[Malaysia] Business 101: What is an Enterprise?

Enterprise is the most popular choice for aspiring business owners to kickstart their business idea. The minimal capital requirement and the less strict statutory compliance are the main driving force towards its popularity.

There are 2 types of Enterprises, namely Sole Proprietorship (Pemilikan Tunggal) and Partnership (Perkongsian)

Business Name

The business may be registered using a personal name or using a trade name. The proposed business name must obtain prior approval from the authorities.

The business name must not be blasphemous or offensive and is relevant to your nature of business.

Business Ownership

Only Malaysian citizens and Permanent Residents can be registered as owner(s) or partners for these business entities. 

Sole proprietorship is owned by a single individual only. 

A partnership is considered as an ‘extended version’ of Sole Proprietorship. There can be a minimum of two or a maximum of 20 partners/owners in this business entity.

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Business capital is often limited to the availability of the entrepreneur’s funds and the profit generated from the business. Often, enterprises are unable to obtain public funds when they are having financial difficulties and risked shutting down.


Enterprises are liable to income tax as well. Any business profits will be deemed the owners' personal income and, thus, be subjected to individual income tax.

The difference?

Sole proprietors must file Form B, instead of Form BE, for individuals underemployment or having a non-business income.

In partnership, the precedent partner or the first partner named in a partnership agreement must file Form P. After that, Form CP30 is issued to each partner to indicate the partner's apportionment of partnership income (or loss). Then, partners will declare their income and loss as stated on Form CP30 onto Form B.

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Liabilities of Owner(s)

Both sole proprietorship and partnership are not separate legal entities. This means that the owner(s) and the business is considered as one entity.

Although the owner(s) is entitled to all the profits generated from the business, the liability is unlimited. Sole proprietor and every partner in the business are liable jointly for all business debts and obligations incurred while he/she is a partner.

Hence, the owner(s) risk bankruptcy should the business fail and still have unsettled debts. Creditors may sue the owner(s) for all the debts incurred and claim personal assets through a court order.

For example, the owners of Ali and Beng Enterprise took a loan of RM50,000 each from the bank as capital to set up the business. However, the business did not run well, and the owners are unable to pay back the loan. The owners had to stop the business and filed for bankruptcy. The bank took legal actions and sued the owners for their loan amount, taking their cars and other personal assets. 

However, you can protect your personal assets while running a business. How? The answer is a Private Limited Company (Sdn Bhd)

Governing Law

In Peninsular Malaysia, entrepreneurs must register their businesses with Suruhanjaya Syarikat Malaysia (SSM) under the Registration of Businesses Act 1956 (ROBA 1956) and ROBA Rules 1957.

Meanwhile, businesses in Sabah are required to register under the Sabah Trades Licensing Ordinance 1948 [Cap. 144]. In Sarawak, Entrepreneurs are to register their business under the Business Names Ordinance [Cap. 64], and Businesses, Professions And Trades Licensing Ordinance [Cap. 33].

Entrepreneurs in these two states register with local authorities such as the Resident & District Office or Lembaga Hasil Dalam Negeri (LHDN).

Registration Fees

Registration of enterprise is inexpensive. It ranges between RM 30.00 to RM 100.00, payable to SSM, LHDN, or local authorities.


Under the Income Tax Act 1967, owners must keep a record of any business-related income for a period of 7 years.

It is not a requirement to have a certified company secretary.

There is also no need to lodge an annual declaration and solvency statements or filing of annual returns and financial statements yearly to either SSM or LHDN.

boardroom photo

In short...

Setting up an enterprise in Malaysia is easy and relatively straightforward, unlike a private limited company (Sdn Bhd company). The cost involved in the set-up and running of the business is relatively cheaper. 

Enterprises tend to evolve into a private limited company (Sdn Bhd company) once sustainable with plans for expansions. But what is a private limited company?

Setting up an Enterprise in Kuching? Click below to find out how.


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