Tuesday, December 6, 2011

Advantages & Disadvantages of Sdn Bhd

I noticed that currently there are many professionals run their business under Sdn. Bhd. including one of the newly open clinics in front of my house. Similar to Land Survey, let us see what is the advantages & disadvantages of having Sdn Bhd. set up which commented on Personal Money Magazine on December 2011.

Advantage
  1. Set up with a paid-up capital of RM2.5 million or less, it will enjoy a preferential tax rate of 20% for the first RM500K of chargeable income.
  2. With the Sdn Bhd entity, you will than be an employee serving customers. You will draw a salary to the normal stautory deductions such as EPF & SOCSO.
  3. You can structure a compensation package that includes benefits such as a company car, driver & handphone), which is taxed at a preferential amount.
  4. The Sdn. Bhd. is a limited liability company. As such the risk to the shareholder is limited to the amount of capital he has injected into the company. Land Surveyor faces quite lot of risk and possible being sued is high and at the moment, some land surveyor also buy insurance to protect the company.
Disadvantage

  1. There are compliance requirements such as the filing of annual audited accounts and employment of a company secretary. There are annual audit fees, tax filing fees & company secretarial fees.
  2. Unlike in a sole proprietorship, all transaction in the Sdn. Bhd. will have to be properly accounted for. All funds belong to the company and not to the share holders.


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