The main forms of commercial organizations are the limited company (public and private) formed under the Companies Act 1965, the partnership regulated by the Partnership Act 1961 and Limited Liability Partnership regulated under the Limited Liability Partnerships Act 2012.
Any person intending to carry on a business or maintain a place of business in Malaysia must register a business entity with the Companies Commissions of Malaysia or the Registrar of Businesses.
A business may be carried on in any one of the following forms:
(LLP) registered with the Companies Commissions of Malaysia which combines the characteristics of a company and a conventional partnership.
A business firm can be registered as a sole-proprietorship firm or a partnership under the Business Registration Act. It is considered as an incorporated body, not a legal entity. A foreign individual or corporation may register a business firm as such, provided that a local manager or agent is appointed. The local manager or agent should be a Malaysian, a permanent resident or an employment pass holder.
A partnership may consist of two or more partners but not more than 20. If it exceeds 20, the partnership must be registered as an incorporated company.
The Companies Act 1965 is the principal legislation governing companies in Malaysia. The Act provides for three types of companies:
The most commonly incorporated company registered in Malaysia is a company limited by shares. The liability of its shareholders is limited to the nominal value of the amount of the shares held by them. Such a company may either be a private or public limited company.
A company having a share capital may be incorporated as a private company if its Memorandum or Articles of Association:
excluding employees and some former employees;
to subscribe for its shares and debentures; and
A public limited company may have more than 50 shareholders. Its shares can be offered to the public for subscription and are freely transferable. Such a company must register a prospectus with the Companies Commissions of Malaysia before offering its shares to the public. A company seeking to list on the stock exchange is required to obtain the necessary approval from Bursa Malaysia.
A foreign corporation may opt to establish a branch in Malaysia to conduct its business operations. Before doing so, the foreign corporation must register as a foreign company under the Companies Act 1965 with two or more local resident persons to act as agents.
A foreign corporation may also operate in Malaysia by establishing a representative office. Such a representative office has no legal corporate status. It cannot engage in any profit making or trading activities nor is it permitted to conclude contracts or open and receive letters of credit.
Principally, it merely serves as a promotional and liaison office of its parent company. Its activities are therefore confined to promotions, market research, liaison and coordination of activities on behalf of its parent company.
Limited liability partnership (LLP) is an alternative business set up which combines the characteristics of a private company and a conventional partnership.
LLPs provide limited liability status to their partners and offer the flexibility of internal arrangement through an agreement between the partners. This combination will give entrepreneurs and businesspeople more structure compared to a sole proprietorship or a conventional partnership.
LLPs may be formed by a minimum of two persons (wholly or partly individual or corporate bodies) or any business group to carry on any lawful business with the view to make profit. However, the main targeted groups are: