How to Start an Online Business in Malaysia
When 400 online businesses in Malaysia were charged for not registering with the Companies Commission of Malaysia (SSM) in 2010, it stirred up the online business community.
In fact, it created more confusion and, even up until now, questions such as, "Why should I register as a company to do business online when I only do it part-time or as a hobby?" and "My income is through advertisement on my blog. Do I need to register?" are still being asked.
All online businesses need to comply with the Malaysian Consumer Protection (Electronic Trade Transactions) Regulations 2012 (I discuss what businesses need to do to comply with this regulation in a previous article, Malaysian Regulation and Consumer Protection of eCommerce and Online Business). This includes businesses that sell products through social networking sites such as Facebook and Instagram.
It is an offense punishable under the Registration of Business Act if a business fails to comply. The maximum fine is RM50,000 (about $13,000 USD) or up to two years in jail. This is not a minor infraction, and for people that are trying to supplement their existing income, it is not worth the risk.
The cost of registration is only RM30, and the registration is a simple process. Businesses will also gain other benefits, such as access to microloans and insurance coverage.
To start an online business in Malaysia, you need to:
- Register with MMC if your business activity relates to the telecommunication sector.
- Register with CCM as a business enterprise, no matter what.
- Get a domain name, a hosting account, and a properly designed website. If you want to try out an online business before spending additional money on a website, you can still sell through Facebook, eBay, lelong.com.my, mudah.my, your blogs, and other social-media sites.
- Register and declare income with the Inland Revenue Board of Malaysia.
See below for a detailed write-up for each of the above steps.
Do I Need to Register as a Business Entity to Do Online Business?
I checked with both the Malaysian Communications and Multimedia Commission, and the Companies Commission of Malaysia to confirm these answers.
Clarification from the Malaysian Communications and Multimedia Commission (MCMC)
I spoke with a representative in the Licensing Department and asked him if someone who is doing business online needs to register with MCMC. His answer was no unless their business activity is related to the telecommunications industry. An example of a business that would need to register is one selling SMS services or networking services. If you are doing business in this industry, then you need to register.
Clarification from Companies Commission of Malaysia (CCM)
I also spoke with a representative in the customer service department at the CCM to get answers to my questions:
- "Do I need to register as a business entity to do online business?" Yes.
- 'What if my income is through Google AdSense (through my blog or other articles that I write)?" You still need to register.
- "What if I do this activity part-time, like selling on an ad-hoc basis through eBay, lelong.com.my, etc. or selling cookies during festive seasons? Do I still need to register?" Yes.
Her rationale is that as long as there is income, you need to register. This applies even if your income is through blogging and writing articles online. For these categories, her suggestion was to register as a sole proprietor, which is the cheapest form of registering a business.
She further adds that doing online business in Malaysia is relatively new compared to other developed economies, such as the UK, Australia, and the USA. Regulations and specific requirements are in place to protect potential buyers from any possible fraud. Businesspeople should also be aware of the code of ethics and of their responsibilities.
However, she did agree that even if someone were to register their business, it doesn't mean the consumer is fully protected.
Anyway, with all these explanations, I still feel that the above rationale doesn't quite apply to bloggers and writers who earn through PPC or other similar programs. And for bloggers to register as a business entity is really weird. Unfortunately, laws are laws and we have to comply, no matter how ridiculous it may sound!
In addition, and this is the best part, it is also your responsibility to register and declare your income with the Inland Revenue Board of Malaysia.
Step #1: If Needed, Register With the MMC
Step #2: Register a Company Name and Business with CCM
For guidelines on which business entity you want to register your business as and how to register a company name, please refer to Companies Commission of Malaysia's website (below are links based on which type of entity you will be registering as):
- Starting a Sole Proprietorship/Partnership
- Limited and Unlimited Companies: Application for Name Search, Incorporation of Company (Local), and Incorporation of Company (Foreign)
It is recommended that you visit their office in person to register, which takes one hour for business registration and one day for company registration. You can also do everything online.
Step #3: Set Up Your Website/Online Store
I assume that you already know what products you will be selling online, that you've done your research on your competitors, that you know what will be your unique selling proposition, and that you are ready to start an online business.
Get a Domain Name
If you prefer to sell your products through a dedicated website, then you'll need to obtain a domain name.
You can either buy an existing domain name or register a new domain name for your website. Alternatively, your web hosting service company or your website designer may also provide this service.
