[Season 2] Ep 1: How and Why to Register Your Freelancing Business

If you’re a freelancer or a solopreneur in Malaysia, do you need to register a business? What are the benefits of having a registered business? And how do you go about setting your company up? We answer some of these questions in this episode, going into some of the different types of companies in Malaysia and the processes for setting them up.

Show Notes

To find out more about companies in Malaysia, visit the Companies Commission of Malaysia (SSM) website. To find out more about how to register a Limited Liability Partnership, visit myLLP. To get more information about sole proprietorships and partnerships, check out this info page and then start the registration process here.

When your company is a “separate legal entity”, that means it can sue, be sued, acquire, hold and dispose of property. It also has perpetual succession, which means that it can continue to operate even after its partners die, become incapacitated, go bankrupt etc. These could be good things, but precautions and planning has to be done to protect the company in case of any of these things. Read more

Let us know what you think of this episode in the comments section! If you have any questions, ask away in this form.

Transcript

[Prologue]

Jeannette 0:01
Should I register a company? That question is really just the start of a whole list of other questions. Think of it as like a flow chart with multiple yes-no branches. If you say yes to the first question, you move on to another question, then another, like: Why do I want to register a company? What kind of company should I register? Where should I register? How should I register and what do I need to do to maintain a company?

Sarah
Think through and ask yourself: Is this something I’m willing to be committed to and what level of commitment am I ready for?

[Start] 

Sarah
Hello there, it’s Sarah and Jeanette and this is Solo Sync, a podcast for the curious solopreneur, where we discover simple solutions to keep enjoying what we do together.

Jeannette
One of the questions that usually comes up at some point during the freelancing journey, or even if you’re looking to sell stuff online as a solo entrepreneur, is whether to set up a company. It’s a discussion I’ve had multiple times with other freelancers or even potential partners with whom I sell stuff online and the thing is, “Should I register a company?”, that question is really just the start of a whole list of other questions. Think of it as like a flow chart with multiple yes-no branches. If you say yes to the first question, you move on to another question, then another, like: Why do I want to register a company? What kind of company should I register? Where should I register? How should I register and what do I need to do to maintain a company?

Sarah
Yeah, you got that? Right. Um, I mean, I went through that as well. And for the longest time, I thought, you know, should I even bother? Because what if I just continue without registering one? It just feels very overwhelming. It feels like an added responsibility. And I think just knowing what we’re getting into when we register a company would really help for freelancers.

Jeannette
Yeah, because you think that there’s so much paperwork involved, right? Like, for me, when I first started freelancing, I was really just doing it casually alongside my full time job. So I didn’t actually feel the need to register a company, because my main income was coming from work anyway. Like, full-time work. But just as I was leaving my full time job, SSM, or in English, the Company Commission of Malaysia, introduced a new kind of company called Limited Liability Partnership (LLP). So I thought it was better than the other kinds of companies available at the time. And I guess we’ll get into this a bit later in the podcast. But during that time, you know, I also thought about selling stuff online. And it was something that my husband wanted to help me with, also that he wanted to do it as a side hustle. So after I quit my job and finished a coding boot camp, we went ahead and registered an LLP together, so that we could sell products and services. The other thing I found is that setting up a company is really good if you have clients from overseas. One of my friends recently got a gig with a company in Switzerland. He reached out to them because he wanted to work with them as a programmer. And they said, Oh, we can’t officially hire you. Because, you know, we have HR policies, they have to pay things like like Social Security and all that to their employees. So they told him, oh, what you can do is set up a company in Malaysia, and then we’ll pay you as a contractor. And they gave him a higher fee to replace the social security.

Sarah 3:15
Wow, so there really are big benefits there and I’m sure the same applies here too right. There are some MNCs that can’t hire a freelancer unless they have a registered company and I guess by registering a company of your own, you’re giving yourself the chance to expand your clientele, expand your network, your pool of income streams. So let’s talk about the main types of companies in Malaysia. I understand there are four kinds of companies right? You can look into sole proprietorship, partnership, LLP and private limited (which in Malaysia is called Sendirian Berhad). You choose based on your business plan and your reasons for registering a company, I guess. Sole prop is the simplest, also the cheapest and like the name suggests, it can be owned by only one individual ie. yourself. It’s basically yourself as a company and your liability is unlimited which means that if your business is declared bankrupt your personal income assets and all are on the line so that’s something to consider. If you’re working with another freelancer and want to set up a company together, the two options you can look at are partnership and limited liability partnership. So what’s the difference? The former is like sole prop except that it’s owned by more than one person and again liability’s unlimited but the good thing about sole prop and partnership type of companies is that they’re cheaper to maintain. What else do we have, Jean?

