Sdn Bhd or Enterprise in Malaysia: which one, and the cost each year

Sdn Bhd or Enterprise in Malaysia: which should you choose?

An Enterprise in Malaysia is cheaper and simpler, but its owner is personally liable for every debt of the business. A Sdn Bhd is a separate company: its owners' risk is generally limited to any amount still unpaid on their shares, but it costs more each year. As at 20 October 2026, an Enterprise renews with SSM for RM30 or RM60 a year. A Sdn Bhd pays SSM RM150 a year for its annual return, plus RM20 or RM50 to lodge its financial statements. It also pays a company secretary, an accountant, a tax agent and, unless exempt, an auditor. Four things decide the choice: how much the business could owe, its profit, whether there are partners, and what customers and banks ask for.

• An Enterprise usually fits one person running a small, low-risk business with modest profit, where no customer or bank insists on a company. It can move into a Sdn Bhd later, as a new company, not by conversion.
• A Sdn Bhd usually fits when the business could run up debts you could not pay yourself, when there are two or more owners, when the profit is high enough that the lower company tax saves more than the yearly fees cost, or when a client or a bank asks for a company.
• Before you register with a partner, agree who owns what, who decides what and what happens when one of you leaves; two sections below cover it.

What is an Enterprise, and what is a Sdn Bhd?

"Enterprise" is not a legal type of business in Malaysia. It is a word in a trade name, such as "ABC Enterprise". Under the Registration of Businesses Act 1956, SSM registers a sole proprietorship, owned by one person (in Malay, pemilikan tunggal; in Chinese, 独资企业), or a partnership of 2 to 20 partners (perkongsian; 合伙企业). SSM's guidelines allow only a Malaysian citizen or permanent resident aged 18 or over to register one.

A Sdn Bhd (Sendirian Berhad; 私人有限公司) is a private company limited by shares under the Companies Act 2016. It needs at least one shareholder, one share, and one director aged 18 or over who ordinarily lives in Malaysia (sections 9 and 196); a qualified company secretary (setiausaha syarikat; 公司秘书) within 30 days of incorporation; and a registered office in Malaysia (sections 46, 235 and 236).

A Sdn Bhd is a legal person separate from its owners, with its own property and contracts, and it continues when the owners change or die (sections 20 and 21). An Enterprise is "not a separate legal entity", in SSM's words: the owner, or the partners, are the business.

Who pays the business debts: you or the company?

In Malaysia, the owner of an Enterprise pays its business debts personally, without limit, from personal assets such as savings or a house. In a partnership, every partner is personally liable for all the firm's debts incurred while he or she is a partner (Partnership Act 1961, section 11). Profit shares do not limit this. A creditor who wins judgment against the firm can enforce it against any one partner's own property for the whole sum, and that partner must then recover the others' shares from them (Rules of Court 2012, Order 77, rule 5). A contract one partner signs in the usual course of business binds all of them (Partnership Act 1961, section 7).

In a Sdn Bhd, the company pays its own debts. A shareholder's liability is limited to any amount still unpaid on his or her shares, which is nothing more once the shares are fully paid (Companies Act 2016, section 10). That protection has gaps. Four matter most to a small owner.

• A personal guarantee. Banks often ask a small company's directors or shareholders to guarantee its loan, and a guarantor owes what the company owes (Contracts Act 1950, section 81).
• Statutory debts. Directors are jointly and severally liable with the company for unpaid sales tax and service tax, in a winding up only if its assets fall short (Sales Tax Act 2018, section 34; Service Tax Act 2018, section 33), and for unpaid EPF and SOCSO contributions, former directors included for their period (EPF Act 1991, section 46; Employees' Social Security Act 1969, section 108A).
• Income tax. A director with 20% or more of the ordinary shares is liable for the company's unpaid income tax (Income Tax Act 1967, section 75A).
• Fraud and reckless debts. Anyone knowingly party to carrying on the business to defraud creditors can be made personally liable for its debts without limit. So can an officer convicted of knowingly taking on a debt the company had no reasonable prospect of paying (Companies Act 2016, sections 539 and 540).

