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By definition, a sole proprietorship is a business that is owned and managed by one person. Thus, with regards to legality, the individual and the business are the same entity. It should be noted that although it is defined as being managed by one person, the owner is allowed to hire employees at their discretion.
The business climate in Malaysia is currently at its peak for new businesses. With a GDP value tipping $354.348 billion, the economy of Malaysia is at an all time high. Moreover, the country now has an ease of doing business rank of 15 out of a survey of 180 countries. One of the most common business structures for a new entrepreneur to take in Malaysia is that of the sole proprietorship. Aside from the sole proprietorship, the following four legal structures are also available in Malaysia:
All these structures are regulated by the Companies Act of 2016 and differ by how the structures are managed. Prior to 2002, all business formations were regulated by two different bodies. They were the Registrar of Companies and Registry of Business. However, they are now merged and run as the SSM. Company and business formations in Malaysia all follow the Companies Act of 2016.
This Act, which is a revision of the Companies Act 1957, serves as an updated set of laws to suit the modern economic climate of Malaysia. The SSM of Malaysia enforces the Companies Act 2016. As such, sole proprietorships also fall under their jurisdiction.
As mentioned before, the sole proprietorship is the most popular business structure in Malaysia. This is because of the following laws set in place:
However, in turn, you must be aware of the following laws as well:
Moreover, by law, a sole proprietorship can only be registered by a Malaysian or a foreign national who has a permanent residency permit in the country.
In order to register for a sole proprietorship, one needs to simply follow a few steps:
You can register for your sole proprietorship either online or in person at an SSM counter.
Step 1- Choose your business name
This name can be the same as the name on your identity card or can be a different name. If it is different, you must give three potential names to be vetted. In addition to this, you will also have to complete the Business Name Approval Form (Form PNA.42) if your business name is different.
Step 2- Completion of Form A
The next step is to fill in the business registration form. This is titled ‘Form A’. It requires the following details to be completed:
Step 3- Submitting the application
In order to submit the application, you will need the following:
Step 4- Payment of Fees
The registration of a sole proprietorship is liable to the following fees:
Once all relevant fees are paid, you will receive your certificate of registration within the day, or on the following business day.
Do note that the Companies Act 2016 outline severe penalties if an individual is conducting a business without being registered. According to this act, if the owner fails to register the business within 30 days of the date of business commencement, they will face these penalties. This ensures that the Malaysian public is not harmed in case of illicit business activities. The penalties are as follows: