TYPES OF BUSINESS ENTITIES IN MALAYSIA
COMPANY LAW/ Z.Elias
DIFFERENT TYPES OF BUSINESS ENTITIES
COMPANY LAW/ Z.Elias
Meaning One 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 his business dealings. Laws His business is subjected to personal laws, such as in contract and tort. In other words, all rights and actions are in his personal capacity, thus he can sue and be sued in his name.
COMPANY LAW/ Z.Elias
Assets and Liabilities He is the owner of the business and is personally responsible for those 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 proprietor may start and end his business as he wishes.
COMPANY LAW/ Z.Elias
Definition Section 3(1) PARTNERSHIP ACT 1961: Partnership is the relation which subsists between persons carrying on a business in common with view of profit. Laws The laws relating to Partnership in Malaysia is based on common law, 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 of two 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 normally carried out under a firms name. Like a sole proprietorship, a partnership has to be registered under the Registration of Businesses Act 1956.
COMPANY LAW/ Z.Elias
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 of the firm. PA 1961 makes all partners liable for the acts of other partners under 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 of a 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, by operation of law, or according to the grounds under the Partnership Act.
COMPANY 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 the number of members of a Public Co.
Form Once registered, the company is recognized at law as a person separate from people behind its formation. A companys life continues even if all the members of a company have died.
COMPANY LAW/ Z.Elias
Assets and Liabilities Co. can own property in its own name, It is liable for its own debts and obligations, and it can sue and be sued in its own name. Cos assets belong to the company.
Dissolution A company must be dissolved as according to the process set out under the Companies Act 1965.
COMPANY LAW/ Z.Elias
DIFFERENCES BETWEEN COMPANIES AND 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.
COMPANY LAW/ Z.Elias
ADVANTAGES OF COMPANIES OVER PARTNERSHIPS
COMPANY Can sue and be sued in its own name. As one legal entity, also owns the companys assets. Has the unique ability to create floating charges over their current assets to secure a loan. May have limited liability. Continuous life until it is legally wound up, and does not dissolve because of the death of their member. PARTNERSHIP Legal action on a partnership generally through its members. Assets are generally collectively owned by all the partners. Can only borrow by charging on their fixed assets. Partners liability is unlimited. Death of a partner is a ground for dissolving the partnership.
COMPANY LAW/ Z.Elias
