How to Start Your Business in Malaysia
Updated: Jul 27, 2022
Yes! You've finally decided to start a business in Malaysia! If you've not got the engine started, here are some of the things you would have to take into account.
According to the World Bank Collection of Development Indicators, there were 47,823 newly registered businesses in 2020 alone. Starting a business in Malaysia is appealing.
Malaysia is strategically located right at the heart of the Southeast Asian region, it boasts excellent transportation links which facilitate international business trading, travelling and transactions. It also has a dynamic pool of talents as well as being run by a pro-business government.
Apart from having a wide range of infrastructure that gives small and large businesses wide latitude for growth, its cosmopolitan community speaks fluent English in a business environment.
So, if you’re thinking about starting your own business, Malaysia is an ideal place to do it.
1- Have a Solid Business Plan and Strategy to Tackle the Malaysian Market
It’s the first step you need to take before the business gets registered. It’s a process that people often skim over because it sounds deceivingly simple.
Having a solid plan and strategy is the first building block you put on the foundation of your business and it will work in your favour when you're applying for a loan, licences, or hiring workers.
During the course of running your business, you'll go back to it as the original point of decision-making when you are securing businesses, recruiting partners and workers, and planning future campaigns.
Your business plan should include your value proposition, ways to fund your business, things you can do to network with others and market your business, how to manage your working capital, and a deep understanding of the industry or market you are in, including a comprehensive look at all your potential competitors.
Knowing your competitors’ strengths and weaknesses will help you strategize more effectively when trying to fill in the gaps.
2- Getting Professional Advice and Services Helps Foreign Business Owners
It may be a breeze for Malaysians to start their businesses straight away. For foreigners, however, the application can get tricky, especially if you don’t speak or read Bahasa Malaysia.
It’s not impossible…just trickier. The application processes, filings, and submissions are often done in the official language of Bahasa Malaysia. Hence, it is much faster and easier to engage the services of agents or runners who know the system well.
You will need to find and secure a business premise, apply for signboard licences, work around procuring work visas and permits, deal with state land offices and municipal councils for the filing of documents like tax-related documents, etc.
Although Malaysia’s business registration system works fine online, things are better-done face to face. Using professional services will save you time, money, and a lot of headaches.
3- Decide on the Type of Business
Like in other countries, business owners can start deciding on what kind of business they want to register in Malaysia. Your options are:
Sole Proprietorship - Owned and taken responsibility by an individual.
Partnership - Two or more persons (not more than 20 persons) would be the key players in the business
Limited Liability Partnership - Two or more persons are the directors of the company
The company is registered under the provisions of the Company Act 1965 (locally incorporated company or a foreign-owned company)
Foreigners who wish to start a business in Malaysia can also register their business entities as foreign investors. Your options are a sole proprietorship, partnership, private limited company, a Labuan company, or a representative office in Malaysia. The condition is that the owners of the said companies must be permanent residents (PRs) of Malaysia.
4- A Local Bank Account for Transactions
All transactions conducted by the business will need to go through a local business bank account. .
The first thing to do is to consult with the bank’s officer-in-charge and get the list of documents, information, address and legal documents you need to submit to get the approval process going. The officer is in the best position to advise you on the kind of business account and services you may need; for instance, do you need a foreign currency account or would you be performing cross-border money transfers? Or if you need a loan, what are your options?
For the sake of simplicity and convenience, open a bank account with a branch near your company’s premises. Bear in mind that you will need to consult with the bank often, especially during the first few months of starting your business because Malaysia has comparatively strict anti-money laundering compliance regulations.
5- A Business Address and Local Premise is Required
To apply for a bank account, a complete company registration, and a business address is required to apply for licences or work permits.
The good news is that it can be a rented or owned premises, virtual office, service office, or even a home address. This is to ensure that the bank knows where to send communication to.
If you’re tight on budget at the point of starting your business, you can always consider using a virtual office, renting service offices, or using co-working spaces. This is your temporary office address before making the big decision of settling down on a permanent business premise.
If this is a challenge for you, most corporate secretarial service companies provide their addresses as business addresses during the registration process.
6- Loan Matters
You can either secure a loan from a commercial bank or through other financial institutions. Suffice to say, funds can be secured more easily and quickly through private means because the application, approval, and disbursement process is much faster in most cases.
Of course, this depends on the type of loan you’re applying for, the kind of bank facilities, and your credit history.
The great thing about it is that private bank loans do not require you to pledge a collateral asset like a Fixed Deposit, property, or other forms of security. The downside? The requirement for higher income levels, revenues, and the tenure of your business are higher. This can be a challenge for small startup businesses.
The Malaysian government also offers business loans to aspiring entrepreneurs and they are startup-friendly. They’re also more affordable compared to other forms of funding. Better yet if you fall under one of the following categories:
You belong to an ethnic minority
You are a young, aspiring entrepreneur with a solid business plan
What’s available includes Soft Loan Scheme for SLSME (Small & Medium Enterprises) which was launched to support startups specifically. Another good option is the Graduate Entrepreneur Development Programme (PPUS) which is provided by TEKUN Nasional, an agency managed by the Ministry of Entrepreneurial and Cooperative Development. The downside is that the latter loan option is available only for Bumiputera graduates aged between 18 and 40. If you’re a woman entrepreneur, you can apply for TemanNita Financing Scheme, and if you are a Bumiputera age between 18 and 60, the TEKUN Niaga Financing Scheme could be right up your alley.
7- Forming Your Team and Employment Matters
There is no shortage of talents in Malaysia. According to a survey extracted from Linkedin Talent Insights, foreign companies favour Malaysian talents due to their high analytical skills in the software development sector, and knowledge of programming languages and cloud computing.
Malaysian workers are also known for, among other things, their interpersonal skills, leadership qualities, being multilingual, computer literacy, teamwork skills, resourcefulness, adaptability, honesty, integrity, and many more.
When you hire talents in Malaysia, be mindful of employer obligations and contributions like EPF (Employees’ Provident Fund), Social Security Organization, Human Resource Development Fund and Monthly Tax Deductions.
Other regulations you should take into consideration include local employment laws in the Employment Act & Regulations, Occupational Safety & Health Act, Minimum Wage Order, Workman’s Compensation Act, and Industrial Relations Act which are complicated for newbies.
Seeking professional help may be your best bet.
8- Taxes and Financial Regulations
Dealing with taxes should be one of the first things to understand when starting a business in Malaysia. Not complying with taxation laws could have a negative effect later on.
Because the law applies differently to Private Limited Companies, limited liability partnerships, sole proprietorships, and partnerships, our advice would is still to consult with a professional before you make a decision.
The main types of business taxes are:
Real property gains tax
GST (Goods and Services Tax)
If taxes are not dealt with and understood right from the start, you may lose opportunities to claim input tax credits in the future. There are pre-operational and pre-commencement business costs that are tax-deductible against Malaysian income tax.
These are savings you don’t want to miss out on.
Before You Go…
If you’re an SME or startup looking for a short-term business loan to help free up your cash flow and find yourself jumping through hoops and hurdles to get your hands on urgent funds, speak to an INFT officer ASAP.
Our Business Term Loan is flexible and easy to apply for. The fuss-free application process is perfect for people with big dreams to start a business in Malaysia but need working capital to get started.
Here’s how you can get started.
Read about our business term loan on our website
Contact us at either firstname.lastname@example.org or +6018-7928328
Sign up for a free business account with INFT.com.my here
Speak to our consultants to get your loan application started
Get your disbursement funds
…and that’s it!
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