Guide to Prepare Your Company’s Financials for Compliance Purpose
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Have you ever had that craving for something more fulfilling? Something that lets you truly take control of your circumstances? Ever felt tired of working the same old job 9 to 5 every single day?
Surely, some of these thoughts have crossed your mind before. We’ve all had our moments of wanting to break away from the same old routine, and wanting to venture toward new horizons.
In fact, this has become quite a popular option for many people, as many are seeking out opportunities to start their own businesses.
After all, the pull of being your own boss and being able to call your own shots is undeniably enticing for many. Not to mention the freedom to decide on your own working schedule!
If you’ve ever tried to search for more information about starting a business, you may have come across a certain term before: sole proprietorship.
Of course, this may have made you wonder, “What exactly is a sole proprietorship?”
- What a sole proprietorship is?
- Why a sole proprietorship is preferred?
- How to register for a sole proprietorship in Malaysia?
- What risks are associated with a sole proprietorship?
- What options you have for funding a sole proprietorship Malaysia?
What is a Sole Proprietorship?
A sole proprietorship is basically the simplest form of business ownership there is, and in Malaysia, it is governed by the Registration of Businesses Act 1956. Unlike a corporation, a sole proprietorship is not a separate entity from the person who owns it.
Basically, this means you are the business, and the business is you. You, as the owner of the business, are not separate from it. So, whatever you earn through your business counts directly as your personal income.
Additionally, since there is no separation between the owner and the business, this means that all the owner’s personal assets, or the things you own (such as your house or car) are also liable in the event of any payments that need to be made.
If you’re unfamiliar with a liability, it basically is something that you’re answerable for. So in the event you have a debt to pay, your personal assets (such as your car) are liable (can be claimed to cover that debt).
Why is a Sole Proprietorship Preferred?
Simply put, a sole proprietorship is the simplest form of business to set up and manage due to:
- the lower amount of paperwork
- the lower cost for setting up the copmpany
- the overall simplicity of execution
Additionally, setting up a sole proprietorship still allows an opportunity for the business to grow. Should the owner ever decide to expand, there is always the opportunity to change the business to either a partnership or a private limited company (the ones with the Sdn. Bhd. at the back) in the future.
Furthermore, it is still the lowest cost alternative to starting a business, making it a popular option for many aspiring entrepreneurs who may not necessarily have the money to begin a private limited company.
Additionally, being the sole owner of a business can be quite an attractive option, as this means that you have full control over the business and how it is run.
Plus, there are much less regulatory requirements to be met as a sole proprietorship. You’re free from corporate taxes, the need to audit your business, or to publish any financial statements.
Basically, the attractiveness of a sole proprietorship lies in its simplicity. Less paperwork, less costs, and less fuss makes it an easy go-to solution to form a business for anyone who might want to do so.
Say, for instance, you want to begin a business selling fried ice cream. Yum. As a sole business owner, it might not necessarily be the best idea to register a private limited company just so you can start selling your fried ice cream on the corner of the block.
Instead, it’s much simpler to just register for a sole proprietorship, and begin selling your product to the masses. Simple, cheap, and efficient.
So How Do I Register for a Sole Proprietorship?
In order to begin such a business, you must first go through registration with the SSM (Suruhanjaya Syarikat Malaysia/Companies Commission Malaysia)
To do so, you will need to register your business at an SSM branch near you.
To register with the SSM, you will need to first complete this form and then choose a name for your business.
To name your business as a sole proprietorship, you can either opt for a personal name, or a trade name.
A personal name is rather straightforward, as this is just using your own name to register your business. Using your own name (as per your MyKad) means that you don’t actually have to wait for approval for your name, and you get almost instant approval for your business.
On the other hand, you have the option of choosing a trade name, which is basically a name that you come up with for your company.
If you wish to register your company under a trade name (e.g. Kedai Dobi Untung Besar-Besar), then you would need to submit your trade name to the SSM through this form. This process is subject to certain guidelines as well.
Once you have done so, you will need to wait for approval for your trade name, which is subject to Rules 15, Rules of Business Registration 1957. Your business can be registered for anywhere between one to five years, but no longer than that.
Of course, this registration process comes together with certain costs:
- A trader name will have a fee of RM60 per year
- A personal name will have a fee of RM30 per year
If you’d like to know more about this process, you can visit this SSM page to find out more.
Do note, however, that you must be either a Malaysian citizen or a permanent resident to apply for a sole proprietorship in Malaysia.