The firm's guide explains when a director must pay the company's debts personally.

How are an Enterprise and a Sdn Bhd taxed?

An Enterprise pays no tax of its own: its profit is the owner's income, taxed at personal rates from 0% to 30% (Income Tax Act 1967, Schedule 1), on Form B by 30 June of the following year (a partnership also files Form P). A Sdn Bhd is taxed separately. For the year of assessment 2025 and, unless changed, 2026, a qualifying small or medium company pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 and 24% above RM600,000. It must be resident and incorporated in Malaysia, with paid-up ordinary share capital of RM2.5 million or less and no more than 20% foreign ownership, among other conditions. Any other company pays 24% (Income Tax Act 1967 as at 1 January 2026; LHDN Public Ruling 8/2025, read 20 October 2026). Budget 2027, tabled on 9 October 2026, proposes from the year of assessment 2027 small-company rates of 14% and 16%, a RM12,000 individual relief and new personal bands (lower on some middle bands, 30% from RM1 million); these are proposals, not yet law, and the conclusions here do not change on them.

The profit reaches the owners as a salary, directors' fees, or a dividend. A dividend comes out of profit the company has already taxed, and since the year of assessment 2025 an individual pays a further 2% on Malaysian dividends above RM100,000 a year (Schedule 1, Part XXII). Three worked examples at the 2025 rates show that the choice can go either way. The owner is a resident with no other income, only the RM9,000 individual relief and, where chargeable income is RM35,000 or less, the RM400 rebate. The company qualifies for the small-company rates and pays out all its after-tax profit as a dividend that year. Dividend tax is shown as 2% of the dividend above RM100,000, before reliefs, which would cut it by up to RM180 a person.

• RM60,000 profit, one owner, no salary or fee: sole proprietor about RM1,610; Sdn Bhd RM9,000 of company tax and no dividend tax. The Enterprise pays less.
• RM150,000 profit, one owner, no salary or fee: sole proprietor about RM19,650; Sdn Bhd RM22,500 plus RM550 of dividend tax, RM23,050 in all. With no fee, the Enterprise still pays less.
• RM400,000 profit, one owner, no salary or fee: sole proprietor about RM82,150; Sdn Bhd RM65,000 plus RM4,700 of dividend tax, RM69,700 in all. The company pays less, before its yearly fees.
• With a directors' fee: if the company pays its owner a directors' fee of RM80,000 and the rest as a dividend, its total at RM150,000 of profit falls to about RM14,400, below the Enterprise's RM19,650 (EPF and the yearly fees ignored).
• Two equal partners, tax for both together at the same three profits: about nil, RM6,520 and RM64,300 in an Enterprise; RM9,000, RM22,500 and RM67,700 through a Sdn Bhd. Two equal partners pay less in an Enterprise at each of these levels, by the most at RM150,000 (about RM16,000) and by about RM3,400 at RM400,000.

These are illustrations, not tax advice. EPF, reliefs and expenses change every figure, and how the owner is paid can matter as much as the form.

How much does a Sdn Bhd cost each year, compared with an Enterprise?

In Malaysia, an Enterprise's only yearly SSM fee is its renewal; most of a Sdn Bhd's yearly bill is professional fees. The government fees here were read from SSM's business and company tables of fees on 20 October 2026. To register an Enterprise, SSM charges RM30 a year under the owner's own name, RM60 a year under a trade name, and RM60 a year for a partnership. To incorporate a Sdn Bhd, SSM charges RM1,000.

Each year, a Sdn Bhd pays SSM RM150 to lodge its annual return and RM50 to lodge audited financial statements, or RM20 if unaudited; an Enterprise files nothing else with SSM. Those are SSM's only yearly fees. The rest is professional fees: the Companies Act 2016 requires a qualified company secretary at all times, yearly financial statements and an audit unless the company is exempt, and the Income Tax Act 1967 requires a company tax return.

