1. What is a Sdn Bhd Company?
It means your business is a separate legal entity, so your personal assets are protected if anything goes wrong. You can also bring in partners (shareholders) and look more credible to clients and banks.
However, it does come with extra responsibilities like appointing a company secretary, doing annual filings, and (in most cases) having audited accounts.
It’s ideal if you’re planning to grow or want a more structured setup.
2. Sole Proprietor vs Sdn Bhd
| Person | Business Type | Annual Income | Goal / Need | Which Suits Better | Why? |
| Ali the Freelancer | Logo Designer | RM60,000 | Just starting out, wants to keep things simple and affordable | Sole Proprietor | Easier to set up, low cost, simple tax filing |
| Mei Ling the Online Seller | Shopee/Lazada Store | RM150,000 | Wants to claim more expenses and appear more legit to suppliers | Sdn Bhd | Can separate personal & business, better tax planning |
| Ravi the Consultant | IT Consultant | RM200,000 | Wants to build credibility, maybe bring in partners later | Sdn Bhd | Can bring in shareholders, looks more professional |
| Sara the Baker | Home-based Bakery | RM70,000 | Small business from home, not ready for formal structure | Sole Proprietor | Lower maintenance, simple compliance |
| Jason the Contractor | Renovation Business | RM300,000+ | Dealing with big clients and government tenders | Sdn Bhd | Many clients require company registration, liability protection |
| Farah the Café Owner | Café in a shop lot | RM250,000 | Hires staff, signs long-term leases, wants investor one day | Sdn Bhd | Protects personal assets, easier to bring in partner or investor |
3. When You Don’t Need a Sdn Bhd (Yet)
Scenario 1: You’re doing freelance work and earning under RM200,000 per year.
Scenario 2: You just started a side hustle and want to test the waters.
Scenario 3: You don’t need to issue invoices to large corporations.
💡Solution: Register as a Sole Proprietor first—it’s cheaper, simpler, and involves less paperwork. You can always convert later.
4. When You Should Consider a Sdn Bhd
Scenario 1: You want to work with larger companies that require a Sdn Bhd for invoicing.
Scenario 2: Your income is growing above RM200,000 per year and you want to save on tax.
Scenario 3: You want to protect your personal assets or plan to take on partners/investors.
Scenario 4: You want to build a more “formal” business brand.
💡Solution: Set up a Sdn Bhd. Though it requires more compliance, you’ll gain credibility and tax planning advantages.
5. Common Misconceptions
“I need a Sdn Bhd to open a business bank account.”
✖️ Not true. Sole proprietors can open business accounts too. You’ll just need your SSM registration (Form D), IC, and other supporting documents such as utility bill that may be required by bank.
“Sdn Bhd is only for big companies.”
✖️ Many one-person businesses register as Sdn Bhd for tax efficiency, limited liability, and credibility. It’s not just for corporations with large teams.
“I want to ‘look more professional’ so I’ll register a Sdn Bhd immediately”
✖️ Consider your stage first. A Sdn Bhd isn’t always necessary when you’re just starting out with low revenue and minimal risk. You can still build credibility as a sole proprietor while validating your business idea – then convert later when it makes financial sense.
“Staying as a sole proprietor is cheaper, so I’ll just stick with it forever.”
✖️ This is short-term thinking. Sole proprietor tax rates can shoot up to 30%, while Sdn Bhd flat tax starts at 15% for the first RM150,000. As your profits grow, the tax difference could easily exceed the extra running costs of a Sdn Bhd.
6. Ongoing Expenses of a Sdn Bhd You Should Know
- Annual audit fees
- Bookkeeping fees
- Company secretary fees
- Tax agent charges
- Additional documentation (e.g. board resolutions)
7. Final Thoughts: Don’t Rush It
A Sdn Bhd isn’t always the best starting point. It’s like jumping to Level 10 when you’re still exploring the game. But when you’re ready to grow, hire, and protect your assets – it becomes a powerful tool.