Things to Know About Starting a Small Business in Malaysia

Published September 26, 2019 · Updated October 26, 2026

Ready to start a small business in Malaysia, but unsure what it really takes? Registration costs as little as RM30 a year for a sole proprietorship using the owner's personal name, while a trade name costs RM60 a year and incorporating a company carries a RM1,000 statutory fee.

In this guide, we explain how to set up a business in Malaysia in 2026: the structures open to locals and foreign founders, SSM registration steps and current fees, licences, taxes, employer duties, and a staged compliance checklist for your first year.

Who Can Start a Business in Malaysia?

Citizens and permanent residents can register any structure, while foreign founders who want to start a business in Malaysia generally incorporate a local private limited company.

The Companies Commission of Malaysia (SSM) keeps two registers. Sole proprietors and partners register under the Registration of Businesses Act 1956, within 30 days of commencing operations. Companies are incorporated under the Companies Act 2016. Who you are determines which options apply.

Residency and citizenship also shape your tax and licensing position, so settle these questions before you commit to a name or premises.

1. Malaysian citizens and permanent residents

A citizen or permanent resident may register a sole proprietorship or partnership using a trade name for RM60 a year. These structures are quick and cheap, but the owner carries unlimited personal liability for business debts.

2. Foreign investors

Foreigners cannot register a sole proprietorship or partnership in Malaysia. Instead, they incorporate a local company, which many services sectors allow to be 100% foreign-owned. Every company must have at least one director who ordinarily resides in Malaysia, with a principal place of residence in the country.

3. Sector-specific equity limits

Some industries cap foreign participation, including distributive trade, education and oil and gas. Confirm the position with the Ministry of Investment, Trade and Industry (MITI) or the Malaysian Investment Development Authority (MIDA) before choosing your structure.

Which Business Structure Should You Choose?

Structure is the first big decision: it sets your liability, tax bill, compliance load and how easily you can later raise funds.

Malaysia offers four practical structures for a small business. Each trades setup cost against protection and credibility, so match the choice to your plans rather than to the cheapest registration fee.

Beyond personal savings, many founders weigh grants, micro-financing and equity. Our article on how startups fund a business in Malaysia sets out the main options.

1. Sole proprietorship

One owner, registered under the Registration of Businesses Act 1956. It suits freelancers and traders testing an idea, but there is no liability shield for business debts.

2. Conventional partnership

Two to twenty partners share profits and unlimited joint liability. Registration also sits under the Registration of Businesses Act 1956 and is open only to citizens and permanent residents.

3. Limited liability partnership (LLP/PLT)

A hybrid under the Limited Liability Partnerships Act 2012 that blends partnership flexibility with limited liability. It suits professional practices and small firms, and is taxed at company rates: 24%, or the 15% and 17% SME bands where it meets the conditions.

4. Private limited company (Sdn Bhd)

A private limited company (Sendirian Berhad) is a separate legal person under the Companies Act 2016. Shareholders risk only their share capital, which makes it the standard vehicle for funded startups and foreign founders.

How Do You Set Up a Company in Malaysia?

Company setup in Malaysia runs through SSM: either reserve a name or use direct incorporation, lodge the incorporation, appoint a secretary, then register for tax and licences.

The process is largely paperless through SSM's online systems, and most applications clear within days once your documents are complete. The statutory steps are fixed.

Our Malaysia company incorporation services manage these filings end to end, from name clearance to secretary appointments and bank account referrals. Plan for professional fees on top of the statutory charges, because secretarial work and licence applications are ongoing rather than one-off.

Step 1: Reserve a company name

Apply to SSM under section 27 of the Companies Act 2016. The fee is RM50 for every 30 days, up to a maximum of 180 days. Our guide to select your Malaysia company names covers the naming rules and common rejection grounds.

Step 2: Lodge the incorporation application

Submit the application under section 14 of the Companies Act 2016. The statutory fee is RM1,000 for a company limited by shares. According to the SSM table of fees, a company limited by guarantee pays RM3,000 instead.

Step 3: Appoint a licensed company secretary

Every company must appoint at least one company secretary within 30 days of incorporation, under section 236 of the Companies Act 2016. The secretary keeps the statutory registers and files annual documents.

Step 4: Confirm your registered office and bank account

Companies need a registered office address in Malaysia. A corporate bank account is not an incorporation requirement, although it is commonly needed for operations. Both are prerequisites for licences, tax registration and payroll.

Step 5: Register with LHDN and as an employer

Secure an income tax reference number, register for SST if you cross the threshold, and register as an employer before your first hire.

