Before a business can operate legally in Malaysia, it must be registered under the act that matches its form of business. These acts give legal recognition, protect consumers and ensure that the business is accountable for its dealings.
The regulating body
The Companies Commission of Malaysia (SSM) is the main body that manages the registration of businesses and companies in Malaysia. SSM enforces several different acts depending on the type of entity.
Acts by type of entity
- Registration of Businesses Act 1956 — governs sole proprietorships and partnerships.
- Companies Act 2016 — governs companies such as Sendirian Berhad (Sdn. Bhd.) and Berhad (Bhd.).
- Limited Liability Partnerships Act 2012 — governs Limited Liability Partnerships (LLP).
- Cooperative Societies Act 1993 — cooperatives are registered under the Malaysia Co-operative Societies Commission (SKM).
Example
Mr Rahman opens a grocery shop as a sole proprietorship, so he registers under the Registration of Businesses Act 1956. When his business grows into a Sdn. Bhd., it now falls under the Companies Act 2016.
Why registration matters
Registering under the correct act gives a business a lawful identity. It allows the business to open a bank account, apply for loans, enter into contracts and claim legal protection. Operating without registration is an offence that can carry a fine.
Remember
The full name of SSM is the Companies Commission of Malaysia. Match the act to the form: sole proprietorships and partnerships under the 1956 Act, companies under the 2016 Act.
It is important to tell apart registering a business and incorporating a company. Registering a sole proprietorship or partnership under the 1956 Act does not create a legal entity separate from the owner, so the owner bears unlimited liability. Incorporating a company under the Companies Act 2016, in contrast, creates a separate entity with limited liability. Choosing the right form of business and the correct act affects the responsibility, tax and risk that an entrepreneur carries.
By complying with the correct act, an entrepreneur avoids legal trouble and builds the trust of customers and suppliers. This forms an important foundation for starting a business with confidence and responsibility.