There are several companies in Malaysia that will sell ready-made domains or register a new domain name with any of the following extensions:
You can find these companies through an Internet search and make an appointment to meet with them to discuss your requirements. Remember to choose a reliable company.
Find a Company to Host Your Website
Your website needs to be hosted on a web server in order for people to view and buy your products. You can either choose an independent company for the web hosting service, buy a package provided when you buy your domain, or buy a package through your website designer.
Here are the criteria to keep in mind when you're looking for a web hosting service:
- What is the storage capacity?
- Do they offer a domain-based email address?
- What is the percentage of time the server is up and running?
- What's the server security like?
- Do you have the ability to host a blog and feedback forms?
Design Your Website
You can buy a ready-made website or have one designed if you have specific requirements. Your website must at least offer the ability for customers to put products in a shopping cart and for you to edit it as needed. It should also have a well--designed layout.
Most people don't have the patience to read websites, so they scan them. Be brief and make your homepage easy-to-read. As always, ask for a demo before deciding.
Shopping Cart Software
A positive and easy online shopping experience is crucial for online sales. Even if your product is priced well, if the buying process is slow and difficult, you may not get repeat customers.
Remember to ensure that your website has an easy-to-read layout, easy-to-use shopping elements, several payment options, and reasonable shipping and delivery options and rates. Check out a demo before purchasing a shopping cart software.
In Malaysia, you can sign up with companies such as PayPal Malaysia, iPay88, or MOLPay (formerly known as NBePay) as a payment gateway for your sales transactions. These are trusted and respected companies, and potential buyers will have no hesitation in buying products from your site.
iPay88 and MOLPay also accept Malaysian Online Bank transfer to cater to customers who do not have a credit card. You may also opt for direct debit via internet banking such as Maybank2u, but a potential buyer may be hesitant to transfer their money before receiving the goods if they are not familiar with your company.
If your shipping costs are high and delivery times are long, these will also deter potential buyers from buying from you. If your sales volume is high, you should negotiate with Pos Malaysia or another courier company to ensure your customers have a positive experience.
Selling Online Without a Website
If you don't want the hassle of having a website, you can sell items on Amazon, eBay Malaysia, Etsy Malaysia, Facebook, lelong.com.my, and even on your blog site.
Whether you sell through a dedicated website or otherwise, you need to get traffic. If there's no traffic, there will be no buyers. Examples of how you could get traffic to your site are:
- Register with search engines such as Google and Yahoo.
- Online advertisements on Google or Facebook ads
- Offline marketing through flyers, billboards, media ads, and direct mailing
- Publish an email-based newsletter.
- If you have a blog, list it in major blog directories.
Step #4: Register and Declare Income with the Inland Revenue Board
Lastly, you need to register and declare your income with the Inland Revenue Board of Malaysia.
This is the simplest of all the procedures, and I will not be detailing the steps here. The Malaysian Inland Revenue Board has guidelines on taxation for eCommerce. This document explains what is taxable for e-commerce income derived from inside and outside Malaysia and other scenarios.
Why You Should Start an Online Business
As I mentioned, CCM requires everyone to be registered in order to do business online. When we consider the huge potential of e-commerce in Malaysia, registering as a business entity is a small issue. In fact, it's a way to gain the trust of your potential buyers.
Open Your Business to a Bigger Market
If you have an existing brick and mortar store, consider expanding to a much wider market by starting an online business, as the growth potential in Malaysia is huge.
If you are doing it part-time or just earning through Google AdSense, don't be disheartened by the need to register. Your small venture might grow into something big, and as a registered business entity, it's easier to get additional funding, if required.
To quote a Chinese proverb: “All cats love fish but fear to wet their paws.” Don't be afraid to venture into this new business environment.
Some Tips on Advertising Your Business
To help you get started on your business, here are some tips on advertising:
- Who are your consumers? Market your products to people who will most often visit your site and buy your stuff. You cannot advertise to everybody because it will be expensive. To be successful, your marketing and advertising efforts must capture the attention of people that you intend to sell to (e.g. students, teenagers, mothers, etc).
- To connect with your customers, your advertising and marketing style and concept must tell a story and evoke their emotions.
- When you are new to this business and have very limited funds, the above tips may be hard to figure out. Experiment with a few styles, and do your initial marketing through FB, Instagram, email and forum sites (be an active contributor before you start to insert your ad. Otherwise, it will get removed, and you'll get a bad reputation!)
These are just some examples to help you get started. Good luck!
Questions & Answers
© 2012 Mazlan