types of business entities

8/2/2019 Types of Business Entities

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TYPES OF

BUSINESSENTITIES

IN MALAYSIA

COMPANY LAW/ Z.Elias


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DIFFERENT TYPES OFBUSINESS ENTITIES



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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.



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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.



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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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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.



7/10COMPANY LAW/ Z.Elias

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.


8/10COMPANY LAW/ Z.Elias


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 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.

types of business entities

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