If you’ve read out article on our article on business ideas in Malaysia, you probably have motivation and are confident to start up a business. All of a sudden, you don’t know where to start and how to start. You also will be wondering how much it will cost, be it time or money to start up a business. Don’t worry, here is a guide by AsiaLawNetwork on how to set up a business in Malaysia 2021.
How to set up a business in Malaysia 2021
#1. Seek Local Professionals & Advice
While it is not impossible to get things done by one’s self, certain critical applications, filings or submissions may be challenging without engaging local service providers, agents or runners familiar with the nuances and idiosyncrasies of the system. Examples of critical steps that may be challenging to accomplish without the assistance of such services providers include procuring business premise and signboard licences from municipal councils, work visas and permits from the immigration department, filing of documents with the state land offices for property-related dealings, tax related registrations and filings etc.
Malaysia’s national language (Bahasa Malaysia) is the default language that government offices and official documents use, often without English translations being readily available. Foreigners may also experience difficulty in getting accurate information or updated documents online or through telephone enquiries, and may often find that certain processes are best done ‘over the counter’.
Therefore, shortlisting and engaging professional services such as accountants, auditors, tax agents, corporate secretaries, lawyers, work permit & visa agents, intellectual property agents, property agents etc, is a critical first step. These professionals will also be able connect you with other service professionals or specialists, which will save invaluable time, money and ultimately, frustration.
#2. Open a Bank Account
Opening an individual or company bank account locally (and preferably near the potential business premise) is one of the first things that needs to be done. In order to effect payments, share issuance, deposits, and fees which usually require local currency. Enquiring in advance with local or international banks on the exact documentation, requirements and time need to open a bank account will be prudent, bearing in mind the anti-money laundering compliance checks and the “know your customer” requirements that all banks need to satisfy before approving the new bank account.
Action tip: Identify what documentation/ information / address is needed to open a bank account and whether a foreign currency account / cross border monetary transfers or loans are needed (and if so, any applicable exchange control rules that may apply.)
#3. Incorporate a Company / Business Entity
It is a decision that a private company limited by shares (known as ‘Sendirian Berhad’ or ‘Sdn. Bhd.’ in Malaysia) is the business vehicle of choice, searching and reserving a company name and incorporating a company is now made procedurally simpler and faster under the Companies Act 2016, which allows for the use of a ‘super form’ via an electronic template submitted 24/7 online through the MyCoID 2016 portal. You can do the process by yourself or through a professional and the incorporation should take less than 3 working days upon submission. The Companies Act 2016 also allows for private companies to have a single foreign member / shareholder and a single foreign director provided that the foreign director has a principal place of residence in Malaysia.
#4. Secure a Business Address & Premises
Whether in the form of a rented or purchased premises, virtual office, service office or even a permanent residential address, a physical premise or mailing address within Malaysia there is a requirement in other applications for bank account, company formation, licences and work permits etc. Foreigners may consider subscribing to virtual offices or renting service offices or co-working spaces, which are often located at prestigious business locations, for a quick and affordable ‘temporary business address’ prior to committing to a longer term tenancy or property purchase.
#5. Human Resources and Employment
Malaysia offers a sizeable pool of educated and skilled human resources, at relatively affordable wages, many with the ability to speak multiple languages or dialects (mainly English, Malay, Chinese, Tamil, Cantonese, Hokkien). There is also a high mobility of talent from smaller cities in Malaysia who are hungry for the opportunity of better career prospects. Every business owner should be mindful of its obligations as an employer with regard to employee related statutory deductions and contributions (such as Employees’ Provident Fund, Social Security Organization, Human Resources Development Fund and Monthly Tax Deductions), prior to hiring its first employees.
Furthermore, Malaysian labor laws are to favor the employee, which may increase the risk of industrial action suits brought against the employer should the employer be ignorant or breach local labor practices. Being knowledgeable of and compliant with the whole swath of local employment laws and practices (contained in the Employment Act & Regulations, Occupational Safety and Health Act, Minimum Wages Order, Workman’s Compensation Act, Industrial Relations Act and others) is a professional discipline on its own and may be next to impossible for a business to undertake on its own. Seeking professional advice on compliance, contracts, procedures and policies which are compliant with local laws and practices will benefit the business in the long run.
Now that you know the fundamentals and basics of how to set up a business in Malaysia, you can start to build your way up to success!
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