Malaysia is one of Southeast Asia’s most attractive destinations for foreign investors, thanks to its strategic location, robust infrastructure, and business-friendly policies. If you’re planning to enter this market, understanding the different business structures available is a vital first step. Whether you’re considering Sendirian Berhad (Sdn. Bhd.), a Branch Office, or a Labuan Company, each structure has distinct advantages and regulatory requirements.
This guide will help you evaluate these three main options and make an informed choice for your venture’s company registration in Malaysia.
Why the Right Business Structure Matters
Choosing the appropriate legal entity determines your liability, tax obligations, compliance requirements, and even your eligibility to apply for work permits. Malaysia offers flexibility to foreign entrepreneurs, but that flexibility must be navigated wisely.
Whether you are registering a company in Malaysia for a long-term enterprise or a specific project, the right structure will help minimize risks and maximize operational efficiency.
1. Sendirian Berhad (Sdn. Bhd.)
Overview
A Sendirian Berhad (Sdn. Bhd.) is a private limited company and the most popular structure for both local and foreign investors. It is a separate legal entity, offering liability protection and enabling full foreign ownership in most sectors.
Key Features
- Requires at least one director (must reside in Malaysia)
- Allows 100% foreign ownership in many industries
- Minimum one shareholder, and share capital starts from RM1
- Must have a registered office in Malaysia
- Subject to corporate tax at 24% (standard rate)
Advantages
- Full operational control
- Access to government incentives (for qualified sectors)
- Can enter into contracts, own property, and sue or be sued
- Best suited for long-term investment
Disadvantages
- Subject to audit and annual filing requirements
- Requires a local director (can be fulfilled by a nominee)
- Higher startup and compliance costs compared to other structures
Ideal For:
Foreign entrepreneurs planning to open a Sendirian Berhad company in Malaysia for scalable operations and full market presence.
2. Branch Office
Overview
A Branch Office is an extension of a foreign parent company and not a separate legal entity. It operates under the name and liability of the parent company, and its activities are limited to those of the parent.
Key Features
- Must register with the Companies Commission of Malaysia (SSM)
- Must appoint a resident agent
- Cannot engage in retail trade or manufacturing (restricted sectors)
- Profits are taxed at 24%, same as Sdn. Bhd.
Advantages
- No need to incorporate a separate company
- Good for short-term projects or support offices
- Operates with the brand and reputation of the parent company
Disadvantages
- Parent company bears all liabilities
- Limited to business activities of the foreign company
- Less credibility with local banks and partners
- Not eligible for local tax incentives
Ideal For:
Foreign companies looking to establish a temporary or limited presence without going through full Sendirian Berhad company formation in Malaysia.
3. Labuan Company
Overview
Labuan is a federal territory of Malaysia with a preferential tax regime, mainly used for offshore business activities, holding companies, and international trading. Companies registered in Labuan operate under the Labuan Business Activity Tax Act 1990.
Key Features
- Low tax regime: 3% tax on audited net profits or a flat RM20,000 (depending on activity)
- Only applicable for non-Malaysian-sourced income
- Must have a registered office in Labuan
- Requires one director and one shareholder
Advantages
- Extremely tax-efficient
- 100% foreign ownership allowed
- Ease of fund repatriation and banking
- Ideal for international trading, licensing, fintech, and holding companies
Disadvantages
- Limited ability to trade with Malaysian residents
- Subject to substance requirements (office, staff, expenses in Labuan)
- Misuse can raise red flags with tax authorities
Ideal For:
Companies focused on international business, asset protection, or holding structures, not looking for significant domestic operations in Malaysia.
Comparing the Structures
| Feature | Sdn. Bhd. | Branch Office | Labuan Company |
|---|---|---|---|
| Legal Entity | Separate | Extension of Parent | Separate |
| Foreign Ownership | 100% (most sectors) | Fully foreign-owned | 100% |
| Liability | Limited | Parent liable | Limited |
| Tax Rate | 17%-24% | 24% | 3% or RM20,000 |
| Local Substance | Required | Required | Required in Labuan |
| Domestic Trade | Allowed | Limited | Not allowed (generally) |
| Ideal Use | Long-term business | Temporary/local extension | Offshore/international focus |
How to Register a Company in Malaysia
Whether you choose an Sdn. Bhd., Branch Office, or Labuan Company, the company registration in Malaysia follows a legal process under the Companies Commission of Malaysia (SSM) or the Labuan Financial Services Authority (LFSA).
Steps to Register an Sdn. Bhd.:
- Name Reservation: Reserve a unique company name with SSM.
- Incorporation Documents: Prepare Constitution, shareholder details, and Form 48A/49.
- Appoint Directors: At least one resident director is mandatory.
- Registered Address: Provide a local office address.
- Company Secretary: Appoint a licensed company secretary within 30 days.
- SSM Filing: Apply online or via a corporate service provider.
Documents for the Branch Office:
- Certified copy of the parent company’s certificate of incorporation
- Details of directors and local agents
- Local office address
- Board resolution approving branch establishment
Setting Up in Labuan:
- Engage a Labuan trust company for incorporation
- Submit the proposed company name, business activity, and shareholders’ information
- Comply with substance rules: physical office, staff, and operational expenses
Also Read: Documents Required for Company Registration in France
Which Structure Is Right for You?
- Choose Sdn. Bhd. If you want a full-fledged presence in Malaysia with long-term plans and operational control.
- Choose a Branch Office if you’re testing the market or supporting parent company activities.
- Choose a Labuan Company for international trading, asset protection, or holding investments with tax efficiency.
It’s crucial to assess your business goals, compliance capacity, and tax exposure before choosing the structure. You may also consider professional assistance to help you register a company in Malaysia smoothly and in compliance with local regulations.
FAQs
1. Can foreigners fully own a Sendirian Berhad company in Malaysia?
Yes, 100% foreign ownership is allowed in most sectors, except those restricted under Malaysia’s Negative Investment List. It’s always advisable to consult with a local advisor to confirm eligibility in your industry.
2. What are the tax benefits of registering a Labuan company?
Labuan companies pay either 3% of net profits or a flat RM20,000 annually, depending on the type of business activity. However, they must meet economic substance requirements and generally cannot trade with Malaysian residents.
3. How long does it take to register a company in Malaysia?
Incorporating an Sdn. Bhd. Typically takes 5–10 working days if all documents are in order. Branch offices may take slightly longer, while Labuan companies can be incorporated within 10–15 working days via licensed agents.
