Forms of Business Entities and RegulationsABDM3314 EntrepreneurshipLecture #10
Forms of Business EntitiesBusiness in Malaysia can be registered under the following Acts:•Business Registration Act 1956 ( Amendment 1978) and Procedures of Business Registration 1957There are two types of businesses that can be formed under this Act:1.Sole Proprietorship2.Partnership
Forms of Business EntitiesCompany Act 1965: •There are three types of companies:a. Limited Company by Guaranteeb. Limited Company by Share•Private Limited Company (Sendirian Berhad)•Public Limited Company•Foreign Owned Companyc. Unlimited CompanyOther Acts: (examples)•Cooperation Act 1948•Parliamentary Act or State (Govt) Enactment
Forms of Business Entities (Cont.)•Sole Proprietorship, Partnership and Private Limited Company are the most common forms of business entities registered by small and medium enterprises ( SMEs).
Properties/Characteristics of Sole Proprietorship •Formed under the Business Act 1956 ( Amendment 1978).•Solely owned by one person.•Where management rests on that person whose liability is unlimited.•Simplest business structure.•It requires small amount of capital to start.•Does not mean has to be small.–It may have any number of employees and/or amount of sales revenue•Name of the business can be the name of owner or any other name.•Examples: Ah Chong Tailor, Mei Beauty Salons, Pak Lah Restaurant, Kak Jah Mini Market.
Advantages of Sole Proprietorship•Easy to manage, owner make decision.•Easy to form and dissolve with minimum formalities (with minimum procedure for registration).•Enjoys a certain flexibility. Owner can react quickly and positively regarding changes in the business.•Not subjected much to government rules and regulations. –Eg.: giving share to/hiring of Bumiputra.•Validation by qualified auditor not required.•Nobody will share the rewards or profit.•The owner pays income tax based on his total individual income.
Disadvantages of Sole Proprietorship•Limited source of capital that could limit the business activity.•Future development is limited, depending on the capability of owner.•Owner is solely responsible to carry out all the tasks.•Life span of the business is dependant on the owner. –Eg.: Business will be dissolved if the owner pass away.-If someone wants to continue business after the owner pass away, it has to re-registered.•The liability is unlimited. –Eg.: If business assets are not sufficient to cover debts, then owner must settle the debts with his personal assets.When business becomes bigger or requires more partners, it needs to change to other forms of business entities.
Properties/Characteristics of Partnership•2 or more partners but not exceeding 20 persons/partners.