The difference between an Sdn Bhd and Enterprise in Malaysia is essential. If you are Malaysian and planning to incorporate a company in Malaysia – the key differences between an Sdn Bhd and Enterprise in Malaysia can be seen below.
What is an Sdn Bhd in Malaysia?
A Sendirian Berhad (Sdn Bhd) company is a private limited company that may be established in Malaysia by both locals and foreigners.
What is an Enterprise in Malaysia?
An enterprise is a straightforward business entity that can be registered quickly. Many company owners are drawn to its simplicity and ease while yet maintaining complete control over the business’s profits.
It is exclusively open to Malaysian nationals and permanent residents (PRs). The simplicity with which the firm can be registered comes with hazards. It is an infinite commercial entity and not a legal entity, as it is related to the business owners.
What are the major differences between an Sdn Bhd and Enterprise in Malaysia?
A summary of the differences between an Sdn Bhd and an Enterprise in Malaysia can be seen below:
Ownership and management – Sdn Bhd can have up to 50 shareholders and manage by shareholders but an enterprise can be formed by sole proprietorship managed alone or in partnership with up to 20 partners.
The signing of agreements – Sdn Bhd will bear the legal liability of the agreement but for an enterprise, the owner will be personally liable.
The business and personal income of an Sdn Bhd will be declared or distributed as remuneration or dividends. For an enterprise, all the profits earned will be deemed as the personal income of the owner.
Personal income tax and corporate tax of an Sdn Bhd will be recorded and declared under the corporate tax guidelines whereas the enterprise will have to declare tax with the personal income of the owner.
How do the law and regulations differ from an Sdn Bhd and Enterprise?
An Sdn Bhd is governed by the Companies Act 2016, which states that the Sdn Bhd is considered a separate legal individual with limited liability, capable of earning income, owning properties, signing contracts, and suing and being sued, which separates your liabilities from the Sdn Bhd’s.
An enterprise is governed by the Registration of Business Act 1956 in terms of the legal framework. It has no legal standing, and the owner and the business are treated as a single entity. As a result, you will be personally accountable for any obligations incurred by your company.
What are the compliance requirements with laws and regulations for both an Sdn Bhd and Enterprise?
An Sdn Bhd does not need to be renewed. However, there are additional SSM compliance obligations, such as:
- The Appointment of a company secretary within 30 days of the creation of the Sdn Bhd.
- The filing of annual returns and audited financial statements.
- Update company information such as directors’ and shareholders’ information, paid-up capital, registration address, and so on.
An enterprise, from a legal standpoint, requires frequent renewal with the Registrar of Business to keep the business going.
- Aside from that, both the enterprise and Sdn Bhd are needed to comply with governmental regulatory requirements such as business license application, EPF and SOCSO registration for workers, tax filing, and so on.
How do the ownership and management differ from an Sdn Bhd and Enterprise?
An Sdn Bhd is held by shareholders who contribute to the company’s paid-up capital and is managed by directors. Without a business partner, you might be the only shareholder and director of an Sdn Bhd. An Sdn Bhd can have a maximum of 50 shareholders. This shareholder limit can be expanded by transforming the Sdn Bhd structure into a Berhad, which is a public corporation.
For an enterprise, you can either own and run a Sole Proprietorship on your own or share ownership and responsibility with up to 20 business partners through a Partnership. In addition to the business owners, you may recruit personnel to administer the organization.
How does the signing of an agreement differ from an Sdn Bhd and Enterprise?
For an Sdn Bhd, you sign the agreement on its behalf. As a separate legal entity independent from its owner, your Sdn Bhd will carry the legal obligation of the agreement. Therefore, the Sdn Bhd can engage in agreements in its own personal capacity.
Because there is no legal existence for an enterprise, you are held personally accountable if you violate the agreement.
How do the business and personal income differ from an Sdn Bhd and Enterprise?
Because a Sdn Bhd is a separate legal company, it must pay corporate taxes on its profits. The directors’ salary from the firm is considered personal income and will be taxed as part of the directors’ personal income. Dividends are issued based on retained earnings, which have already been taxed under corporation tax, so you do not have to pay personal income tax on them as a shareholder.
Because an enterprise is not a separate legal entity from its owner(s), profits made by the business are taxed alongside your personal income.
How do the personal and corporate taxes differ from an Sdn Bhd and Enterprise?
An Sdn Bhd is a separate legal entity. The company’s money stays within the company, and the corporation pays its own taxes. Directors of the company might be remunerated through the director’s pay, whilst shareholders of the company get dividends declared by the firm’s board of directors depending on profits such as retained earnings available.
All profits earned from an Enterprise, either in the form of Sole Proprietorship or Partnership, will be included with personal income.
If you would like to know more about the differences between an Sdn Bhd and Enterprise in Malaysia, drop us an inquiry at email@example.com.
Relin Consultants always look forward to helping business owners thrive in their respective fields.
Can I change my business entity from an Enterprise to an Sdn Bhd?
Yes, you can legally change your enterprise to an Sdn Bhd. A summary of the process is as follows: –
- Register an Sdn Bhd.
- Transfer the Enterprise’s assets and other papers to the Sdn Bhd.
- Dissolve the enterprise to avoid being taxed twice.
If you would like a detailed explanation of the procedure, contact us and we will do our best to assist you.
Are audits and company secretary mandatory for both Sdn Bhd and Enterprise?
- An Sdn Bhd is required to file audits and appoint a company secretary.
- An enterprise is not required to file audits and appoint a company secretary.