Opening a business can be an exhilarating journey filled with hopes and dreams. But what is the cost of starting a business in Malaysia?
In this article, we explore the various expenses you’ll encounter when starting a business in Malaysia, from the initial setup fees to the ongoing costs that keep your venture running.
Whether you’re a resident with a ground-breaking idea or an international entrepreneur drawn to Malaysia’s vibrant economy, understanding these costs is crucial for a smooth start.
Continue reading to learn more!
How Much Capital Do I Need to Open A Business in Malaysia?
When embarking on your entrepreneurial journey in Malaysia, one of the primary considerations is the initial capital investment required to get your business off the ground.
The amount of capital needed varies significantly depending on the type of business structure you opt for, such as sole proprietorships, partnerships, or limited liability companies.
Moreover, beyond just meeting the minimum requirements, you should also consider additional financial factors crucial for your business’s sustainability and growth.
Here are the capital requirements for various types of businesses in Malaysia:
1. Sole Proprietorship
For entrepreneurs considering a sole proprietorship, the process is somewhat simplified as there are no set paid capital requirements.
This flexibility can be particularly advantageous for individual entrepreneurs or small-scale startups, allowing them to invest according to their capabilities and business needs.
2. Limited Liability Company (LLC)
If you’re looking to set up an LLC, you must adhere to the capital requirements outlined in the Companies Act 1965.
These requirements ensure that your LLC has enough capital to cover its liabilities, which is crucial for the company’s financial health and legal compliance.
3. Private Limited Company
For those interested in establishing a private limited company, the minimum starting paid-up capital is remarkably low, at just RM1.
However, it’s essential to understand the other financial obligations and structural requirements involved.
One important aspect is that in private limited companies, shareholders are the principal owners. They can be individuals or corporate entities, for example, Sdn Bhd.
They acquire ownership through share subscriptions, and their numbers can reach up to 50. This ownership structure gives them an indirect influence on the company’s operations due to their investment.
In cases where there is a single shareholder, this person holds complete ownership with 100% of the company shares. These shareholders are often called subscribers during the company’s registration process.
Another significant financial consideration for private limited companies is the mandatory annual submission of audited financial statements.
This process can incur substantial costs, which should be factored into the initial capital requirements for starting the business.
4. Public Limited Company
Lastly, if you’re aiming to establish a public limited company, the financial stakes are higher.
The minimum capital for a public limited company is set at RM2,000,000, and they must:
- Have at least seven shareholders.
- Offer shares to the public.
- Submit annual audited financial statements.
What is the Cost of Starting a Business in Malaysia?
Understanding the initial costs of starting a business in Malaysia and preparing for them is vital for a smooth launch.
Let’s break down the key areas you’ll need to focus on before opening a business:
1. Research First
Your entrepreneurial journey in Malaysia begins with an essential step: research.
Understanding trends, competition, potential customer demographics, and market needs is not just beneficial; it’s necessary for success.
This in-depth understanding aids in tailoring your business model to meet market demands effectively.
For instance, you can conduct this research using online resources or by networking with owners of similar businesses, which can provide valuable insights and avoid common pitfalls.
2. Financial Costs
The next aspect to consider is the costs of starting a business. Small businesses, in particular, require an initial capital investment for setup.
This capital can be sourced in various ways, including personal savings, investments from friends and family, or securing funds from external investors.
Additionally, business loans are a common avenue to gather the necessary funding.
In Malaysia, various banks offer business loans, but it’s important to note that the eligibility criteria, interest rates, and loan terms can vary between banks.
3. Legal and Compliance Costs
When starting a business in Malaysia, entrepreneurs must prepare for a range of expenses, including:
a. Business Registration Fees
This fee ensures that your enterprise is officially recognised and can operate legally within the country.
b. Sdn Bhd Incorporation Fee
If you opt for a private limited company, there are specific incorporation fees associated with this business structure.
These fees can vary depending on the scope and scale of your business.
c. Solicitor’s Fees
Legal advice and services are indispensable for navigating the complexities of business law in Malaysia, ensuring that your venture adheres to all regulations and legal requirements.
d. Name Registration Fee
This process involves officially registering your business name, an important step for brand identity and legal protection.
e. Insurance Costs
Depending on the nature of your business, various insurance types, such as public liability, income protection, and vehicle insurance, may be necessary.
These insurances are crucial for safeguarding your business against unforeseen events and liabilities.
f. Premises-Related Expenses
For online-based or freelance businesses, you might bypass the need for a physical location, which can lead to substantial savings on overhead costs.
However, if a physical premise is essential, the choice of location becomes a strategic decision.
Retail stores, for example, benefit from being in areas with high foot traffic, while B2B companies might prioritise locations that offer easy accessibility and are close to clients.
The condition of the premises also influences your budget, particularly if renovations and fit-outs are required to tailor the space to your business needs.
4. Equipment Acquisition Costs
One of the primary expenses for new businesses in Malaysia is equipment acquisition, such as furniture, computers, and any specialised equipment needed for your specific business operations.
The decision to lease or purchase these items should be based on your financial capacity.
However, purchasing equipment can be more cost-effective in the long run, particularly for items that are crucial to your business and have a long usable life.
