Making solopreneurship work for you (Malaysia edition)

You need to eat, sleep and live, and these cost money. Working no longer guarantees income, so you need to make sure you are spending only on what is necessary. Determine the minimum spending to give yourself more time.

Regardless of how much savings you have, the goal is to make the first income as soon as possible. Admin job, web design, bake cookies, anything you can do. Give every product or service you can sell 2 to 3 weeks, and see if you can make a sale. Switch to the next one if there are no sales. If you made a sale, then try to repeat the same sale a few times.

Having a group of customers that always choose to buy from you in a sea of competitors will give you a massive amount of peace. Customers tend to choose based on price, quality and service. In a world of contract manufacturing and AI, we have to compete on the 4th paradigm - belonging. Join a community whose goal is to uplift all its members, such as 27Gems Club.

The fortunate thing is that these laws do not get updated often. Some have not changed since the formation of Malaysia.

The first one is that every person that runs a business must register with SSM (Suruhanjaya Syarikat Malaysia). This comes from Registration of Businesses Act 1956 Section 5(1).

There are 5 types of business entities you can choose.

Non-corporate: the sole proprietorship and the partnership.

Corporate: the limited liability partnership (LLP), the private limited company (Sdn Bhd) and the public limited company (Berhad).

The deciding factor to choose between non-corporate and corporate are tax rates.

There are a few key timeless things to memorise from here.

[1] Taxes are applied on profits. Profits are what is left after revenue subtract business expenses.

This is why individuals only pay taxes on the amount after tax reliefs are applied. It follows the same logic.

[2] Business expenses are amounts that need to be spent to earn revenue

The official wording is "all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of gross income from that source". The official wording is precise enough to handle very complicated revenue, but for us solopreneurs, it is just as simple as money we have to spend to earn money. "Person" in the act refers to legal persons, which are individuals like you and me, and corporate companies.

[3] Individuals pay 0% - 30% tax, Corporates pay 15% - 24% tax

The tax rate to be applied depends on the amount of profits you have. At a glance, we can see individual tax rates are better at lower profits, but worse at higher profits.

That line is around RM200,000 revenue per year. That is when you start to see a difference of several thousand ringgit.

After subtracting typical expenses of around RM56,000 per year (for rental, phone number, transportation, company fees etc.) and RM95,000 for personal salary, the total amount of taxes to pay if you use an LLP/Sdn Bhd is RM11,000.

You will pay RM21,000 in taxes when filing as a sole proprietor entity (Form B).

Start with a sole proprietorship, then move to LLP/Sdn Bhd at the right time.

27Gems provides an LLP Concierge Service that covers your LLP needs from day 0 onwards.

For example, medical doctors need to comply with medical regulations. Opening a shop requires compliance with local council regulations. These are outside the capability of general advice, so please run a quick search for the kind of product/service you are selling.

If you file taxes in Malaysia, and you worked on one project while in Singapore, that income is foreign-sourced, because the income is manifested while you are physically outside of Malaysia. This is to be differentiated from exports, where you made income while being physically in Malaysia - this is foreign income (defined as physically performed in Malaysia, but income earned from overseas). All income must be converted to Malaysian ringgit for tax filing purposes.

Foreign-sourced income is not to be included in the tax calculations until 31 December 2026. After this date, the foreign-sourced income must stay outside of your Malaysian bank accounts if you want to continue keeping it excluded in the tax calculations.

An LLP can deduct a wider variety of expenses. Payments to the owner of a sole proprietorship are not business expenses, and expenses that benefit the owner are not allowed either. Entertainment needs strong evidence of business use.

The biggest advantage of an LLP is that your contributions to EPF can be considered a business expense. Most 27Gems members do this.

A business that is steady, resilient, and safe runs on strategy, policies and frameworks.

While it is true that you are your own boss, you are playing two roles now: the "boss you" and the "staff you".

The "boss you" decides the strategy, policies, frameworks that the "staff you" follow and execute.

A basic business strategy involves determining the target customer, what to sell, where to sell and how to sell.

Let's illustrate with a widely known business sector, the car business.

Technically everyone can buy a car, but brands still determine who their target customers are.

Just look at Proton, Perodua, Honda, Toyota, BMW, and Porsche, and we can clearly see they are selling to different customers.

Selling to rich customers requires a car that is well designed, have advanced features, and exclusive pricing.

The place to sell to rich customers has to be in specific affluent areas.

In the same customer market with many competing businesses, Honda and Toyota sell differently from each other by focusing on different aspects.

Again, everyone can buy a car. But a steady, resilient, and safe business chooses who it sells to.

You need to make that choice if you want to have a decent living from solopreneurship.

It can feel like there are a lot of learning and thinking to do. And you do not have time.

Join 27Gems' support groups. You can apply as you learn.

When you Do-It-Yourself, you need to be 9 professionals-in-one

[1] The Company Secretary who does business laws and regulations compliance

[2] The Accountant who does bookkeeping and accounting

[3] The Tax Agent who plans and files taxes

[4] The Human Resources officer who calculates payroll and submits monthly EPF, SOCSO and PCB, and yearly Form E

[5] The Lawyer who ensures proper signed paperwork and legal documentations

[6] The Business Coach who makes sure you are keeping to your strategies, and adapting them to real-life situations

[7] The Sales and Marketing Specialist who decides the sales strategy, advertising and sale deliveries

[8] The Operations Manager who decides, tracks and reports on KPIs to improve sales and optimize expenses

[9] The Business Development person who develops collaborations with suppliers, customers and partners

It is a lot of work. 27Gems has built tools such as Jade and programmes such as Support Group to make your journey easier.

When your business is starting to work, you will soon find that you do not have enough hours in a day to do everything.

In the previous section, we have outlined that you are at least several employees in one now. So what do you do?

At this stage, you have cash coming in, and more cash can come in, but you do not have time.

It is time to convert some of that cash into time.

Every 1 hour task you need to do can be converted into a cash equivalent.

For example, 1 hour of bookkeeping is worth RM15, or 1 hour of business development is worth RM2,000.

It is better that you pay RM15 to someone else to do bookkeeping, and take the 1 hour to do business development.

You will end up RM1,985 better off. Or you can choose to rest, which may be worth more as saved future medical bills.

Instead of paying a person, you can pay for a tool too.

27Gems provides many free and paid tools such as Jade and Trader's Network for you to reclaim your time.

The moment we start making some extra cash, it is time to switch and trade wealth for health.

Visit your doctor for a general review, meet your dentist, pick up some exercise classes, eat nutritionally better.

27Gems is working on a wellness programme of activities. We aim to organise more value for money, solopreneurs for solopreneurs style.