Enterprise vs Sdn Bhd: What Malaysian Owners Must Know

 Key Takeaways

• Sdn Bhd protects your assets with limited liability, while enterprise owners are personally exposed to debts and lawsuits.
  
• Taxes differ by structure, enterprise income is taxed as personal earnings (up to 30%), while Sdn Bhds enjoy lower corporate tax tiers (15–24%).
  
• Compliance is heavier for Sdn Bhd, requiring audited accounts, a company secretary, and annual filings; enterprises are lean but less formal.
  
• Enterprise is cheaper and faster to start (under RM100), but Sdn Bhd builds credibility with banks, investors, and clients.
  

Sdn Bhd is a private limited company with limited liability, an enterprise is either a sole proprietorship or partnership with personal liability.

Sounds simple? Legally, financially, and strategically, they couldn’t be more different.

Running a nasi lemak stall and launching a SaaS startup shouldn’t use the same structure, yet many first-time Malaysian entrepreneurs still default to “enterprise” without understanding the risks.

That confusion ends today. We will compare liability, tax, setup costs, compliance, and growth potential between an enterprise and a Sdn Bhd, with one goal: helping business owners to choose the right structure for your business journey in Malaysia.

Enterprise vs Sdn Bhd Comparison Table 

How Does Liability Work in Each Structure?

Sdn Bhd offers limited liability protection while enterprise owners face personal financial risk.

This is by far, the biggest legal difference between the two business types in Malaysia.

Enterprise = Personal Risk

Enterprise owners (sole proprietors or partnership) are personally liable for all debts and legal claims.

If the business defaults on payments, faces a lawsuit, or goes bankrupt, your personal assets, like your house, car, or savings,  can be seized.

• There’s no legal separation between you and your business.
• Creditors can go after you directly.
• Insurance coverage may not fully protect you in serious cases.

An enterprise is ideal for small, low-risk businesses that prioritise simplicity, low cost, and minimal compliance.

Ideal For:

• Freelancers and solo service providers (graphic designers, tutors, home bakers)
• Side hustles or part-time businesses testing the market
• Cash-based businesses with little to no liability exposure
• Owners who prefer to manage everything themselves without formal structures or boards
  

But caution: Once your business starts growing or handling more risk (employees, clients, inventory), consider upgrading to a Sdn Bhd to avoid legal exposure.

Sdn Bhd = Asset Protection

A Sdn Bhd is a separate legal entity. This means:

• Liability is limited to the company’s paid-up capital.
• Your personal finances are protected, even if the business fails.
• Directors and shareholders are not personally responsible for the company’s debts (unless there’s fraud or negligence).

“A private limited company (Sdn Bhd) creates a financial firewall between the business and personal finances of the owner.” — Suraya Zainal, SME Legal Advisor

If your business operates in a high-risk industry (food, logistics, finance, online retail), or if you deal with contracts, loans, or customer liabilities, a Sdn Bhd is a much safer structure.

Ideal For:

• Entrepreneurs planning to scale
• Businesses with employees, assets, or customer liabilities
• Anyone who doesn’t want to risk losing personal wealth due to business debts

What Are the Tax Implications for Enterprise and Sdn Bhd?

Enterprise income is taxed as personal earnings, while Sdn Bhd profits are subject to corporate tax rates.

Enterprise = Personal Income Tax (Up to 30%)

If you register as an enterprise (sole proprietorship or partnership), your business income is treated as your personal income. 

This means it’s taxed under Malaysia’s progressive individual tax system:

In other words:

• There’s no separation between you and your business
• Profits directly increase your personal tax bracket
• Filing is simpler (via personal income tax portal)

If you earn above RM100,000, your effective income tax rate can spike quickly, reducing how much you keep. So keep this in mind if you do choose enterprise.

