What is the difference between a sole proprietorship and a Sdn Bhd in Malaysia?
A sole proprietorship is not a separate legal person, so you are personally liable for all business debts. A Sdn Bhd is its own legal person and shareholders are generally liable only for unpaid share capital. A Sdn Bhd costs more to set up and carries more yearly filing duties.
Legal identity. A sole proprietorship is you, trading under a registration. A Sdn Bhd is a company with its own legal personality: it owns assets, signs contracts and can be sued in its own name.
Liability. For a company limited by shares, a member's liability is limited to any amount unpaid on their shares (Companies Act 2016, s.10(2)). Directors can still be personally liable for their own wrongdoing, and banks often ask for personal guarantees.
Set-up and upkeep.
- Sole proprietorship: SSM registration is low-cost and renewal is cheap (RM30 or RM60 a year under SSM's renewal guideline), done online.
- Sdn Bhd: RM1,000 SSM incorporation fee plus name and secretary costs, and each year an annual return, financial statements and registers.
Ownership. A sole proprietorship has one owner and cannot issue shares. A Sdn Bhd can have shareholders, so you can bring in partners or investors.
Continuity. A sole proprietorship ends with its owner; a company continues if a shareholder dies or leaves.
Tax treatment differs too; get tax advice before deciding.
Legal basis
- Companies Act 2016, s.10(2)
- Registration of Businesses Act 1956
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What business structure should I choose in Malaysia: sole proprietorship, partnership, LLP or Sdn Bhd?Pick based on liability, who owns it and how credible you need to look. A sole proprietorship or partnership is cheapest but the owners are personally liable; an LLP or a Sdn Bhd gives a separate legal entity. A Sdn Bhd is the usual choice once you hire staff, sign larger contracts or bring in investors.
- What is an LLP in Malaysia and how is it different from a Sdn Bhd?A limited liability partnership (LLP) is a body corporate registered under the LLP Act 2012. It needs at least two partners (a shortfall is allowed for six months) and a compliance officer who is a Malaysian citizen or permanent resident living in Malaysia. It runs on a partnership agreement, not a board. A Sdn Bhd has directors, shares and heavier governance under the Companies Act 2016.
- Can one person be the only director and shareholder of a Sdn Bhd?Yes. A company needs at least one member and one director, and one person can be both. A private company must have at least one director who ordinarily lives in Malaysia. You still need a licensed company secretary, and you cannot act as both director and secretary where the law needs both.
- What is the minimum paid-up capital for a Sdn Bhd in Malaysia?The Companies Act 2016 sets no minimum amount; a company needs at least one share. Shares no longer have a par value. Many Sdn Bhds start with RM1 to RM1,000, but regulators, banks and immigration can expect more depending on your activity or foreign ownership.
- Is a company constitution compulsory for a Sdn Bhd in Malaysia?No. Under the Companies Act 2016 a company may choose to adopt a constitution by special resolution. Without one, the Act's default rules apply. If you do adopt one, you must lodge it with SSM within 30 days. A company limited by guarantee must have a constitution.