Trade Associations in Malaysia (2023)

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

• Fast and easy registration

• No corporate tax payments

• Less formal business requirements

• Simple billing process

• Lower annual compliance costs

Benefits of a partnership in Malaysia

The reasons why a corporation is the preferred entity for entrepreneurs are as follows:

• shared responsibility

  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

• Competition

• 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)

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Registration Fees:

• 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!