Jeannette 4:38
If it’s important to you that your company is treated as a separate legal entity, the two (types of) companies you can opt for is the LLP and Sdn Bhd. There are a few implications here which we’ll include in the show notes but the one important thing is that your personal finances will be separated from the business finances. But of course the reason I guess a lot of people go for sole prop and partnership is that it’s just easier to maintain. It’s a lot cheaper, less than RM100 a year. The LLP is about RM500 to set up and then you have to pay RM200 every year to maintain it. You also have to file an annual declaration. That’s not something you have to do with a sole prop and partnership. The annual declaration requires you to maintain your accounts, like you need to know your money in and money out and things like that and then when you declare it you need to know like how much revenue you got and this is important because it affects your taxes as well. So you really need to get it right.

Sarah
Yeah. And I guess that means you won’t be paying tax on it, like as a company, you will pay tax, and then you will still be taxed as an individual. Yeah, so that’s like double what to do for the year, every year. Yeah. All right. What about this in your inbox? yeah and i guess that means as a company you will pay tax and then you will still pay tax as an individual yes so that’s like double what to do for the year, every year. What about Sdn Bhd, like what kind of costs or commitment is involved there?

Jeannette
With a Sdn Bhd you have to appoint a company secretary within 30 days after successfully registering it, so a lot of people advise that you just get a company secretary to handle the whole process for you right away. It just simplifies it and if you can afford it, to me there’s less paperwork that you have to do yourself because the company secretary handles everything. You just need to provide information, sign some documents and they’ll just get it done for you. But it comes with a fee of like RM2000. Besides paying the SSM fees, which is about RM1000 already, you need to pay the company secretary their yearly secretarial fees and then their invoice usually also comes with like stationery and photocopying so there are all these charges that you have to add on.

Sarah
So are we looking at a total sum of say, RM3000 and up per year?

Jeannette
Yeah, I would say that. Because you also need to have your accounts audited annually with a Sdn Bhd, whether it’s active or not. The audit fee depends on how much your revenue is and it can range from like RM1000 and up per year.

Sarah
Is there like a standard percentage like oh, the audit fee will take 20% or 5% or?

Jeannette
I don’t know what the percentage is, but they have like a table from the Malaysian Institute of Accountants and it says like oh, if a company makes this revenue range, you need to charge them this much.

Sarah
I see. I have two questions, actually. So one, like a person say myself, I can actually be part of an LLP and own a Sdn Bhd as well, like two separate companies to my one name. Is that right? Is there a limit to that, like one person can only, you know, have their names on X amount of companies, even different types of companies? Is there a limit to that?

Jeannette
I actually don’t know the answer to that but I think you can definitely own more than one because I have at least a couple. Okay, the thing about Sdn Bhd is that there are shareholders and directors and they can be different people. So you can be a shareholder but not a director right and vice versa.

Sarah
Well, it really does seem like there’s a lot of people i think a lot of people listening to this might ask in this case, why would I want to register a company?

Jeannette
Yeah, I found that having my personal finance separate from my company finance was a good thing. Like it really helped me to be disciplined with my personal spending because I pay myself a salary and that also means that the business or the company has capital for me to explore new business ideas. So it really helps with the accounting side of things, especially if I want to do things like hire junior writers for some projects. As a separate entity I can set up like standard operating procedures for clients, contractors and even myself. So maybe it’s quite psychological but i think it helped me be a bit more disciplined with my work. If that’s something that’s important to you, you might want to think about registering a business. There are quite a lot of benefits, including other things like you know how earlier we mentioned that it opens up business opportunities. It can open up grant opportunities as well, like some companies when you register for grant they’re looking to transfer to a company bank account instead of a personal one. So there are a lot of reasons to set up a business or register a company.

Sarah
I guess, I guess you have to be at this point, if any, depending what company you set up. I guess you have to be very sure about your path in that sense, because it comes with responsibility and commitment, right? Yeah. Don’t feel pressured to do it just for the sake of saying, Hey, I own a company. But think through and ask yourself, Is this something I’m willing to be committed to? And what level of commitment am I ready for?

Jeannette
And it’s not so easy. It’s a lot of paperwork to close down a company also, so I think it’s always good to think about your long term plans also when you decide what company to set up. But in any case there are processes that are different for different kinds of companies. Sarah, maybe you can tell us a bit about the process of setting up an LLP.

