What is in this article
- Definition of an association
- Benefits of a partnership in Malaysia
- Disadvantages of opening a business in Malaysia
- Malaysia Membership Termination Policy
- frequently asked questions
There are manyTypes of Business Enterprisesthat exists in Malaysia and one of the most popular is partnership. For partnerships, they are governed by the Malaysia Companies Commission - Suruhanjaya Syarikat Malaysia (SSM) and the Companies Registration Act 1956.
Definition of an association
A partnership is a business entity owned by two (2) people but no more than twenty (20) people at any one time. The use of an ID card name as the company name of this legal entity is not permitted. Only a local Permanent Resident (PR) of Malaysia can register a company to conduct their business.
Some of the unique features included with membership:
Fast and easy registration
No corporate tax payments
Less formal business requirements
Simple billing process
Lower annual compliance costs
The purpose of partnerships is for startups to test their business strategy and explore a new market. The partnership agreement is usually drawn up by a nominated attorney who outlines the responsibilities and duties of each partner, the terms of termination, and the means of resolving disputes between the partners.
All partners involved are required to share the company's profits and liabilities according to the percentage they invest.
Tip: Instead of waiting for a job offer, you can start your own business and apply for an employment pass through a designated agent.
Benefits of a partnership in Malaysia
The reasons why a corporation is the preferred entity for entrepreneurs are as follows:
In a partnership, the partners must share responsibility for running the business. This process allows each partner to fully utilize their individual skills and expertise and combine these skills to ensure the business runs smoothly and revenue is generated.
No corporate tax payments
A partnership is not considered a legal entity, therefore all taxable income generated by the company is included in the income tax of all partners, rather than in corporate income tax.
Lowest Annual Cost
Compared to other types of trading companies in Malaysia, a company only has to file an annual renewal fee which costs MYR 60 per company name per year. It's a relatively simple and straightforward introduction to SSM.
Simple billing process
If the business is no longer profitable for the partners, they can turn to any SSM branch to liquidate the company. If the company fails to file its annual renewal fee on time, SSM may automatically terminate the business as provided for in the Companies Registration Act 1956.
Minimum entry requirements
Entry requirements for clubs are very simple as they only require a minimum of 2 Malaysian citizens or Permanent Residents (PR) with a legitimate local Malaysian home address. The cost of incorporating the company is only MYR 60 for a company name.
Disadvantages of opening a business in Malaysia
Of course, there are also some disadvantages when it comes to forming a club in Malaysia.
A partnership is not an independent legal entity. This means that the partners are jointly and severally liable for the debts and liabilities of the company. If one of the partners has filed for bankruptcy, creditors have the right to sue the partners involved to collect the debts they owe, directly affecting each partner's personal assets.
If there is an internal dispute between the partners, they cannot exclude any partner unless the power to do so has been conferred by written agreement between the partners when the company was formed. This can lead to bad relationships between partners and poor decision-making for the company.
As previously communicated, the partnership is not subject to corporation tax. However, every shareholder is obliged to state the profits made from the company in his personal income tax return. This leads to a higher taxation of your personal income tax.
Malaysia Membership Termination Policy
With regard to association law, each country has its own rules; Malaysia is no exception. A Malaysian partnership may be dissolved for any of the following reasons:
cessation of activity
death of the owner
According to court order
The procedure on how to proceed with cancellation is as follows:
Owners must complete the Notice of Termination of Incorporation (Form C) accordingly. This is available from the official SSM website.
Each partner involved must sign the completed form.
The form can be submitted through any SSM counter or through the online portal at ezbiz.ssm.com.my (for business termination only).
Documents to be submitted with the submission are:
- Certificate of business registration
- Clear copy of partners' NRIC
- Clear copy of the couple's death certificate (if available)
- Clear copy of court order for termination (if applicable)
- Relevant documents showing that the owner has been declared bankrupt (if applicable)
Notice of Termination of Incorporation - No Fees
The trading information: MYR 10
If everything is in order, the partners can cancel as follows:
The trade termination must be registered within thirty (30) days from the date of the trade termination
A corporation of record that has not yet expired may file a notice of termination of corporation of record
Submit the notice of cause of death within four (4) months of the date of death
Backorder acknowledgment letters can be requested from SSM on payment of MYR 10
The results can be retrieved within fifteen (15) minutes from the time of submission.
We know that starting a business in Malaysia can be challenging and choosing the right trading entity is crucial to successfully building your business. Talk to us for business advice or to learn more about company formation in Malaysia!
frequently asked questions
Can clubs in Malaysia evolve into other business structures?folding2020-04-28T16:55:31+08:00
Can clubs in Malaysia evolve into other business structures?
It is possible to transform companies in Malaysia into other business structures. The most common approach is to convert a partnership into a limited liability company. The following criteria apply to the conversion of a partnership into a GmbH: The shareholders must be the same after the conversion, the company to be converted must be solvent and a letter of approval from the responsible bodies is required. The company is deemed to have been dissolved upon completion of the conversion. Since the conversion is a complex and difficult process, this change should only be made after consultation with a lawyer and a tax advisor.
Which industries in Malaysia have many companies that are associations?Fold2020-04-28T16:54:40+08:00
Which industries in Malaysia have many companies that are associations?
The industry with the most associations in Malaysia is the construction industry. Malaysia has a large construction industry worth over RM102.2 billion (US$24.3 billion). The areas of structural engineering in which associations predominate are non-residential construction, structural engineering, residential construction and special trades.
Other industries in Malaysia with many associations contributing to the country's economy are electronics industry, defense industry and automotive industry.
Can foreigners set up companies in Malaysia?Fold2020-04-28T16:53:52+08:00
Can foreigners set up companies in Malaysia?
Foreigners planning to incorporate a company in Malaysia should note that they are not permitted to incorporate an unlimited company, sole proprietorship, partnership, corporation or limited liability company in Malaysia. Foreigners can only register Limited Liability Companies, also known as Sendirian Berhad Companies (SdnBhd). Companies in this business structure may be owned by foreigners.
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