No law fixes those professional fees. On 10 Malaysian providers' websites that we read on 20 October 2026, a company secretary's yearly retainer was listed at about RM960 to RM4,200, most between RM1,140 and RM2,600. A small company's audit was listed "from" RM1,500 to RM3,000, bookkeeping from RM1,399 a year, and a company tax return at RM700 to RM2,500 by turnover. Added together, the lowest prices listed for a secretary, an audit, bookkeeping and a tax return, with SSM's RM200, come to about RM4,760 a year. That is a floor, not a typical bill: most listed prices were higher, and turnover raises them. Several pages said SSM's fees are extra, and some said tax is extra too, one naming 8% service tax. These are other businesses' published prices on that date, not a survey.

The audit is the largest variable. Every private company must appoint an auditor unless SSM exempts it (Companies Act 2016, section 267). SSM's Practice Directive 10/2024 tests a small company on its figures for the current year and the 2 years before, so a new company that trades does not qualify: budget for an audit for at least its first 2 financial years. A company dormant since incorporation, or this year and last, is exempt. One rule applies to both forms: since LHDN's update of 30 August 2026, a business with annual turnover below RM3 million is exempt from e-Invoicing.

What must a Sdn Bhd file each year, and what if it goes dormant or closes?

A Malaysian Sdn Bhd lodges its annual return with SSM within 30 days of each anniversary of incorporation, from the year after incorporation (Companies Act 2016, section 68). Financial statements are circulated to the shareholders within 6 months of the year end and lodged with SSM within 30 days after that (sections 258 and 259). It files Form C within 7 months of its year end (Income Tax Act 1967, section 77A). Late filing is an offence, with fines of up to RM50,000 (Companies Act 2016, section 68) and penalties of up to three times the tax (Income Tax Act 1967, section 112).

A Sdn Bhd that stops trading still files and pays a secretary until it is struck off or wound up. To strike it off under section 550 of the Companies Act 2016, SSM's guideline (revised 14 July 2026) requires, among other things, no assets and no liabilities and tax clearance; the fee is RM100. A company whose last audited accounts lodged with SSM show a dividend cannot apply. If it can pay its debts in full, it is closed by a members' voluntary winding up, which needs a liquidator appointed by the members (sections 439, 443 and 445). Weigh that before you plan to take all profit as dividends. Closing an Enterprise is a notice to SSM within 30 days of stopping (Registration of Businesses Act 1956, section 5D), but the owner stays liable for the business debts.

Starting with a partner: a partnership or a Sdn Bhd?

Two or more people can register a partnership with SSM as an Enterprise, or incorporate a Sdn Bhd and hold its shares. A partnership is two or more people in business together for profit (Partnership Act 1961, section 3). It is not a legal person.

Unless the partners agree otherwise, in writing or not, the Partnership Act 1961's standard rules apply (section 26). All partners share capital, profits and losses equally, whatever each put in. No partner is paid a salary for working in the business. Every partner may manage. The majority cannot expel a partner without an expressly agreed power (section 27). With no fixed term, any partner can end the partnership at any time by notice (section 28). Unless agreed otherwise, the death or bankruptcy of any partner dissolves it for all (section 35).

A written partnership agreement can change every one of those standard rules between the partners, though not what each of them owes the firm's creditors: profit shares, a salary for the working partner, management, expulsion, notice, death, a leaver's payout and disputes. Partners may also agree not to carry on another business while the partnership lasts, and, on or in anticipation of its dissolution, not to compete within reasonable local limits (Contracts Act 1950, section 28, Exceptions 2 and 3). In a Sdn Bhd the owners' document is a shareholders' agreement; the hub article explains how a partnership agreement differs from a shareholder agreement.

Where does an LLP (PLT) fit?

A limited liability partnership (Perkongsian Liabiliti Terhad, PLT; 有限责任合伙) in Malaysia sits between the two. It is a legal person, like a company, separate from its partners, and a partner is not personally liable for its debts just by being a partner (Limited Liability Partnerships Act 2012, sections 3 and 21). It needs two or more partners and a compliance officer who is a citizen or permanent resident living in Malaysia (sections 6 and 27).

