Capital Needed to Start a Business in Malaysia
One of the first considerations for entrepreneurs starting a business in Malaysia is the amount of paid capital needed to start a business. Malaysia requires a minimum capital depending on the type of company you want to register as. However, this minimum requirement is only a starting point and businesses will need to take into account a number of factors in addition to it when determining what amount of starting capital is necessary for the success of their company.
Minimum Required Paid Capital for Businesses in Malaysia
- Sole proprietorships: do not need to meet specific paid capital requirements.
- Limited liability companies: must meet certain capital requirements as stipulated by the Companies Act 1965.
- Private limited companies: the minimum paid-up capital requirement is RM1. However, these types of companies have additional requirements that will necessitate a higher paid capital at start-up. Private limited companies must have a minimum of two shareholders and are restricted from offering shares to the public, removing one method of financing. In addition, private limited companies are required to submit audited financial statements annually, which can be a significant cost for start-ups with limited resources.
- Public limited companies: the minimum paid-up capital requirement is RM2,000,000. Public limited companies are required to have a minimum of seven shareholders. Unlike private limited companies, they are permitted to offer shares to the public. However, public limited companies are still required to have their financial statements audited annually.
Minimum capital requirements are subject to change, so check with the Companies Commission of Malaysia for the most up-to-date information. We also recommend seeking advice from a professional accountant or business consultant to help you navigate the capital requirements and determine the best strategy for your business.
Beyond the Minimum
In addition to the minimum capital requirements, businesses may also be required to pay fees and taxes at start-up including registration fees, stamp duties, and annual fees. These fees and taxes vary depending on the type of company and the location of your business.
A final and crucial consideration when determining your business’s starting capital is the costs specific to your industry and business plan. The biggest cost you will need to prepare for is the cost of goods sold (COGS). This is followed by overhead costs which will include things like marketing, advertising, professional fees, rent, utilities, equipment, supplies, and insurance expenses. These costs will continue to define your cashflow throughout the life of your business, but they will be felt most keenly at start-up as it will take some time before cash inflow can be established. While meeting minimum requirements is important, when securing capital for your start-up all costs should be taken into consideration as the success of your business will require more than meeting those minimums.