Sarah 9:54
Well, in Malaysia before the MCO, when we were allowed out of our homes, you need to go to the SSM office in KL. I mean, actually, there are a few. And you need to go there to verify your identity and set up an account with them. So it’s just like a membership account, right?

Jeannette
This is myLLP, right?

Sarah
Yeah. And once you get there, you queue up, they’ll give you a form, fill it up, and then you need to key in your details online. And once you set up that account, then you can use that account login to log in anytime to continue the rest of the process. The rest of the process is actually putting your company registration through. So you’ll need to provide at least three name options for your company just in case you know, one or two don’t make it through and when I say don’t make it, I mean that basically SSM has a few requirements for what a company name can be in Malaysia. You usually need to define the entity of your company in your name. So it kind of explains why a lot of companies have very standard sounding names in Malaysia. You will have to be like something something partnership, or something something and co or something, something ventures, you know, and basically your name can’t be what your company is not providing. It’s nice to have a fancy name. But in this part of the world, you need to be a little bit more straightforward with what your name is, depending on what your company is going to provide in terms of products and services. What about the rest? What’s your experience with that?

Jeannette 11:25
I’d say like I mentioned earlier, Sdn Bhd is quite simple. The main thing is to make sure you get a good company secretary who can really handle everything for you. But I think what’s more relevant for freelancers, I guess, would be if you have a partner, partnership or LLP, and if you’re alone, like a sole prop would be the most relevant. And the process for setting up a sole prop or partnership is similar. You can just register for an EzBiz account at the SSM website. After you register for an account like the LLP process, you know, you used to have to go to the SSM office to verify your identity. But EzBiz has set up, during this period, an online verification process. So those links will be in our show notes.

Sarah
Yep. And after you’ve registered, what’s next?

Jeannette
So again, you know, if you’ve set up a Sdn Bhd, you need to make sure you keep your books properly, because you know, you’re going to get audited. And you can do it yourself if it’s simple enough. But when it gets more complicated, you might want to get an accountant.

Sarah
And we’re gonna have one on our show in the coming episodes.

Jeannette
Yeah, because even though I’m using an LLP, what I found is that you need to file an annual declaration every year, which involves financial details, as I mentioned earlier, you know, your company revenue, what assets you have, and all that. And if you do it just at that period, once a year, it can get very, I mean, for me, very stressful. Because you know, if you haven’t done your books properly, you wouldn’t even know what to put in. So I think it’s important to have like regular bookkeeping done throughout the year.

Sarah
In addition to bookkeeping, what about taxes?

Jeannette
After you’ve registered your company, you also need to register for a tax account with LHDN. So with LLP, we mentioned earlier that it was a separate legal entity, right? Which means that it can pay taxes as well. Yeah. So you need like a separate tax account. You just need to go to one of the LHDN offices and get some assistance from there. It’s quite a fast process.

Sarah
Do you have any other tips for this process?

Jeannette
When you’re doing anything company related, just bring along your company certificate, IC copies, company stamp and like all other relevant documents. I usually keep this in a file and bring it out with me when I’m doing these things because it can be really annoying if you’ve gotten all the way there and then you’re just missing like one document or your company stamp. It happened to me so many times.

Sarah
Oh, man. So I guess sole props and partnership always simpler, right?

Jeannette
Yeah, you just need to renew your business. It should around RM30-60, depending on what name you’ve registered. So with a sole prop, you actually have the option to just register your full name. And that’s the cheapest option — about RM30. If you use like a trade name, then it’s RM60.

Sarah
What about if you want to move from sole prop to LLP or LLP to Sdn Bhd? And I suppose the best thing to do would be to close the previous company. Is it difficult to close a sole prop?

Jeannette
That, I’m not sure because I’ve never done that before. But with the LLP what you need to do to close it is you have to buy like classifieds. This was back then when I found out about the process. You need to buy classified ads in like a big enough (according to their requirements) English newspaper, as well as a Bahasa Melayu (BM) newspaper, and it needs to run for a certain period of time before you can even close the company and you need to actually set up a tax account if you haven’t already to, you know, close the company because they need to check if you still owe any taxes. You know, if you have any other like transactions due or things like that, you need to do all these things before you can actually close down the LLP.

Sarah
Thank you for listening! We hope that’s been helpful. If you have any more questions about this topic you can get in touch with us at our email hello@solosync.xyz. Show notes for this episode are on our website http://www.solosync.xyz. Follow us on instagram for more updates to our handle is @solosyncpodcast.

[End]

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