Starting a Sdn Bhd with a partner: what to agree before you register

Before you register a Sdn Bhd in Malaysia with a partner (rakan kongsi; 合伙人), agree in writing who puts in what, who runs it, and what happens if one of you leaves, dies or disagrees. In law your partner is a shareholder (pemegang saham; 股东). The Companies Act 2016 and two documents set your relationship.

Votes follow shares on a poll or a written resolution. More than 50% of the votes passes an ordinary resolution, for example to appoint or remove a director (sections 202, 206 and 291). At least 75% passes a special resolution, which changes the constitution (sections 36 and 292). So at 70:30 or 51:49, the larger partner alone passes ordinary resolutions but not special ones, and the smaller partner, with more than 25%, can block a constitution change. At 50/50 each owner can block every resolution, which is why a 50/50 split can deadlock. An unequal split avoids deadlock on ordinary resolutions; the firm explains what a minority shareholder can and cannot block. Record the shares with SSM as actually agreed (sections 14 and 78): not a different split on paper, for example 51:49 when the deal is 70:30, and not one name holding shares for two people; the firm's guide covers holding shares for someone else.

Shareholders and directors are different jobs. The board manages the company (section 211), sets the bank mandate, which says who signs at the bank, and in a private company approves directors' fees, subject to the constitution (section 230). Decide who will be directors, and require two signatures for payments above a set sum. A partner who is not a director has no right under the Act to inspect the accounting records (section 245), so the agreement should give every partner monthly accounts and the bank statements.

A salary or fee is that partner's income. A dividend can be paid only from profits, and only if the company can still pay its debts, and it goes to shareholders in proportion to their shares unless the constitution or the terms of the shares say otherwise (sections 71, 131 and 132). Money a partner puts in is either paid for shares, with no right to repayment, or lent to the company; write down which. Where one partner brings money and the other work, do not simply issue shares for work still to be done: once issued, they stay with that partner if he or she stops. Set in the agreement which of the working partner's shares the other may buy, and at what price, if he or she leaves early.

Two documents record all this. The constitution is the company's rulebook. The Act makes it optional (section 31), but partners should adopt one: without a constitution that allows it, the directors cannot refuse to register a transfer of fully paid shares (section 106), so a partner could sell to someone you never agreed to. Once adopted by special resolution, it binds the company and every shareholder, including later ones, and must be lodged with SSM within 30 days (sections 32 and 33). It is public (section 601), and it changes by a 75% vote unless it says otherwise (section 36).

The shareholders' agreement is a private contract: it binds only the people who sign it, not the company or a shareholder who did not sign. So a rule that must bind the company, such as a limit on the directors' powers, belongs in the constitution too (section 211), and the two must match. The hub article explains what a shareholders' agreement covers and what it costs. Have a lawyer draft the agreement, and the constitution clauses that must match it, and advise you on both. The company secretary keeps the registers and minutes and lodges the company's documents with SSM.

Settle these in the agreement, and in the constitution where they must bind the company or a later shareholder:

• Decisions and board seats: list the decisions you must both agree, such as new shares, large borrowing, directors' pay and selling the business, and each partner's right to name a director; put both in the constitution too (sections 206 and 211).
• Transfers: a partner who wants to sell must first offer the shares to the others, and the constitution must let the directors refuse a transfer to an outsider (section 106).
• Leaving: no shareholder has a right to be bought out, and a Sdn Bhd generally cannot buy back its own shares (section 123), so set who buys, at what value and when, and who replaces the leaver's bank guarantee.
• Death: the shares pass to the executor or administrator (section 109), so the family may become your co-owners; make the option to buy cover shares that pass on death, not only transfers. See when a shareholder leaves or dies.
• Deadlock: notice, a meeting, mediation, then a buy-out at a valued price, so that a dispute does not end in a winding-up petition (section 465).
• New money: who puts in more, as shares or a loan. New shares need the shareholders' prior approval (section 75) and, unless the constitution says otherwise, are first offered to existing shareholders in proportion (section 85). Put each loan in writing: the amount, any interest and the repayment date.
• Competing: an agreement not to compete is generally void, and the partnership exceptions do not cover shareholders (Contracts Act 1950, section 28); rely instead on confidentiality.