Sdn Bhd = Corporate Tax (Tiered System)

As a registered company, Sdn Bhd is taxed separately from the owners. Corporate tax rates (as of 2025) are:

What this means:

• Profits remain within the company
• Directors’ salaries are taxed as personal income
• Malaysia operates a single-tier system; however, from YA 2025 a 2% tax applies to individuals on annual dividend income exceeding RM100,000

If you reinvest profits instead of drawing them as salary, a Sdn Bhd can be significantly more tax-efficient, especially as you scale.

Source: Hasil

Which Is Better for Taxes?

Is It Easier to Set Up an Enterprise or Sdn Bhd?

Enterprise is faster, cheaper, and easier to register, but as we discussed, it comes with fewer legal protections.

Enterprise = Quick, Simple, and Low-Cost

Registering an enterprise in Malaysia (sole proprietorship or partnership) takes as little as 1–2 hours and costs under RM100.

Here’s what you’ll need:

• Register your enterprise via SSM ezBiz online or at SSM counters, fees are RM30 (personal name) or RM60 (trade name) per year, plus RM5 per branch.
• Choose to operate under your personal name or a trade name
• Provide owner’s IC, business address, and nature of business
• Receive instant business certificate upon payment

No need for:

• Company constitution
• Annual returns
• Company secretary
• Audited financial statements

Perfect for freelancers, home businesses, or side hustles with minimal risk.

Sdn Bhd = More Formal, But Future-Proof

Setting up a private limited company is more structured. 

The process takes 3–5 working days and the SSM incorporation fee is RM1,000 (CA 2016), plus secretary/filing service charges (RM500–RM1,500 depending on provider)

What’s required:

• Minimum 1 director and 1 shareholder (can be the same person)
• A licensed company secretary must be appointed within 30 days
• Prepare and submit:
  
  • Company name reservation
  • Constitution (or adopt model template)
  • Incorporation forms and director declarations

Post-registration obligations:

• Annual General Meetings (AGM)
• Prepare and lodge financial statements annually (unless eligible for audit exemption)
• Annual return filings to SSM

Sdn Bhd is ideal for those planning to scale, hire staff, or apply for grants and business loans.

Setup Comparison

“Think of enterprise as a ‘try-before-you-scale’ option. But once your operations grow, Sdn Bhd becomes the better long-term structure.” — Clara Wong, Accounting.my Business Setup Consultant

Which Structure Supports Long-Term Growth?

In Malaysia, many sole proprietors start small, selling kuih, running workshops, or doing freelance work on Fiverr. But when it’s time to expand, apply for funding, or hand over the reins to someone else, they hit a wall.

Sdn Bhd gives you the flexibility to:

• Bring in investors through share issuance
• Hire and formalise teams with EPF/SOCSO compliance
• Secure bank loans or MDEC grants more easily
• Transfer ownership to family, co-founders, or buyers without restarting the entire business

As for enterprises, if you retire, become ill, or pass away, the business typically ceases, unless manually transferred, which is complex and time-sensitive.

You also can’t easily sell the business or pass shares to a child or spouse without re-registering everything.

Hence, Sdn Bhd is ideal for long-term growth:

• Tech startups eyeing future investors
• Ecommerce brands building a nationwide customer base
• F&B chains expanding into multiple locations
• Consultancies hiring local or remote staff
• Any business seeking grants, loans, or long-term exit plans

If your dream includes IPOs, funding, or generational wealth, Sdn Bhd gives you the legal structure to make it real.

Choosing the Right Business Structure

For Malaysian entrepreneurs, choosing between an Enterprise or Sdn Bhd isn’t just a legal step, it determines your liability, tax efficiency, funding access, and even how easily you can pass your business on in the future.

When in doubt, don’t take chances. Speak to a licensed company secretary or SME consultant who can match the right structure to your goals.

Accounting.my offers:

• Enterprise registration (fast and affordable)
• Sdn Bhd incorporation (full compliance + secretary services)
• LLP registration services for those exploring alternative setups

Start smart, scale safely, let Accounting.my set up your business the right way.