Quick answer: A Sdn Bhd and an LLP are separate legal entities with limited liability. A sole proprietorship is not, so you are personally liable. A sole proprietorship costs RM30 to RM60 a year and is open only to Malaysian citizens and permanent residents. An LLP costs RM500 and needs two partners. A Sdn Bhd costs RM1,000 and is the usual choice for foreign owners and growing businesses.
- Only a Sdn Bhd and an LLP are separate legal entities.
- A foreigner who is not a citizen or permanent resident cannot register a sole proprietorship.
- Registration fees: sole proprietorship RM30 or RM60 a year, LLP RM500, Sdn Bhd RM1,000.
- An LLP is taxed at the LLP level. Its partners are taxed on remuneration and benefits.
Side-by-Side Comparison
Fees and rules from SSM.
| Sole proprietorship | LLP | Sdn Bhd | |
|---|---|---|---|
| Separate legal entity | No | Yes | Yes |
| Liability | Unlimited. Can reach personal assets. | Partners generally not personally liable, except for their own wrongful acts or omissions | Limited to unpaid shares |
| Who can register | One owner who is a Malaysian citizen or permanent resident, aged 18 or above | At least 2 partners, no maximum. Individuals or companies. | At least 1 shareholder, up to 50. At least 1 resident director. |
| Registration fee | RM30 a year (personal name) or RM60 a year (trade name) | RM500 | RM1,000, plus RM50 per name |
| Local requirement | Owner must be a citizen or permanent resident | Compliance officer must be a citizen or permanent resident living in Malaysia | One director who ordinarily lives in Malaysia |
| Yearly filing | Business renewal | Annual declaration of solvency within 90 days after year-end | Annual return within 30 days of the anniversary date, plus financial statements |
| Tax | Profit is the owner's income | Taxed at the LLP level | Company taxed on its own profit |
Fees and rules are from SSM and LHDN. Agencies change them, so confirm before you apply.
Strengths and Limits
Sole proprietorship
Strengths
- Lowest cost: RM30 or RM60 a year.
- Simple renewal, for one to five years at a time.
- No audit is required.
Limits
- Not a separate legal entity. Liability is unlimited and can reach personal assets.
- Open only to Malaysian citizens and permanent residents.
- A business under a personal name cannot have partners.
LLP
Strengths
- Separate legal entity with limited liability for partners in general.
- RM500 to register. No maximum number of partners.
- Partners can be individuals or companies.
Limits
- Needs at least two partners.
- Needs a compliance officer who is a citizen or permanent resident living in Malaysia.
- Partners remain liable for their own wrongful acts or omissions.
Sdn Bhd
Strengths
- Separate legal entity. Shareholders' liability is limited to unpaid shares.
- One shareholder is enough, and foreigners can hold shares.
- Suits growth, investors and hiring.
Limits
- RM1,000 to incorporate, plus RM50 per name.
- Needs a resident director and a company secretary.
- Files an annual return and financial statements, audited unless exempt.
Not sure which structure fits? We will compare them for your case.
How They Are Taxed
LLP
Under LHDN Public Ruling No. 5/2015, an LLP is taxed like a company. Its income is taxed at the LLP level. Partners are not taxed on their share of the LLP's income, whether or not it is distributed. They are taxed on remuneration, perquisites and benefits they receive from the LLP.
Sole proprietorship and partnership
These are not separate legal entities, so the profit is the owner's or the partners' own income.
Sdn Bhd
A Sdn Bhd is a separate company and pays tax on its own profit.
Rates
Tax rates and incentives change with the Budget. Ask us to work out which structure gives you the best result in your case.
Which One Suits You?
A simple decision guide.
Choose a sole proprietorship if
- You are a Malaysian citizen or permanent resident running a small business alone.
- The business has low risk and you accept personal liability.
- You want the lowest registration and renewal cost.
Choose an LLP if
- You and at least one other person will run a business together, such as a professional practice.
- You want limited liability without the full company structure.
- You can appoint a compliance officer who is a citizen or permanent resident living in Malaysia.
Choose a Sdn Bhd if
- You have foreign owners, or expect investors.
- You plan to hire staff, including foreign staff.
- You want shareholders' liability limited to unpaid shares.