5. Marketing and Advertising Costs
Another significant cost of starting a business in Malaysia is marketing and advertising, which is essential for attracting customers and establishing your brand in the market.
These costs encompass various elements such as logo design, brochures, business cards, signage, and web services to build a recognisable and trusted brand.
6. Employee and Staffing Expenses
Lastly, employee and staffing expenses form a crucial part of the business budget. This includes:
- Salaries
- Employee benefits
- Contributions to the Employees Provident Fund (EPF)
- Medical coverage
- Recruitment costs
What’s more, offering adequate compensation and benefits is crucial for attracting and retaining skilled employees, which in turn helps in reducing turnover rates.
Given these expenses, a rough estimate of the funds needed to start a business in Malaysia includes:
a. Accountant Fee
Expect to spend around RM 2,000 for accounting services. This is crucial for managing your finances and ensuring compliance with tax regulations.
b. Rental Deposit
If your business requires a physical space, a rental deposit is needed. Typically, this is RM 4,000 (2 months at RM 2,000 per month).
c. Renovation
Customising your business space to suit your needs can cost about RM 20,000. This varies depending on the scale and nature of the renovations.
d. Furniture
Outfitting your space with necessary furniture can cost around RM 15,000. This includes desks, chairs, and other office essentials.
e. Salaries
Initial employee salaries, including an admin (RM 3,000) and a director (RM 5,000), total up to RM 8,000.
f. Reserve for Cash Flow
It’s wise to have a reserve to cover six months of cash flow. This includes salaries and rental, totalling RM 60,000 (RM 8,000 for salaries and RM 2,000 for rent per month).
In total, it’s advisable to prepare around RM 100,000 as a fund to start a business in Malaysia.
This amount should give entrepreneurs a clear idea of the loan amount they might need to secure to cover these initial costs.
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How to Save on the Costs of Starting a Business in Malaysia
1. Utilise Self-Managed Accounting Software
One of the key areas where you can save costs is accounting. Instead of hiring a full-time accountant, opt for self-managed accounting software.
It should align with your business needs, offering features like invoice creation, expense tracking, and financial reporting.
Furthermore, many of these programmes come with user guides and tutorials, providing a good foundation in accounting principles.
Automating regular tasks, like recurring invoices and payment reminders, also reduces the chance of errors, saving you both time and money.
2. Choose Coworking Spaces
For many entrepreneurs, especially those with families, working from home may not be the ideal solution. This is where coworking spaces come in as a viable alternative.
They offer a productive, professional environment without the hefty costs and commitments associated with maintaining a traditional office.
Additionally, you avoid expenses on office maintenance, utilities, and long-term leases, which can be substantial in the early stages of a business.
3. Implement Commission-Based Sales or Referral Programmes
Another effective strategy to save on the cost of starting a business in Malaysia is implementing commission-based sales or referral programmes.
These programs are vital for boosting sales in the initial stages of your business.
By identifying and collaborating with individuals or entities like bloggers, social media influencers, and industry experts who have significant influence in your business niche, you can expand your market reach.
Hiring salespeople with relevant experience and networks can also enhance your sales efforts.
And, to ensure the effectiveness of your sales team, equip them with essential marketing materials and thorough product information, including:
- Unique selling points
- Target audience insights
- Market trends
Read More: Business Investment Tips Malaysia: 5 Essential Steps to Consider When Refinancing for Business
How Bluebricks Can Help You Understand the Cost of Starting a Business in Malaysia
Starting a business in Malaysia involves various financial considerations, and navigating through them can be daunting.
This is where Bluebricks, as a proficient bank loan and debt consolidation agency, steps in to assist entrepreneurs in understanding and managing the financial aspects of starting a business.
We offer a wide range of loan services that cater to different needs, including:
- Personal loan services
- SME loan rejected services
- Mortgage loan rejected services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Expert Personal Loan Consultancy Services
Our experts understand that everyone has unique financial needs and circumstances, which is why they offer consultancy that encompasses a thorough analysis of several critical factors:
- The specific loan amount you require.
- The urgency with which the loan amount is needed.
- Whether you or your parents own a property that has been held for over ten years.
- Your income level.
- Your CTOS score (such as your credit score and credit history).
Cost of Starting a Business in Malaysia – FAQs
In this comprehensive guide, we look into the most frequently asked questions about the cost of starting a business in Malaysia.
One of the most important costs of starting a business in Malaysia is the cost of a business license, which depends on the type, location, and activity of the business. For example:
Business Premise Licenses and Signboard Licenses:
Required by respective state authorities, these licenses are necessary for operating a business at a specific location and displaying a signboard.
The fees for these licenses vary according to each local authority but generally range from RM1,500 to RM2,000 per year.
Yes, registering with SSM is another cost of starting a business in Malaysia. It requires a fee of RM1,010, inclusive of tax.
Moreover, additional charges may apply if you engage professional accounting services or a company secretary in Malaysia to handle the incorporation process.
Starting a business in Malaysia requires registering with the Inland Revenue Board (LHDN) to obtain a tax identification number, which incurs certain costs. Additionally, compliance with Malaysia’s tax laws and regulations is mandatory.
This includes filing annual tax returns and paying applicable taxes like corporate tax and goods and services tax (GST), all of which contribute to the overall cost of starting a business in Malaysia.
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