A sole proprietorship business entity in Malaysia is owned solely by just 1 individual, as his/her liability is unlimited. This implies that if the business fails or is declared bankrupt, creditors can sue the sole proprietor’s owner for all debts owed to respective merchants. The owner’s personal assets, personal income and employment income are all liable. It is the simplest and the least expensive to incorporate.

A partnership is an extended form of sole proprietorship, with the difference that a partnership has 2 to 20 members – as against just 1 in a sole proprietorship. This form of company is generally set up for professional firms such as lawyers and auditors.

A private limited company, also known as Sendirian Berhad (Sdn Bhd), is a company which doesn’t extend any invitation to the public to subscribe to any of its shares, deposit money with the company for investment or subscription. The number of members in a Sendirian Berhad may range from 2 to 50.

A public limited company, referred to as Berhad (Bhd) regionally, is similar to a private limited company, except that it may offer its shares to the public and it has more than 50 members. Although not necessarily so, Berhads are usually listed companies. A Berhad is governed by the Securities Commission of Malaysia. Large businesses prefer to go with a Berhad.

An international trading company, also called a Labuan company, is a provision for entrepreneurs looking only to trade with customers overseas. It is registered with the Labuan International Business and Financial Centre, and unlike other business entities, does not require the appointment of a resident director. A Labuan company enjoys considerable tax exemption.

A Bumiputera company is essentially a limited liability company whose at least 30% of the shares are held by native Malay residents or other Bumiputera companies. Such a company is eligible for special grants and incentives like discounts on purchasing or renting land, less expensive business licences, special bank agreements, etc. A Bumiputera company is preferred by people looking to form a Malay joint venture.

A foreign corporation can set up its branch office in Malaysia. Such an office can engage in business activities involving invoicing, contract signing or trade, and is required to appoint 2 resident representatives in Malaysia.

A representative office is allowed only to conduct market research or promote the business of its parent company. It is not authorized to conduct business or sign contracts in Malaysia. It is not subject to corporate tax.

A free zone company, or Export Processing Zone (EPZ) company, is a company in an EPZ in Malaysia, generally aimed at maximizing export value. An EPZ company enjoys varied tax exemptions, unlimited repatriation of funds, low land and utility costs, and proximity to efficient transport networks.