies corporate may be partners (s.6) | Up to 100% in most sectors, subject to sector limits | Same | By definition foreign | Open |
| **Raise equity** | No | No | Awkward — capital contributions, not shares | Yes | Yes, including from the public | No | Yes |
| **Public offer** | No | No | No | Prohibited (s.43) | Permitted, subject to CMSA 2007 | No | Only under the Labuan FSSA 2010 |
| **Exit** | Asset sale; ends with the owner | Asset sale; dissolves on a partner's death (s.35(1)) | Assign interest with consent (s.26) | Share transfer, or strike-off / winding-up | Share transfer or listing | Cessation notice in 7 days (s.578) | Share transfer; Labuan FSA process |

## Reading the table

**The unlimited three.** An enterprise, a conventional partnership and a foreign
branch all leave someone personally or wholly exposed. For the branch, that
someone is the overseas parent. If liability is the question, the table has
already answered it.

**Audit is not the differentiator people think.** The LLP is the only structure
that escapes statutory audit outright, under s.69(5) of the LLP Act 2012. A Sdn
Bhd can qualify for exemption under SSM's Practice Directive 10/2024, but the
thresholds phase up: RM1m/RM1m/10 employees for 2025, RM2m/RM2m/20 for 2026, and
RM3m/RM3m/30 from 2027, on a **two of three** test across the current and past two
financial years. Most guides get this wrong in both directions.

**Tax rarely decides it.** An LLP, a Sdn Bhd and a Berhad are all taxed once, at
the entity. An enterprise and a partnership are taxed in the owners' hands at
personal rates, which can be cheaper at low profits and more expensive at high
ones. The Labuan regime is a separate system with its own conditions.

**The twenty and fifty ceilings are real.** Section 13 of the Companies Act 2016
still caps an unincorporated partnership at twenty persons. Section 42(1) caps a
private company at fifty shareholders — but s.42(3) counts joint holders as one
and excludes anyone who was an employee when they became a shareholder, so the
ceiling is higher in practice than it reads.

**Exit is decided at formation.** Structures with shares can be sold by
transferring shares. Structures without them can only be sold asset by asset, with
every contract, licence and lease reassigned individually.

## A short decision path

1. **Any meaningful liability exposure?** Then eliminate the enterprise and the
   conventional partnership immediately. Their cost advantage is measured in tens
   of ringgit a year; the downside is your house.
2. **Will you ever raise outside capital, grant equity to staff, or sell the
   business?** If yes, you need shares. That means a Sdn Bhd.
3. **Are you a chartered accountant, an advocate and solicitor, or a company
   secretary in practice?** Your only limited-liability route is an LLP, under s.8
   and the First Schedule of the LLP Act 2012.
4. **Is the operating business genuinely outside Malaysia, or genuinely in
   Labuan?** Only then is a Labuan company worth evaluating.
5. **Is this a foreign group entering Malaysia?** Compare branch against subsidiary
   on tax residence and ring-fencing before doing anything else.
6. **Otherwise, incorporate a Sdn Bhd.** It is the default for a reason.

## Common mistakes

- **Registering an enterprise because it is cheap.** RM60 a year buys you unlimited
  personal liability, not a discount.
- **Choosing an LLP for tax transparency.** Malaysia taxes the LLP at entity level.
- **Assuming Berhad means listed.** It means public.
- **Treating a branch as a lighter Sdn Bhd.** Section 575 puts the parent's audited
  accounts on the Malaysian public record.
- **Picking Labuan before checking whether the licences you need are available to a
  Labuan entity.**
- **Never revisiting the choice.** The right structure at RM50,000 of revenue is
  often the wrong one at RM5 million.

## What's next

Read the head-to-head that matches your shortlist rather than all seven pages: the
sole proprietorship against the Sdn Bhd if you are starting alone, the LLP against
the Sdn Bhd if you are a professional firm or a small partnership, the Sdn Bhd
against the Berhad if you are approaching fifty shareholders or planning a raise,
the branch against the subsidiary if you are a foreign group, and Labuan against
the Sdn Bhd if someone has pitched you an offshore structure.

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**Verification status.** AI-assisted draft, not yet reviewed by a subject-matter
expert. Statutory references are to the Companies Act 2016 (Act 777), the Limited
Liability Partnerships Act 2012 (Act 743), the Partnership Act 1961 (Act 135) and
the Labuan Companies Act 1990 (Act 441). Fees are from SSM's published tables and
brochures and should be re-checked before filing. Cells marked
`verificationNeeded` are unconfirmed and deliberately left blank rather than
guessed.

## Sources

- Companies Act 2016 (Act 777), as at 1 August 2022 — https://www.ssm.com.my/Pages/Legal_Framework/Document/Companies%20Act%202016_Akta%20777_BI%20(1.8.2022).pdf (SSM)
- Limited Liability Partnerships Act 2012 (Act 743) — https://www.ssm.com.my/Pages/About_SSM/PDF/LLP%20ACT%202012%20-%20For%20Portal_new.pdf (SSM)
- Partnership Act 1961 (Act 135), Revised 1974 — https://lom.agc.gov.my/act-detail.php?act=135&lang=BI (Attorney General's Chambers of Malaysia)
- Labuan Companies Act 1990 (Act 441), updated version 23 August 2022 — https://www.labuanfsa.gov.my/clients/asset_120A5FB8-61B6-45E8-93F0-3F79F86455C8/contentms/img/documents/Legislation_and_Guidelines/Legislation/2022/Act%20441%20-%20Labuan%20Companies%20Act%201990%20-%20Updated%20Version_23082022.pdf (Labuan FSA)
- Registration of Business — Table of Fees — https://www.ssm.com.my/Pages/Services/Registration-of-Business-(ROB)/table-of-fees/Table-of-Fees.aspx (SSM)
- MyLLP brochure — fees and filing deadlines — https://www.ssm.com.my/Pages/Publication/PDF%20Files/BROCHURE%20MYLLP.pdf (SSM)
- PD 10/2024 — Qualifying Criteria for Audit Exemption for Certain Categories of Private Companies — https://www.ssm.com.my/Pages/Legal_Framework/Document/PD10-2024-Qualifying-Criteria-for-Audit-Exemption-for-Certain-Categories-of-Private-Companies.pdf (SSM)

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License: CC BY-SA 4.0