Choosing the right business structure is an important decision for every business owner in Malaysia. Whether you are starting small or planning long-term growth, the structure you choose will affect your taxes, liability, credibility, and compliance responsibilities. Two of the most common options are Sdn Bhd (Private Limited Company) and Enterprise (Sole Proprietorship or Partnership). In this guide, we break down Sdn Bhd vs Enterprise clearly and, using numbers and facts to help you make an informed decision based on your business goals.
Understanding a Sdn Bhd (Private Limited Company)
A Sdn Bhd, or Sendirian Berhad, is a private limited company registered under the Companies Act 2016 in Malaysia. The company exists independently of its owners, enabling it to hold assets, enter into contracts, and initiate or face legal proceedings in its own capacity. A Sdn Bhd requires:
- At least 1 director
- At least 1 shareholder
- A qualified Company Secretary
- Registration with SSM
Understanding an Enterprise (Sole Proprietorship or Partnership)
An Enterprise is the simplest business structure in Malaysia. It includes:
- Sole Proprietorship: owned by one individual
- Partnership: owned by two to 20 partners
Unlike a Sdn Bhd, an enterprise is not a separate legal entity. The business owner and the business are legally the same.
As a result:
- Profits are taxed as personal income
- Owners are fully responsible for all the debts and legal obligations
- Compliance requirements are minimal
Key Differences Between Sdn Bhd vs Enterprise
A Sdn Bhd is an independent legal entity that offers limited liability, corporate tax benefits, higher compliance requirements, and stronger business credibility. An enterprise, however, is not legally separate from its owner, involves unlimited personal liability, simpler compliance, and is taxed under personal income tax. As a result, enterprises are suited to small, low-risk businesses, while Sdn Bhd structures are better for growth and long-term stability.
Why Many Businesses Choose a Sdn Bhd?
Firstly, a Sdn Bhd offers limited liability protection. If the company faces losses or legal claims, personal assets are generally protected. Secondly, it provides better credibility. Banks, investors, and government bodies often prefer dealing with Sdn Bhd companies. In addition:
- Easier to raise funds through shareholding
- Suitable for businesses with revenue above RM500,000 per year
- More attractive for long-term expansion
As businesses grow, many enterprise owners eventually convert to Sdn Bhd for these reasons.
Why an Enterprise Still Makes Sense for Some Owners?
On the other hand, an enterprise structure has its own advantages. Most importantly, it is low-cost and simple. Registration fees are minimal, and there is no need for a company secretary or annual audit. Moreover:
- Full control by the owner
- Simple bookkeeping
- Ideal for side income or small-scale operations
Therefore, if your business income is modest and risk exposure is low, an enterprise may be sufficient.
Sdn Bhd vs Enterprise: Taxation Comparison
Taxation is a major factor when comparing Sdn Bhd vs Enterprise.
Sdn Bhd Tax:
- Corporate tax rate up to 24%
- SMEs enjoy 15% tax on the first RM150,000 chargeable income (subject to current regulations)
- Taxed separately from owners
Enterprise Tax:
- Taxed under personal income tax
- Progressive rates from 0% to 30%
- Higher profits may result in higher tax brackets
As income increases, a Sdn Bhd often becomes more tax-efficient.
Compliance and Reporting Requirements
Compliance requirements differ significantly.
Sdn Bhd Must:
- Appoint a Company Secretary
- Prepare annual financial statements
- Submit annual return to SSM
- File corporate tax with LHDN
- Conduct audits (unless exempted)
Enterprise Needs:
- Renew registration with SSM
- File personal tax return
- Maintain basic records
While Sdn Bhd compliance is stricter, it also ensures better governance and financial transparency.
Sdn Bhd vs Enterprise: Cost Comparison
Cost is another key consideration.
Estimated Annual Costs:
- Sdn Bhd: RM3,000 – RM8,000 (includes secretary fees, accounting, and compliance)
- Enterprise: RM500 – RM2,000 (basic accounting and tax filing)
Although Sdn Bhd costs are higher, they often justify the added protection and scalability.
About Jin Advisory
Jin Advisory is a Chartered Accounting Firm in Klang Valley, backed by a dedicated team of experienced professionals. We assist businesses at every stage with:
- Company Incorporation
- Company Secretary Services
- Accounting & Bookkeeping
- Taxation & Auditing
Our goal is to help business owners meet today’s compliance demands while planning for sustainable growth.
Choosing between Sdn Bhd vs Enterprise depends on your business size, income level, risk exposure, and plans.
- Choose Enterprise if you want simplicity and low cost
- Choose Sdn Bhd if you wish to protect your credibility and growth potential
Not sure whether a Sdn Bhd or Enterprise suits your business best? Contact Jin Advisory today for professional advice on business structure, company setup, taxation, and compliance. Let us help you build your business on the right foundation.