What Licences Does a Small Business Need?

At minimum, expect a premise licence and a signboard licence from your local council, with sector and ownership rules adding more on top.

Licensing sits outside SSM registration, and applications often take longer than incorporation itself. Identify the requirements before signing a lease or hiring staff, because council approvals can hinge on premises type and use class.

1. Local council licences

Nearly every business needs a premise (business) licence and a signboard licence from its local authority (PBT), such as Kuala Lumpur City Hall (DBKL). Fees vary by premises type, floor area and activity.

2. Sector-specific approvals

Restaurants need food-handling certificates under the Food Act 1983, and halal claims require certification from JAKIM. Manufacturing licences require MITI approval, with applications submitted to MIDA where shareholders' funds are RM2.5 million or more or the business employs 75 or more full-time paid employees. Our guide to starting a coffee shop business in Malaysia shows what a typical F&B launch involves.

3. WRT licence for foreign-owned trading companies

Foreign-owned companies in distributive trade, including importing, retailing and franchising, need a Wholesale and Retail Trade (WRT) licence. It generally applies where foreign participation holds more than 50% of voting rights, with shareholder-funds requirements that vary by format and are commonly RM1 million.

What Taxes Will Your Small Business Pay?

Sole proprietors pay personal income tax on business profits, while companies pay 24% corporate tax, with lower bands for small and medium enterprises (SMEs) and possible SST on top.

Tax follows structure and turnover. Locals in sole proprietorships and partnerships pay personal income tax at progressive individual rates. Companies face corporate tax and a monthly instalment regime with the Inland Revenue Board (LHDN).

The staged checklist at the end of this guide ties these deadlines together.

1. Corporate tax and SME preferential bands

Resident companies pay 24% on chargeable income. A company with paid-up capital of RM2.5 million or less and gross income below RM50 million qualifies for SME bands: 15% on the first RM150,000 and 17% on the next RM450,000, with 24% on the balance, subject to conditions.

2. CP204 estimates, instalments and Form e-C

Companies must submit an estimate of tax payable on form CP204 at least 30 days before the basis period starts. New companies whose first basis period is at least six months furnish the estimate within three months of commencing operations. Monthly instalments fall due by the 15th, and Form e-C plus any balance of tax within seven months of the financial year end.

3. Sales and service tax (SST)

Cross the applicable registration threshold and you must register with the Royal Malaysian Customs Department (RMCD) through MySST for SST. The standard service tax rate is 8%, raised from 6% in March 2024, while sales tax applies at 5% or 10% depending on the goods.

What Employer Registrations Must New Employers Complete?

Hiring adds monthly remittances: register with the Employees Provident Fund (EPF, known locally as KWSP), SOCSO and the EIS before the first payday, then pay by the 15th of each month.

Malaysia funds worker protection through statutory schemes administered by separate agencies. Register before the first contribution falls due, and remit by the 15th of the following month. The national minimum wage of RM1,700 a month has applied since 1 February 2025, which matters when you set salaries.

1. EPF (KWSP)

Employers contribute 13% of wages for employees earning RM5,000 or less, and 12% above that. Employees contribute 11% of their own wages.

2. SOCSO (PERKESO) and EIS

The Social Security Organisation (PERKESO) collects 1.75% from employers and 0.5% from employees for injury and invalidity cover. The Employment Insurance System (EIS) adds 0.2% from each side.

3. HRD Corp training levy

Employers in specified sectors with ten or more employees pay a 1% levy on wages to HRD Corp for staff training.

How Should You Plan Your First Year of Business Compliance?

Work compliance in stages: launch, first month, first tax year, then annual filings on a fixed calendar.

The checklist below maps a typical first year for a Malaysia company setup. Treat it as a planning map rather than a fixed calendar, because your structure and sector shift the dates.

Use it alongside a reminders system for the 15th-of-month remittances and the annual return, which are the deadlines that most often trip up new founders.

Conclusion

Starting a small business in Malaysia is manageable when you sequence it. Choose the structure that matches your ownership mix and growth plans first. Then register with SSM, secure the right licences, and build the tax and employer calendar before your first sale.

We help clients through each of these stages, from name reservation and incorporation to secretarial support, tax registration and payroll. Our Corporate Professional Advisors pair local regulatory knowledge with technology-enabled processes, and the 3E Accounting International Network extends support across more than 110 countries.

If you plan to set up a company in Malaysia, speak with 3E Accounting Malaysia. We will map the steps, costs and deadlines for your specific venture so you can launch with confidence.

Frequently Asked Questions