Differences between a Private Limited Company and a Sole Proprietorship besides Limited Liability in Running a Business
In addition to limited liability protection, a private limited company in Malaysia must adhere strictly to the provisions outlined in the Companies Act 2016. This act establishes a structured framework that codifies the guidelines for forming, operating, and dissolving a company. These requirements encompass maintaining and preparing accurate financial statements, undergoing audits, and complying with corporate governance regulations, such as disclosure obligations, conflict of interest rules, and reporting standards.
Operating a business under a company structure enhances its credibility due to the legal assurance mandated by the Companies Act 2016.
Apart from limited liability protection, a private limited company in Malaysia differs from a sole proprietorship in several aspects, including:
Legal Entity: A private limited company is a separate legal entity from its owners (shareholders), while a sole proprietorship is not. This means that the company's assets and liabilities are separate from those of its owners, and the owners' personal assets are protected from business debts.
Formation and Management: Setting up a private limited company requires more formalities and compliance with the Companies Act 2016, including appointing directors, issuing shares, and holding annual general meetings. A sole proprietorship, on the other hand, is relatively simple to establish and manage, as the owner has complete control over all business decisions.
Taxation: Private limited companies are subject to corporate tax, while sole proprietors pay personal income tax on their business profits. Corporate tax rates may be higher than personal income tax rates, but companies can also enjoy certain tax benefits and deductions.
Perpetual Succession: A private limited company has perpetual succession, meaning it continues to exist even if its owners change or pass away. A sole proprietorship, on the other hand, ceases to exist if the owner dies or becomes incapacitated.
Raising Capital: Private limited companies can raise capital by issuing shares to investors, while sole proprietors are limited to personal funds or loans. This makes companies more attractive for businesses that require significant capital investments.
Credibility and Reputation: Private limited companies are generally perceived as more credible and established than sole proprietorships. This can be beneficial when dealing with potential customers, suppliers, and investors.
Compliance and Reporting: Private limited companies are subject to stricter compliance requirements, including maintaining proper accounting records, submitting tax returns, and adhering to regulatory standards. Sole proprietors have fewer compliance obligations.
Transferability of Ownership: Shares in a private limited company can be easily transferred to new owners, making it simpler to change ownership or bring in new investors. Sole proprietorships require more complex procedures to transfer ownership.
How Bestar can Help
Bestar is a leading corporate services provider in Malaysia that offers a comprehensive range of services to assist businesses in setting up and managing their operations. Here's an overview of how Bestar can help you establish your company in Malaysia:
Company Registration: Bestar streamlines the company registration process, handling all necessary paperwork, including name reservation, company formation, and registration with relevant authorities.
Secretarial Services: Bestar provides ongoing corporate secretarial services, ensuring compliance with statutory requirements, maintaining company records, and handling shareholder meetings.
Taxation and Accounting: Bestar offers expert tax and accounting services, assisting with tax registration, preparing financial statements, and managing tax filing obligations.
Nominee Director Services: Bestar provides nominee director services for companies that require a Malaysian resident director, ensuring compliance with local regulations.
Immigration and Work Permit Assistance: Bestar guides businesses through the immigration process for foreign directors and employees, assisting with work permit applications and visas.
Business Licenses and Permits: Bestar helps businesses obtain the necessary licenses and permits required for their specific industry and business activities.
Compliance and Regulatory Support: Bestar ensures ongoing compliance with Malaysian laws and regulations, keeping businesses informed of any changes and providing guidance on compliance matters.
Office Setup and Virtual Office Solutions: Bestar assists with setting up physical offices or providing virtual office solutions for companies seeking a professional presence in Malaysia.
Payroll and HR Services: Bestar offers payroll management services, including payroll processing, employee benefits administration, and HR consulting.
Other Business Support Services: Bestar provides a range of additional support services, such as accounting software setup, business advisory, and market research assistance.
By working with Bestar, businesses can benefit from their expertise, experience, and extensive network of contacts in Malaysia, ensuring a smooth and compliant setup process for their company. Contact Bestar today!