Malaysian Business Structures Compared

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.