How to Register a Business in the US from Malaysia

Step 1: Benefits of starting your US business from Malaysia

Starting a US business from Malaysia offers numerous benefits, making it an attractive option for enterprising individuals. One of the primary advantages is access to the robust and dynamic US market, which is among the largest in the world. By tapping into this vast market, Malaysian entrepreneurs can significantly expand their customer base, increase sales, and enhance their global footprint. Moreover, the US business environment is characterized by strong legal protections, well-developed infrastructure, and a culture that fosters innovation and entrepreneurship, all of which are conducive to business growth and success.

Additionally, Malaysia's strategic geographic location and established trade relationships with the US further enhance the potential for business success. Entrepreneurs can leverage Malaysia’s advanced logistics and shipping capabilities to streamline their supply chain management and reduce costs. The time zone difference also allows for extended business hours, enabling companies to operate virtually around the clock. Furthermore, the availability of skilled and affordable English-speaking talent in Malaysia makes it easier to manage customer service, marketing, and other essential business operations efficiently. This combination of factors creates a compelling case for Malaysian entrepreneurs looking to establish and thrive within the US market.

Step 2: How to start your US business from Malaysia

Starting a US business from Malaysia involves several steps that are crucial for ensuring a smooth establishment. Firstly, you need to decide on the type of business entity you wish to form, such as an LLC (Limited Liability Company) or a corporation. Each type has its own set of advantages and obligations. After selecting the business structure, the next step is to choose a unique business name and register it with the relevant state authorities in the US. Many states offer online registration processes to facilitate international entrepreneurs.

Another important step is obtaining an Employer Identification Number (EIN) from the IRS, which is necessary for tax purposes. Additionally, it is advisable to open a US bank account to manage your business finances effectively. You may also need to comply with various federal, state, and local regulations, which could include acquiring specific licenses or permits based on the nature of your business. Engaging the services of a US-based attorney or business consultant can greatly assist in navigating the legal and logistical aspects of establishing a business in the United States from Malaysia.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Malaysia

Understanding Compliance Requirements for Running a US Business in Malaysia

Running a US business in Malaysia involves navigating several compliance requirements specific to the Malaysian legal and regulatory landscape. Here are the key considerations to ensure you remain compliant:

1. Business Registration

Any foreign company planning to operate in Malaysia must first register with the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM). The typical forms of business entities include:

• Private Limited Company (Sendirian Berhad or Sdn Bhd)
• Public Limited Company (Berhad or Bhd)
• Branch Office
• Representative Office

2. Foreign Ownership Regulations

Malaysia generally allows 100% foreign ownership in most sectors but there are restrictions in certain industries. These include:

• Telecommunication
• Transportation
• Financial Services

It's essential to verify the specific foreign ownership limits applicable to your industry.

3. Taxation

US businesses must comply with Malaysian tax laws. Relevant taxes include:

1. Corporate Income Tax: Generally, the rate is 24%. There are reduced rates for small and medium-sized enterprises (SMEs).
2. Withholding Tax: Applies to payments made to non-residents for services like royalties and interest.
3. Goods and Services Tax (GST): Malaysia replaced GST with Sales and Service Tax (SST). Ensure you're up-to-date on the applicable taxes.

4. Employment Laws

US businesses must adhere to Malaysian employment laws. Important areas include:

• Minimum wage requirements
• Employment contracts and terms
• Employee benefits and protections
• Termination procedures

The Employment Act 1955 and other related legislations govern these aspects.

5. Licensing and Permits

Depending on your business activities, you may need specific licenses and permits. Examples include:

• Manufacturing License for production companies, issued by the Malaysian Investment Development Authority (MIDA)
• Retail License for businesses engaging in retail sales
• Construction Permit for building projects, which requires conformity to local regulations

6. Data Protection and Privacy

Adhering to the Personal Data Protection Act 2010 (PDPA) is crucial for businesses handling personal data. This includes:

• Securing personal data from unauthorized access
• Ensuring the accuracy of data collected
• Providing clear notices about data collection and usage

7. Intellectual Property (IP) Laws

Protecting IP rights is vital. US businesses should ensure their IP is registered with the appropriate local authorities, such as:

• MyIPO (Intellectual Property Corporation of Malaysia) for trademarks, patents, and copyrights

Understanding these compliance requirements will facilitate the successful operation of your US business in Malaysia while minimizing legal risks.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Malaysia

Understanding Tax Obligations for Running a US Business in Malaysia

Expanding a US business to Malaysia can be an exciting venture, but it is crucial to understand the local tax obligations to ensure compliance and optimize financial operations. Here are some key considerations to keep in mind:

1. Corporate Tax Rate

Malaysia has a tiered corporate tax rate. Resident companies are taxed at 24% on their worldwide income, but for small and medium-sized enterprises (SMEs) with a capital of no more than RM2.5 million, the first RM600,000 is taxed at 17%, with the remaining balance being taxed at 24%.

2. Withholding Tax

Withholding taxes apply to various payments made to non-residents, including interest, royalties, and services. The rates can vary, generally falling between 10% and 15%. Double Taxation Agreements (DTAs) between Malaysia and other countries, including the US, can alter these rates.

3. Double Taxation Avoidance Agreement (DTAA)

The DTAA between the US and Malaysia aims to prevent double taxation on the same income and offers tax relief and exemptions in certain circumstances. Businesses should ensure they understand the provisions of the DTAA to take full advantage of these benefits.

4. Goods and Services Tax (GST)

GST in Malaysia has been replaced by the Sales and Service Tax (SST) as of September 1, 2018. The SST comprises two elements: sales tax, imposed on taxable goods, and service tax, levied on taxable services. It is essential to determine whether your business activities are subject to these taxes and comply accordingly.

5. Transfer Pricing Regulations

Transfer pricing rules in Malaysia require that transactions between related parties be conducted at arm's length. Proper documentation must be maintained to justify the pricing strategies employed, and failure to do so can result in significant penalties.

6. Tax Incentives and Exemptions

Malaysia offers various tax incentives to attract foreign investment, such as the Pioneer Status and the Investment Tax Allowance. These incentives provide tax exemptions or reductions for qualifying activities and investments. Research and development activities may also qualify for additional benefits.

7. Filing Requirements and Deadlines

Companies in Malaysia are required to submit annual tax returns electronically. The standard fiscal year runs from January 1 to December 31, but companies can apply for a different tax year. Estimated tax payments are also required, typically in the ninth month of the fiscal year.

Understanding and complying with these tax obligations is crucial for seamless and successful business operations in Malaysia. Consulting with tax professionals familiar with both US and Malaysian tax laws can provide valuable guidance and ensure adherence to all requirements.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country