Advantages
1. Limited liability: One of the most significant benefits of becoming a Private Limited Company is that the shareholders’ liability is limited to the amount they have paid or agreed to contribute. For example, if a shareholder invests RM100,000 in a company in exchange for a 10% shareholding and the company eventually goes bankrupt, the shareholder is unlikely to recover his or her investment in the worst-case scenario. If you have issued a personal assurance, you are not legally responsible for the company’s liability as a shareholder or even a director.
2. Separate Legal Entity: The corporation has its own legal entity. It is ‘immortal,’ meaning it can be passed down through the generations or sold.
3. Lower tax rate: The standard corporate tax rate is 24%. For small and medium enterprise (SME) with paid up capital not more then RM2.5 million, the first RM500,000 Chargeable Income will be taxed at 17% and subsequently will be taxed at 24%.
Disadvantages
1. Higher cost: Private Limited Company has more compliance responsibilities as compared to Sole Proprietorship. You will need to appoint Company Secretary and file annual returns and financial statements to the Companies Commission of Malaysia (SSM).