Sdn Bhd (Sendirian Berhad): Your Guide to Private Limited Companies in Malaysia

When starting a business in Malaysia, the most critical decision you’ll make is choosing your business structure. While a sole proprietorship (Enterprise) offers simplicity, the Sendirian Berhad (Sdn. Bhd.), or Private Limited Company, is the most popular and respected structure for entrepreneurs serious about growth, credibility, and security.

A Sdn. Bhd. is a formal business entity registered with the Suruhanjaya Syarikat Malaysia (SSM) and governed by the Companies Act 2016. Understanding what this structure involves is essential for any founder looking to build a scalable and sustainable venture.

This guide will provide a comprehensive breakdown of what a Sdn. Bhd. is, its key characteristics, the major advantages and disadvantages, and an overview of the compliance requirements.

Key Takeaways

• What It Is: A Sendirian Berhad (Sdn. Bhd.) is a private limited company in Malaysia. It is a separate legal entity from its owners (shareholders).
• Limited Liability: This is the primary advantage. Shareholders are not personally liable for the company’s debts or losses, protecting their personal assets.
• Separate Legal Entity: The company can own property, sign contracts, and sue or be sued in its own name, independent of its owners.
• Credibility & Scalability: This structure is viewed as more professional and credible by banks, investors, and clients. It is also the required structure for raising venture capital.
• Compliance Requirements: A Sdn. Bhd. has higher compliance burdens, including the mandatory appointment of a company secretary and the submission of annual audited accounts.

What Does “Sdn. Bhd.” Actually Mean?

• Sendirian (Sdn.): This means “Private” in Malay. It indicates that the company’s shares are not available to the public. They can only be transferred privately, and the company is limited to a maximum of 50 shareholders.
• Berhad (Bhd.): This means “Limited.” It refers to the limited liability of its shareholders. Their liability is limited only to the amount of their unpaid shares, if any.

The Core Features of a Sendirian Berhad (Sdn. Bhd.)

A Sdn. Bhd. is defined by two powerful legal concepts:

1. Separate Legal Entity: A Sdn. Bhd. is legally treated as a “person.” It is entirely separate from its owners (shareholders) and the people who run it (directors). This means the company itself can enter into contracts, hire employees, acquire assets, and take on debt.
2. Limited Liability: This is the most significant benefit. Because the company is a separate entity, the owners are not personally responsible for its debts. If the company fails, creditors can only claim against the assets of the company, not the personal property (house, car) of the shareholders.

Advantages vs. Disadvantages of a Sdn. Bhd.

Choosing this structure provides powerful benefits, but it also comes with responsibilities.

Key Advantages

• Protection of Personal Assets: Your personal finances are safe from business risks.
• Enhanced Credibility and Professionalism: A “Sdn. Bhd.” name signals a more stable and serious business, building trust with suppliers, clients, and banks.
• Easier to Raise Capital: This structure is the only one VCs and angel investors will typically invest in, as they can easily purchase shares (equity).
• Perpetual Succession: The business can continue to exist even if the original owners or directors leave or pass away. Its “life” is not tied to a single person.
• Easier to Transfer Ownership: Ownership is transferred by simply selling or allotting shares.

Key Disadvantages

• Higher Setup Costs: The incorporation process is more complex and expensive than registering a sole proprietorship.
• Strict Compliance Requirements: You must appoint a qualified company secretary, have your accounts audited annually, and file detailed reports with SSM and LHDN every year.
• More Complex Administration: Running a Sdn. Bhd. involves formal processes like board meetings, resolutions, and maintaining official company registers.

Sdn. Bhd. vs. Enterprise (Sole Proprietorship): The Key Difference

Feature	Sdn. Bhd. (Private Limited Company)	Enterprise (Sole Proprietorship)
Legal Status	A separate legal entity	Owner and business are the same
Liability	Limited Liability (Personal assets are protected)	Unlimited Liability (Personal assets are at risk)
Credibility	High. Preferred by banks and investors.	Low. Seen as a small, personal operation.
Taxation	Pays corporate tax on profits.	Pays personal income tax on profits.
Compliance	High (annual audit, company secretary)	Low (annual renewal)

Key Registration Requirements for a Sdn. Bhd.

To incorporate a Sdn. Bhd. in Malaysia, you will need:

• A Unique Company Name: You must check for name availability and get approval from SSM.
• At Least One Director: The director must be at least 18 years old and a resident of Malaysia.
• At Least One Shareholder: The director and shareholder can be the same person.
• A Qualified Company Secretary: You must appoint a licensed company secretary within 30 days of incorporation.
• A Registered Office Address in Malaysia: This must be a physical address, not a P.O. box.

After incorporation, you must also register for a Tax Identification Number (TIN) with LHDN and open a corporate bank account.

Did You Know?

Under the Companies Act 2016, it is now possible for a single person to incorporate a Sdn. Bhd. with themselves as the sole director and sole shareholder. This has made the “Sdn. Bhd.” structure much more accessible for individual entrepreneurs who want limited liability protection without needing a partner.

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Conclusion: The Right Choice for a Serious Business

While a sole proprietorship is a simple way to start, the Sendirian Berhad (Sdn. Bhd.) structure is the right choice for entrepreneurs with a long-term vision. The benefit of limited liability—which protects your personal assets—is the most critical advantage. Although it comes with higher compliance costs, the credibility, scalability, and legal protection it offers are the essential foundations for building a professional and enduring company in Malaysia.

Frequently Asked Questions (FAQs) for Malaysian Businesses

Can a foreigner own a 100% Sdn. Bhd. in Malaysia?

Yes, in most industries, 100% foreign ownership is allowed. However, the company must still have at least one director who is a resident of Malaysia (a citizen, Permanent Resident, or a foreigner holding a valid employment pass).

What is the difference between a “Sdn. Bhd.” and a “Bhd.”?

A Sdn. Bhd. is a private limited company with a maximum of 50 shareholders, and its shares cannot be offered to the public. A Berhad (Bhd.) is a public limited company, which can offer its shares to the public and can be listed on the stock exchange (Bursa Malaysia).

Do I need to audit my Sdn. Bhd. accounts every year?

In most cases, yes. An annual audit by a licensed auditor is a mandatory requirement of the Companies Act 2016. Only certain “exempt private companies” that meet specific criteria (like low revenue and assets) may be exempt.

What is a “Company Secretary” and do I need one?

Yes, every Sdn. Bhd. is legally required to appoint a qualified company secretary. The company secretary is the company’s chief administrative officer, responsible for ensuring the company complies with all SSM regulations, maintaining company records, and filing annual returns.