Can you convert an Enterprise to a Sdn Bhd later?

Yes, but a Malaysian Enterprise cannot be converted into a Sdn Bhd: no law provides a procedure for it. You incorporate a new Sdn Bhd, move the business into it, and end the Enterprise's registration.

Because the company is a new legal person, nothing moves by itself. Assets and goodwill must be transferred to it. Contracts with customers, suppliers, the landlord, the bank and employees move only by a new contract or with the other side's consent, so check each one. Licences are usually issued to the owner, so check whether the company needs its own, and a Ministry of Finance supplier registration must be made again. A sale-of-business agreement is charged stamp duty as if it were a transfer of the property sold, on items such as goodwill, at RM1 to RM4 for every RM100 of the price or value (Stamp Act 1949, section 21; goods and stock in trade are excluded), so ask about stamp duty and tax before you sign. Once the company runs the business, tell SSM within 30 days that the Enterprise has ended (Registration of Businesses Act 1956, section 5D). SSM will not approve a company name identical to a registered business name. To keep the name, reverse the order: lodge the Enterprise's termination before the company applies for the name, and do not trade in any gap between the two.

Sabah and Sarawak: how is an Enterprise registered there?

An Enterprise in Sabah or Sarawak is not registered under the Registration of Businesses Act 1956, which applies to Peninsular Malaysia (section 1) and, by an order of 1996, to Labuan. In Sabah, a person who carries on a listed business needs a trading licence under the Trades Licensing Ordinance (Sabah Cap. 144). In Sarawak, a firm in a listed business and district registers under the Business Names Ordinance (Sarawak Cap. 64) within one month of starting. The Partnership Act 1961 applies in every State, so partners there carry the same personal liability. A Sdn Bhd is an SSM company everywhere in Malaysia.

Key facts: Sdn Bhd and Enterprise in Malaysia

• Enterprise: citizens and permanent residents aged 18 or over; Peninsular Malaysia and Labuan; one owner, or 2 to 20 partners.
• Enterprise fees: RM30 a year in the owner's own name; RM60 under a trade name or for a partnership (SSM, 20 October 2026). Trading unregistered: up to RM50,000, or 2 years in prison, or both.
• Sdn Bhd fees: RM1,000 to incorporate; RM150 a year for the annual return; RM20 or RM50 to lodge financial statements (SSM, 20 October 2026).
• Sdn Bhd: one shareholder, one share, one resident director, a secretary within 30 days; up to 50 shareholders (section 42); no minimum capital.
• Tax, year of assessment 2025: small company 15% on the first RM150,000, 17% to RM600,000, 24% above (Budget 2027 proposes 14% and 16% from 2027; not yet law); personal rates 0% to 30%; dividend tax 2% above RM100,000 a person.
• Audit exemption, years starting in 2026: 2 of 3 of RM2 million revenue, RM2 million assets, 20 employees, for 3 years (Practice Directive 10/2024); a new trading company does not qualify.
• e-Invoice: exempt below RM3 million of annual turnover (LHDN, 30 August 2026).
• Strike-off: not open to a company whose last audited accounts lodged with SSM show a dividend (SSM guideline revised 14 July 2026); fee RM100.

When to get advice

See a lawyer before you register with a partner, before you sign a personal guarantee, and before you move a business into a new company; a tax agent can model your own figures. See how to find a lawyer in Malaysia.

This article is general information about the law of Malaysia as at 20 October 2026. It is not legal or tax advice on your situation, and reading it does not make you a client of the firm. Fees, rates and thresholds change, and the third-party prices are other businesses' figures; check them before you rely on a figure.