- You are happy to file an annual return and financial statements each year.
Consider a general partnership only if
Two to twenty partners will share the business and accept unlimited, joint and several liability. It must use a trade name and costs RM60 a year. Most owners prefer an LLP or a Sdn Bhd instead.
Four Scenarios
Scenario 1. A freelance designer, Malaysian citizen. A sole proprietorship is the cheapest start. The designer is personally liable, so the choice fits only if the risk is low.
Scenario 2. Two accountants starting a practice. An LLP gives a separate legal entity and limited liability for the partners. They must appoint a compliance officer who lives in Malaysia.
Scenario 3. A foreign founder opening a trading company. A sole proprietorship is not open to a foreigner who is neither a citizen nor a permanent resident. A Sdn Bhd is the usual route, and trading may need KPDN approval.
Scenario 4. A start-up expecting investors. A Sdn Bhd lets investors hold shares and keeps liability limited to unpaid shares.
Frequently Asked Questions
Quick answers on business structures.
What is the difference between a Sdn Bhd, an LLP and a sole proprietorship?
A Sdn Bhd and an LLP are separate legal entities. A sole proprietorship is not, so the owner is personally liable for its debts. A Sdn Bhd limits shareholders' liability to unpaid shares. An LLP generally protects partners from personal liability, except for their own wrongful acts.
Can a foreigner register a sole proprietorship in Malaysia?
SSM's registration guidelines say the owner must be a Malaysian citizen or permanent resident aged 18 or above. A foreigner who is neither cannot register one.
How much does it cost to register each one?
SSM charges RM30 per year for a sole proprietorship under a personal name and RM60 per year under a trade name. An LLP costs RM500. A private company limited by shares costs RM1,000, plus RM50 for each name reserved.
How many people do I need to start each one?
A sole proprietorship has one owner. An LLP needs at least two partners and has no maximum. A Sdn Bhd needs at least one shareholder and can have up to 50.
Does an LLP pay tax like a company?
Yes. Under LHDN Public Ruling No. 5/2015, an LLP's income is taxed at the LLP level. Partners are not taxed on their share of the LLP's income, but they are taxed on remuneration and benefits they receive from it.
Does an LLP need a Malaysian compliance officer?
Yes. Every LLP must appoint a compliance officer who is a partner or a person qualified to act as a company secretary. The officer must be a Malaysian citizen or permanent resident and ordinarily live in Malaysia.
Does a Sdn Bhd need a Malaysian director?
Yes. At least one director must ordinarily live in Malaysia.
Which is cheaper to maintain?
A sole proprietorship has the lowest cost, with a renewal of RM30 or RM60 a year. An LLP files an annual declaration of solvency. A Sdn Bhd files an annual return and financial statements, which are audited unless the company is exempt.
Is a general partnership the same as an LLP?
No. A general partnership is not a separate legal entity and its partners have unlimited, joint and several liability. It has 2 to 20 partners and must use a trade name. An LLP is a separate legal entity.
Can I change from a sole proprietorship to a Sdn Bhd later?
You can register a new Sdn Bhd as the business grows and move the business into it. Ask us to plan the transfer so contracts, licences and tax are handled correctly.
How long can a sole proprietorship registration last?
A registration can be renewed for a period of one year and not more than five years. A business that expired more than one year ago cannot be renewed.
About This Guide
This guide was prepared by Neutral Consulting PLT, a Kuala Lumpur firm of chartered accounting and advisory professionals with 10 years in practice. We help foreign and local companies set up, stay compliant and hire talent in Malaysia. Every figure and rule here was checked against the official sources listed below in November 2026.
Sources
Official sources
- SSM, Comparison of Business Entities in Malaysia
- SSM, Guidelines for Registration of New Business
- SSM, Business Renewal
- SSM, Starting a Limited Liability Partnership
- SSM, General Guidelines for Registration of Limited Liability Partnership (2013)
- LHDN, Public Ruling No. 5/2015, Taxation of Limited Liability Partnership (copy hosted by MIA)
- SSM, Guidelines for Incorporation of a Local Company
This page is general information, not legal advice. Agencies change their requirements, so confirm the current rules with SSM and LHDN, or with us, before you act. Checked November 2026.
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