Business wholly owned by a single individual using personal name as per his / her identity card or trade name
The following characteristics characterise a sole proprietorship in terms of its legal status:
It is not considered a separate legal entity from the owner of the business.
The liability of the owner of the Sole Proprietorship is limitless (i.e. the business owner is personally liable for all the debts and losses of the sole proprietorship)
It is possible for either the owner to sue or be sued in its name.
Registration of a Sole Proprietorship in Malaysia
Both the Companies Commission of Malaysia (also known as Suruhanjaya Syarikat Malaysia ("SSM") - https://www.ssm.com.my/) and the Registration of Businesses Act 1956 are responsible for the regulation and registration of sole proprietorships in Malaysia.
Since a sole proprietorship is one of the least complicated and most recognized business structures, setting up one in Malaysia is not a difficult task at all.
But, only the business owner can apply for a sole proprietorship, who must also be:
a citizen of Malaysia or Malaysian permanent resident; and
at least 18 years old.
What is the responsibility of the business owner?
Register the business within 30 days from the commencement date of the business by submitting Business Registration Form (Form A).
Renew your business registration within 30 days before the expiration date of the registration or previous renewal by submitting an Application for Renewal of Business Registration (Form A1).
Register business changes within 30 days from the date of change of main address, nature of business, branch address and owner information by submitting a Registration of Changes (Form B).
Notification of termination of business
within 30 days from the date of termination of business operation or
due to death within 4 months of death by submitting a Notification of Termination of Registered Business (Form C).
Displaying Business Registration Certificate in a conspicuous place at the main business premises or branch.
Put a signboard displaying business name outside the business premises, and if there is more than one place of business, outside of each place of business
Display business name and registration certificate number on letterhead, invoice, bill and other business documents.
Obtain the appropriate license, permit, or letter of authorisation from the relevant authorities of the type of business requiring prior approval even if the business has been registered with SSM.
Documents Needed to Register as a Sole Proprietor
A copy of the business owner's identity card (I/C)
A business name as proposed by the business owner
The nature of the business of the Sole Proprietorship
The official business address
A letter of approval from a government agency (if)
It is not expected that registering your sole proprietorship in Malaysia will take more than a month to finish. At the Companies Commission of Malaysia (SSM), you can submit your application in person or electronically.
Upon completion of the registration, SSM will provide a Certificate of Incorporation to the business.
Annual Fee for a sole proprietorship in Malaysia
Trade Name: RM60
Personal Name: RM30
Branch (s): RM5
How Sole Proprietors Are Taxed
If you run your business as a Sole Proprietorship, you are responsible for reporting any profits or losses on your personal tax return; the Sole Proprietorship itself is not subject to its own taxation. (Tax practitioners refer to this type of taxation as "pass-through" since individual taxpayers are responsible for paying taxes on business profits that flow through to them).
Filing a Tax Return
The primary distinction between reporting income from your sole proprietorship and reporting salaries from employment is that the former requires you to list your business's profit or loss and balance sheet information on Form B, which you will submit to the Inland Revenue Board of Malaysia ("IRBM"). In contrast, the latter only requires you to list the wage information.
Regardless of how much money you take out of the Sole Proprietorship (either as drawing or Sole Proprietorship's salary), you will be subject to taxation on the business's total profits.
Profits are calculated by subtracting total income from total expenses (but will still be subject to the deductible test of the Income Tax Act 1967).
If you want to put it another way, even if you leave money in the Sole Proprietorship's bank account at the end of the year (for example, to cover future bills or business expenses), you are still required to pay taxes on that money.
Your Sole Proprietorship, like any other, is eligible to deduct its outgoing business expenses. You are permitted to expense (deduct) a significant portion of the money you spend in the pursuit of profit.
This includes the operating expenses, the costs of products and advertising, travel expenses, and even a portion of the cost of entertainment that is relevant to the business.
You may be eligible to claim the expense of purchasing business equipment and other assets for your Sole Proprietorship in the form of capital allowances.
Accounting and Auditing Requirement
It is not necessary for a sole proprietorship to engage an auditor to audit their accounting records; however, you will need to keep reliable records for your business that are unmistakably distinct from the records you keep for your personal finances.
One useful strategy is to maintain separate bank accounts for your sole proprietorship and personal expenditures and to pay for all of your business expenditures out of the company bank account.
This is a good way to handle your finances.
Get in touch with us immediately for a free consultation with no fees to discover more.
Guidelines for Registration of a Business:
Commentaires