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TYPES OF
BUSINESSENTITIES
IN MALAYSIA
COMPANY LAW/ Z.Elias
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DIFFERENT TYPES OFBUSINESS ENTITIES
COMPANY LAW/ Z.Elias
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MeaningOne person running a business for himself. The business is the
person who runs it.
Formalities
No formal legal process to start business, BUT have to register his
business under the Registration of Businesses Act 1956.No agreement as he is dealing alone.
May begin business without formality.
Not required by law to expose information relating to hisbusiness dealings.
Laws
His business is subjected to personal laws, such as in contract andtort. In other words, all rights and actions are in his personalcapacity, thus he can sue and be sued in his name.
COMPANY LAW/ Z.Elias
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Assets and Liabilities
He is the owner of the business and is personally responsible forthose assets and liabilities of the business.
Liability unlimited.
Can use the capital in any way he wants to.
Borrowing Powers
No artificial restriction.
Termination
As the running of the business is a personal decision, a sole proprietormay start and end his business as he wishes.
COMPANY LAW/ Z.Elias
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DefinitionSection 3(1)PARTNERSHIP ACT 1961: Partnership is the relationwhich subsists between persons carrying on a business in commonwith view of profit.
Laws
The laws relating to Partnership in Malaysia is based on commonlaw, but PA 1961 makes certain provisions for partnerships
PA 1961 provisions may be set aside by the partners themselves.
Formalities
Partnership under PA 1961 is made up oftwo to twenty persons.
Must have some form of agreement by conduct, orally, or in writing
The partners as one unit is called a firm. The business is normallycarried out under a firms name.
Like a sole proprietorship, a partnership has to be registered under theRegistration of Businesses Act 1956.
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Assets and Liabilities
The assets of the partnership are collectively owned by the partners,and the partners are all personally liable for the debts and obligations ofthe firm.
PA 1961 makes all partners liable for the acts of other partnersunder certain circumstances.
Like a sole proprietorship, the partners are personally liable for actions
in contract and tort.
As for legal actions for or against the firm, it may be taken in the name ofa member of the partnership or the firm as a whole.
Borrowing Powers
Same as sole proprietorship.
Termination
Dissolving the partnership, can be either by agreement, byoperation of law, or according to the grounds under the PartnershipAct.
COMPANY LAW/ Z.Elias
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Definition
Companies are incorporated associations under Companies Act 1965.
Laws
Must be Formed and Registered under Companies Act 1965. The membership of a company is not less than two, and except for
private companies where it should not exceed fifty, it has no limit to thenumber of members of a Public Co.
Form
Once registered, the company is recognized at law as a person separatefrom people behind its formation.
A companys life continues even if all the members of a company have died.
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Assets and Liabilities
Co. can own property in its own name,
It is liable for its own debts and obligations, and itcan sue and be sued in its own name.
Cos assets belong to the company.
Dissolution
A company must be dissolved as according to theprocess set out under the Companies Act 1965.
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DIFFERENCES BETWEEN COMPANIESAND OTHER ASSOCIATIONS
in the formation and dissolution,
members liability,
enforcement of legal rights,
the transfer of interests in the company, the management and ownership of the
business,
the limits on the size of the organization,
the raising of capital and
the disclosure of accounts of companies.
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ADVANTAGES OF COMPANIESOVER PARTNERSHIPS
COMPANY LAW/ Z.Elias
COMPANY PARTNERSHIP
Can sue and be sued in its ownname.
Legal action on a partnershipgenerally through its members.
As one legal entity, also owns thecompanys assets.
Assets are generally collectivelyowned by all the partners.
Has the unique ability to createfloating charges over their currentassets to secure a loan.
Can only borrow by charging ontheir fixed assets.
May have limited liability. Partners liability is unlimited.
Continuous life until it is legallywound up, and does not dissolvebecause of the death of theirmember.
Death of a partner is a ground fordissolving the partnership.