5 Reason why Sdn Bhd is Better

1. Limited Liability

The idea of limited liability companies safeguards the shareholder’s personal wealth. The shareholder is not liable for any liabilities of the company on the grounds that the shareholder has not given guarantee to any liabilities faced by the company. Therefore the establishment of a Sdn Bhd company can be seen as an appealing option to business owners due to the financial security offered by such an agreement. Shareholders need not risk their personal wealth or assets – unlike other business models such as sole proprietorship or partnership models where owners hold greater responsibility for the debts accrued by the company.

2. Status as Separate Entity & Continuous Existence

A Sdn Bhd company exists as a separate legal entity from its owners, meaning it possesses the legal rights as a natural person. This equates to the company’s ability to acquire assets, enter and leave contracts, sued or be sued. Furthermore, existing as a separate entity from its owners allows the SdnBhd company to continue on regardless of the status of its owners, shareholders or directors unless legally dissolved. The stable nature of a Sdn Bhd company may pose as a great advantage for many business owners in terms of long term business growth.  

3. Ease In Transfer of Ownership

Ownership in a Sdn Bhd company is held amongst 2 or more shareholders and these shareholders are at liberty to transfer or sell shares to one another or third parties who consequently become shareholders of the company. The Sdn Bhd company can continue business operations as usual despite changes in ownership, therefore potential business owners may view this aspect of flexibility and ease true to Sdn Bhd companies as a great benefit.

4. Greater Access to Capital Funding

Sdn Bhd companies may raise capital funding via issuing bonds or shares which will protect buyers against debt. Sdn Bhd companies are also able to borrow money from financial institutions at lower rates in comparison to other types of businesses. Finally, more capital can be accessed by Sdn Bhdcompanies through the stock exchange by issuing an initial public offering (IPO). The availability of these options for capital funding proves a stark difference to sole proprietorship or partnerships where these alternatives are stifled.

5. Tax Advantages

The corporate tax rate for a Sdn Bhd company is typically lower than the individual tax rate as SdnBhd companies are taxed based only on their profits. The corporate tax rate for Sdn Bhd companies are:

First MYR 500,000 profit: 17%

A. Above MYR 500,000 profit: 24%
B. Maximum tax rate of 26%

In comparison, individual tax rates can go up to 30% and more.

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