The very first decision of a Malaysia market entry is: which business entity do you register? Get it wrong and you pay for it later — in foreign-ownership limits, tax treatment and personal liability. Here are Malaysia's five common structures compared, and how foreign companies should choose.
What exactly is a Sdn Bhd?
A Sendirian Berhad (Sdn Bhd) is Malaysia's private limited company — the equivalent of a Ltd/GmbH. Its core features:
- Separate legal person — the company exists independently of its shareholders; it contracts, owns assets, sues and is sued in its own name;
- Limited liability — shareholders' exposure is capped at their capital; personal assets are protected;
- Foreign-friendly — most sectors allow 100% foreign ownership;
- Statutory governance — at least one Malaysia-resident director plus a licensed company secretary (see our company secretary guide).
Five entities, one table
| Entity | Liability | Legal person | Open to foreigners? | Best for |
|---|---|---|---|---|
| Sdn Bhd (private limited) | Limited | Yes | ✅ 100% in most sectors | Foreign companies; serious operations |
| Sole proprietorship | Unlimited | No | ❌ Citizens/PR only | Local micro-businesses |
| Partnership | Unlimited (joint) | No | ❌ Locals only | Small local partnerships |
| LLP | Limited | Yes | Restricted / case-by-case | Professional services, small teams |
| Foreign branch | Borne by parent | Not separate | ✅ | Parent's short-term / specific projects |
The classic dilemma: branch or subsidiary?
- Foreign branch — an extension of the overseas parent, not a separate legal person; debts and legal liability flow to the parent, and it is generally treated as non-resident, losing access to local SME tax tiers. Suited to specific projects or short-term work.
- Subsidiary (Sdn Bhd) — separate legal person, ring-fenced risk, and local-company treatment including SME tiered tax rates where eligible (see our corporate tax & SST checklist). The mainstream choice for long-term presence.
How to choose in three questions
- Are you foreign-owned? → Yes: sole prop and partnership are off the table — it's Sdn Bhd (or evaluate an LLP);
- Long-term operations with risk isolation? → Yes: a Sdn Bhd subsidiary, not a branch;
- Need work passes and local tax rates? → Yes: Sdn Bhd, paired with EP applications and proper accounting.
Choosing the right entity is the first and cheapest win of your Malaysia entry. For the registration steps, costs and timeline, see how to register a Sdn Bhd as a foreigner (2026). ONEKEY BIZ offers a free entry assessment — structure, incorporation, licences, visas and tax handled end-to-end. Book a consultation or view the incorporation service.
Frequently asked questions
Which entity should a foreign company register in Malaysia?
Almost always a Sdn Bhd (private limited company): limited liability, separate legal personality, and 100% foreign ownership in most sectors. Sole proprietorships and partnerships are restricted to citizens/PRs.
Branch or subsidiary — what's the difference in Malaysia?
A branch is an extension of the foreign parent — liability flows to the parent and it is generally treated as non-resident, without SME tax tiers. A Sdn Bhd subsidiary is a separate legal person with ring-fenced risk and local-company tax treatment — the mainstream choice for long-term presence.
Sources & references
This article is general information only, not legal, tax or immigration advice. Policies, thresholds and official fees are set by the relevant Malaysian authorities and may change. Talk to our consultants about your specific situation.