6 Methods for Foreign Investors to Obtain Ownership of a Company in Malaysia
Foreign investors can establish ownership of a company in Malaysia by setting up one of the following six types of foreign company registration options:
1. Branch Office
A branch office in Malaysia operates as an extension of the foreign parent company, without separate legal status. The parent company assumes full liability for the branch’s debts. Branch activities must align with those of the parent company, making it ideal for short-term expansion into Malaysia. At least one Malaysian resident agent is required to establish a branch.
2. Representative Office
To enhance market presence and understand the Malaysian business landscape, foreign companies can establish a representative office. This entity lacks independent legal standing, with the parent company bearing all debts and liabilities. The representative office is restricted to non-profit activities such as promotion, market research, and coordination, and cannot enter contracts or engage in trading.
3. Sdn. Bhd. Company / Private limited Company
The most common entity for foreign investors in Malaysia is the private limited company, which allows for 100% foreign ownership, except in certain sectors like agriculture, banking, education, and oil and gas, which require 50% Malaysian ownership. This entity is a separate legal entity, allowing it to own property, enter contracts, and undertake legal actions independently of its owners, who have limited liability up to their investment. A private limited company requires a minimum of one shareholder and a maximum of 50.
4. Sole Proprietorship
Foreigners with permanent resident status in Malaysia can establish a sole proprietorship, one of the simplest business structures. It requires one owner, who has unlimited liability, meaning personal assets are at risk if the business incurs debt or bankruptcy. Sole proprietorships must pay an annual renewal fee to the Companies Commission of Malaysia (SSM) and are exempt from submitting audits and annual filings.
5. Partnerships
Partnerships in Malaysia require two to 20 owners, with only foreigners holding permanent resident status eligible to register. Partnerships are often used by professional firms like auditors and lawyers. Partners share profits and liabilities based on a partnership agreement. While the partnership itself is not taxed, individual partners must report profits and losses for tax purposes.
6. Limited Liability Partnership (LLP)
An LLP merges the benefits of partnerships and companies, providing a separate legal identity from its partners. Foreign investors can set up an LLP without residency requirements for partners, but the compliance officer must be a Malaysian resident, permanent resident, or ordinarily reside in Malaysia. LLPs offer asset protection and reduced compliance requirements, making them a cost-effective option.
By understanding these six methods, foreign investors can strategically choose the most suitable structure for establishing a company in Malaysia, ensuring compliance with local regulations and optimizing their business operations.