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Steps to setting up business in Malaysia for foreigners

The economy of Malaysia is the third-largest in Southeast Asia, after Indonesia, making it a great destination for businesses. But despite this alluring figure, it’s quite astonishing that Malaysia’s economy only grew moderately at 4.5 percent and 4.9 percent in the first two quarters of 2019.

We understand that Malaysia, with its latest economic growth and advancement, is now a top target for many entrepreneurs and business minds alike. And why wouldn't it be? 

The economy of Malaysia is the third-largest in Southeast Asia, after Indonesia, making it a great destination for businesses. But despite this alluring figure, it's quite astonishing that Malaysia's economy only grew moderately at 4.5 percent and 4.9 percent in the first two quarters of 2019. While private consumption has remained resilient, overall economic activity has been weighed down by softer-than-expected investment growth and weakening export demand. In simple terms, there's a market waiting to be tapped into in Malaysia. Having said that, establishing a business in Malaysia may not be all that easy because beyond the attractive market and potential revenues to be gained, one also needs to consider other factors, such as personal status and business status. While Indians may consider themselves lucky with the possibility of exploiting the Malaysia entri visa, citizens of other countries may not be so lucky, which means getting into Malaysia and setting something up may not be all so rosy. However, regardless of whether you are an Indian or an outright foreigner who has chosen to set up a business in or grow an existing business in Malaysia, here is an outline of the key strategic steps you can take to design and execute your business project easily.

1) Find out about industry specific licenses and requirements 
While Malaysia has, indeed, changed its regulations to allow more foreign investments, in numerous divisions, over the past decade, certain particular sectors are as yet constrained or restricted because of national arrangement reasons. Instances of enterprises that include explicit licenses and conditions incorporate oil and gas administrations, reinforced warehousing and cargo, land transportation administrations, discount, retail exchange, visit administrators, F&B café/bistros, establishment and so on. 

It is, therefore crucial to understand at the beginning whether the business action you wish to carry on in Malaysia is dependent upon: 
– Particular licenses or conditions, 
– Any limitations on foreign investments equity, 
– Any necessary minimum capital prerequisites, or 
– Any necessities for Bumiputera (i.e. Malay) executives or local equity ownership. 

The above is not so thorough to understand and find out about, but they may be difficult to process and obtain, as a solitary business activity may require various licenses and endorsements. Getting a clear understanding of this point will assist you with planning your corporate structure, working capital and will likewise give you a reasonable period on the real date of the beginning of your business.

2) Open a bank account 
Opening of an individual or organization's financial balance locally (and ideally close to the planned business premise) is one of the main things that should be done to impact instalments, share issuance, stores, and expenses which as a rule require local cash. Enquiring ahead of time with local or international banks on the careful documentation, necessities and time requirement to open a bank account will be helpful, bearing in mind the anti-money laundering compliance checks and the "know your client" prerequisites that all banks need to fulfil before opening a bank account.

3) Incorporate a company/business entity 
In the event that you've chosen to opt for a privately owned business controlled by shares (known as 'Sendirian Berhad' or 'Sdn. Bhd.' in Malaysia), looking for and choosing an organization name and consolidating an organization is presently made procedurally less difficult and quicker under the Companies Act 2016, which allows the use of a 'super form' by means of an electronic format submitted 24/7, every day online. While you can handle the whole process yourself, you can also use an expert professional. But whichever way you choose to go, the entire incorporation procedure shouldn't take more than 3 working days after submission.

4) Secure a business address & premises
While other countries may allow you to run your business remotely in their country, Malaysia doesn't. And oftentimes, physical premise or mailing address within Malaysia is usually required in other applications for a bank account, company formation, licenses, and work permits, etc. So, as foreigners, it is important to note that you're going to need a physical presence in Malaysia – whether in the form of rented or purchased premises, virtual office, service office or even a permanent residential address – before you're allowed to run your business.

However, if your business stool can't afford to fund a permanent business site, you may want to consider getting a virtual office, renting a virtual service office or co-working spaces, many of which are often located at some prestigious business locations in the country.

5) Human resources and employment
It is no longer news that Malaysia boasts a sizeable amount of labour force, many of whom are quite vast and versatile with an unparalleled ability to speak multiple languages, mainly English, Malay, Chinese, Tamil, Cantonese, Hokkien. Furthermore, there is also a great pool of talent from smaller cities in Malaysia who are hungry for the opportunity of better career prospects. Every business owner should be mindful of its obligations as an employer about employee-related statutory deductions and contributions (such as Employees’ Provident Fund, Social Security Organization, Human Resources Development Fund, and Monthly Tax Deductions), before hiring its first employees.

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