Beginner’s Guide on Starting a Home-based Business in Malaysia
The economic landscape is no longer the same as before the pandemic. To survive in this challenging climate, business owners must be ever ready to adapt to new conditions. They must be willing to leverage elements within their environment to their benefit, and now, one promising alternative exists. Thinking of starting a home-based business in Malaysia? Keep reading!
Home-based businesses have been around for a long time. However, the recent hit of the pandemic gave home-based businesses a surge in popularity. They are now on the rise, and for good reasons! It is an attractive business modality, given how one will generate income or profits from the comfort of their own home. Not to mention, home-based businesses are a much safer and cost-saving option.
You would be surprised by just how much you can do right from home. Just like starting any business in Malaysia, there are necessary steps to complete first. Going about the business registration process properly will provide you with a solid business foundation and long-term sustainability. This article will explore the fundamentals of starting a home-based business in Malaysia. Plus, you can also read our guide to company registration in Malaysia here.
What is a Home-based Business?
Home-based businesses are conducted from homes, and these businesses can be very vast-ranging in forms. The more traditional ones include babysitting, baking and education. In light of the current norms, there are now even more varieties to model from. These can consist of dropshipping, e-commerce, marketing, care services, content creation, consultancy, accounting and more.
With stable internet connections, time and proper tools or equipment, anyone can engage in home-run businesses. They are relatively easy to set up, and there is practical value in relation to current circumstances. Of course, different types of home-based businesses will have different requirements, work characteristics and benefits.
Starting a home-based business can be a rewarding experience as well as serving as a means to generate income. Home-bases businesses can be especially advantageous as it typically involves a low investment and allows the entrepreneur to have a flexible work-life balance. It also allows for much versatility and convenience. You get to decide how you run your business and the time you put into it.
If you are keen on buying and selling, you can engage in e-Commerce or sell via an existing online marketplace. On the other hand, if you prefer content creation, you can do graphic designs, become a YouTuber or a content writer. Apart from that, if you have a flair for marketing, you can sell things via live videos or promote products through trendy social media. These are just a few, and the possibilities are as vast as you can conceive!
Before you can proceed with forming the business, you need to consider many factors. These include skills, capital, business ideas, labour-power and understanding of the local market. Aside from that, it is also vital that you have a business plan, financial budget and evaluate the funds you possess.
Starting a home-based business in Malaysia is very much like starting other types of companies. Incorporation and obtaining relevant licenses or permits are part of the registration process. Different companies will have slightly different requirements. Doing these appropriately ensures that your business is legal and has a solid foundation.
You can proceed in two ways, register and set up your business independently or via company incorporation services. The latter is the most convenient option, and the service provider will handle most of the process for you. The former requires you to self-invest substantial amounts of time for research, consultation and more.
Business Registration Process
The first step would be to decide the type of company. You can choose from the sole proprietorship, limited liability partnership or a general partnership. Each of them has its respective pros and cons. Some of the most noticeable differences include entity name, capital contribution, liability, shareholding and tax. Selecting a business type will heavily impact your future business affairs; therefore, choose wisely
The second step would be to create a name for your company. You will need to complete a Request For Availability Of Name form and submit it to Suruhanjaya Syarikat Malaysia (SSM). This process of application can be done either online or offline. There will be a fee (varies by company), and upon successful application, you will be notified of its approval. Then, you can begin the process of incorporating your business by preparing several essential documents. These documents can include a Memorandum and Article of Association, Statutory Declaration, Declaration of compliance and more. Refer here for more about SSM and the complete list of necessary items.
Incorporation Documents Submission and Tax Registration
Submission of incorporation documents to the SSM should take place between three months after the business name approval. Company registration may also have fees and other formalities. Depending on your type of business and annual income, you need to register for tax with the Inland Revenue Board (IRB). Tax registration is especially important when there is a sales tax licence. Different companies also have different tax rates; refer to your local tax officials or corporate service provider for more.
Again, tax rates, reduction, reliefs and more are dependent on the type of business and earnings. Matters pertaining to tax should actively be in consideration to comply with statutory requirements. This is also important to avoid potential penalties. Knowing which tax applies to you and the intricacies of tax calculation can take time. Filing wrongly or other mishaps can invite more cause for headaches. However, for this purpose, you can also engage with corporate service providers. This is a more time-saving and less risky option.
Permits You’ll Need
Business owners are responsible for obtaining the relevant licences and permits, aside from registering with their business with SSM. Obtaining relevant licences or permits can boost the confidence of your clients in your business. It also signifies the legitimacy of your business. The operation of some business activities will require specific licences or permits.
Small business licences are typically applied from the Ministry Of Entrepreneur Development’s Business Licensing Electronic Support System (BLESS) licensing portal or Pihak Berkuasa Melesen (PBM). Licencing is also contingent on your location, and therefore approvals are either by federal or state authorities.
In general, there are three categories of licences: general, industry or sector-specific or activity-specific. Additionally, depending on your business, specific licences or permits are granted by different bodies. These include the Malaysian Communications and Multimedia Commission (MCMC), the Halal Certification Body (JAKIM) and the Ministry of Health (MOH). You will need to determine which body to refer to based on the nature of your business.
Similar to other trading activities, business licences are mandatory. These licences will have to be applied and renewed. Not having a valid licence is an offence and may potentially jeopardise the business. Refer to the relevant bodies for more information!
But Wait, There’s Also Post-Registration Formalities
Once your company is set up and running, you have to maintain some formalities. These include annual tax filing, possible auditing and more. In some cases, there need to be annual general meetings, issuing shareholder certificates and appointment of directors. As mentioned earlier, licences and permits will also have expiration and renewal.
These formalities are the same for many businesses, and keeping abreast of these keeps the company running. When maintained properly, they can come in handy when an audit is requested. This ensures that your business is operating within legal parameters. In other words, you need to be legally compliant to continue operating.
These formalities are essential, and maintaining them will be a continuous effort. Alternatively, you can seek help from corporate service providers to help you manage in this department. Errors pertaining to these can potentially result in penalties and other undesirable consequences. Therefore, outsourcing from expert third parties can significantly lower the risk.
Let Us Help You
Ultimately, starting a home-based business in Malaysia can prove to be a promising business model. There is much potential and many more possibilities to exploit to your benefit. A good foundation can help propel your business, giving it a head start and a good fighting chance. This means, setting up still whilst adequately being time-conscious remains a crucial component to the long-term sustainability of your business. Researching everything and going through all the formalities can be taxing in time, energy and resources. There is a way if you want to fast track the process and skip through all the hassle.
3E Accounting is a trusted provider for all your corporate needs. From incorporation to accounting, our services are wide-ranging, comprehensive and quality assured. We will handle all of your corporate needs on your behalf! Our team possesses the experience and expertise to deliver the best service tailored to setting up your business. Contact 3E Accounting and get your home-based business off the ground today!