SME DEFINITION

DEFINITION OF SME IN MALAYSIA

{ Definitions of SMEs is based on

two criteria, namely:
1. Number of employees; or
2. Annual sales turnover.
{ The definitions will apply for the following
sectors:
1. Primary Agriculture;
2. Manufacturing (including agro-
based);
3 Manufacturing-Related Services
3.
(MRS); and
4. Services ((includingg Information and
Communications Technology).
SUMMARY OF SME DEFINITION
Sector
Manufacturing
Primary Services Sector
(including agro-
agriculture (including ICT)
Size based) & MRS

Less than 5 Less than 5 Less than 5

Micro employees employees employees

Between
B t 5 & 19 Between
B t 5 & 50 Between
B t 5 & 19
Small employees employees employees

Between 20 & 50 Between 51 & 150 Between 20 & 50

Medium employees employees employees
 SUMMARY OF SME DEFINITION
Sector
Manufacturing
Primary Services Sector
(including agro-
agriculture (including ICT)
Size based) & MRS

Less than RM200,000 Less than RM250,000 Less than RM200,000

Micro

Between RM200,000 & Between RM250,000 & Between RM200,000 &

Small less than RM1 million less than RM10 million less than RM1 million

Between RM1 million & Between RM10 million Between RM1 million &
Medium RM5 million & RM25 million RM5 million
Characteristics
C a acte st cs of
o A Small
S a Business
us ess
{ Ownership
- Privately owned by individual or partners,
partners
typically registered as sole proprietorship,
partnership and private limited (Sdn. Bhd.)
company.

{ Management
- the business is managed and operated by the
owner

{ Resources - often has limited resources

{ Organizational Structure – flat and informal

{ Flexibility of Change
- more flexibility
y to adapt
p to changes,
g , vulnerable to
develop in the business environment
M
Management
t Function
F ti
{ Planning
reviewing current situation and setting future objective.

{ Organizing
allocating
ll ti resources and
d ensuring
i the
th team
t or department
d t t
have everything they need to do the work they have been
asked to do.

{ Leading
involves motivating staff, praising or criticising, setting
individuals' objectives and ensuring these are being achieved

{ Controlling
monitoring & controlling the company budgetary spend,
departments performance and cost efficiency of the work
implemented to achieve objectives.
 FORMS OF BUSINESS ENTITIES

Most common forms of business entities to start

with for SME in Malaysia are:

1. Sole proprietorship
2. Partnership
3
3. Private limited Company
4. Public Limited Company
 FORMS OF BUSINESS ENTITIES

S
Some characteristics
h t i ti off the
th three
th business
b i entities
titi
Sole Proprietor Partnership Private Limited
Company

Ownership Single, normally Owned by up to 20 Separate legal entity

owned by the partners (for – must have
entrepreneur professional buss. – members not
up to 50 partners) exceeding 50
members
Act Business Registration Similar to sole Companies Act 1965
Act 1956 (amended proprietor plus
1978) & Procedures Partnership Act 1961
of Business
Registration 1957
Income Tax Personal income tax Personal income tax Corporate tax

Cost of setting The lowest Second after sole The highest

proprietor compared to all three
entities
 FORMS OF BUSINESS ENTITIES

S
Some characteristics
h t i ti off the
th three
th business
b i entities
titi
Sole Proprietor Partnership Private Limited
Company

Formalities (in term Minimum formalities Minimum with few Complex

of setting up and formalities. Need to Memorandum of
dissolve business) have Contract or Association & Articles
Partnershipp of Association
Agreement

Submission of yearly Yes, but without Yes, but without Audited accounts
financial statements auditor validation auditor validation

Source of capital Limited Larger than sole Largest compared to

proprietor all three

Business liabilities Unlimited Unlimited Limited to the capital

members contribute
to the company
 FORMS OF BUSINESS ENTITIES

S
Some characteristics
h t i ti off the
th three
th business
b i entities
titi
Sole Proprietor Partnership Private Limited
Company

Life span of business Depends on the age Depends on the age Does not depend on
entities of owner & business partners & business age of members or
itself itself resignation of
members
Management Managed individually The responsibility can Handled by “Board of
by owner be divided equally Directors” appointed
among partners by shareholders

Business decision Very flexible as owner Must get agreement Under the preview of
making
ki process can react very quickly
i kl f
from all
ll members
b the
h Board d off Directors
i
(as stated in
Companies Act 1965
& Articles of
Association)
Profit (or Loss) All go to owner Shared among Distribute as
partners dividends, another
portion will go to the
company
 FORMS OF BUSINESS ENTITIES

Sole Proprietor Partnership Private Limited

Company

Registration of FORM A FORM A FORM 13A

business (FORM A1 for annual (FORM A1 for annual
renewal) renewal)

Certificate of FORM D FORM D FORM 9 (corporate

approved registration declaration
certificate, business
license)
Notification
N tifi ti off change
h FORM B FORM B FORM 44 ((notice
ti off
of business, partners, legal business
business address address)
FORM 24 (notice of
shares allotted)
Termination of FORM C FORM C
business