Form of Business Ownership

Form of Business Ownership
Form
2
a) Sole Proprietorship
b) Partnership
c) Cooperative
d) Limited Company
Sole proprietorships
 Owned and controlled by one individual only.

 Funding sources from savings, loans from relatives, government agencies,
financial institutions/own capital
 Low tax/Profit will be subject to personal income tax
 Registered at the business registration office at SSM (Companies Commission
Malaysia)
 Lower overhead costs
 Enjoy the overall business profit
 Flexible in terms of operating period
 Easy to change strategy / free to make decisions
 Quickly solve customer problems and complaints
 Easy to set up/ not many set up requirements
 Establish good relationships with customers
 Need to register within 30 days starting from the date of starting business
Advantages and disadvantages of Sole Proprietorship

Advantage Deficiencies
Easy to set up Managed individually
Not many conditions Hard to grow
Easy to manage-small size All workload is borne by the owner
The owner is free to manage the business Business does not continue
The decision is made by the owner The business closes if the owner dies
Low tax burden Difficult to share expertise
Owners only have to pay individual taxes The owner has unlimited liability
Sharing
 Collaboration between 2 or more individuals

 Agree to run a business together
 Share capital, expertise, experience and knowledge
 The partners will bind the agreement through the partnership agreement.
Content of the partnership agreement
 Firm name
 Names of all partners
 Rights and responsibilities of partners
 Type and place of business
 Distribution of profit and loss
 How to run a business
 How to terminate a business
Sharing features
 The number of partners ranges from 2 to 20 people

 For certain professions (doctors, lawyers, accountants) it can be up to 50
people
 Subject to the Business Registration Act 1956
 Share capital/expertise/experience/knowledge
 Partners enter into an agreement through a partnership agreement
Types of Partners and Liability
1. Limited partners
 liability to the extent of the capital invested only
 no business management authority
 can review business records and accounts
2. Sleeping partners
 unlimited liability
 not active in management
 contribute capital only
3. Common partners
 entitled to manage business
4. Active partners
 active in management
 paid salary
5. Nominal partners
 just use the name
 do not withdraw capital
Responsibilities of partners
 Protect the interests of other partners

 Protect trade secrets
 Advancing business (find resources and opportunities
 Solve business problems (give ideas and opinions)
3 Types of Sharing
1) Ordinary Partnership- Number of partners between 2 to 20 people

2) Limited Partnership- Number of partners between 2 to 50 people
3) Limited Liability Partnership- Number of partners is 2 people and there is no
maximum limit.
Advantages and disadvantages of Sharing

Limited capital-difficult to grow compared to
Capital can be raised from sykt
partners
limited
The business does not continue - if a partner
Easy to set up - not many rules
dies, the business must be dissolved
Unlimited liability-personal assets used for
Share expertise
pay debt
Limited Company
 Registered with ssm under the companies act 1965

 Founded by a group of individuals
 The purpose of doing business
 Consists of board members and shareholders
Limited Company Membership
1. Members of the Board of Directors

 the most senior will be appointed as managing director
 Another ALP will be appointed as executive director
2. Shareholders
 shareholders
 shareholder rights:-
a) vote in the annual general meeting
b) give an opinion about the company's activities and finances
c) question the company's policy
d) vote/accept/reject other ALP proposals
e) vote to appoint ALP
Two types of limited company:
1) Private Limited Company (Sdn. Bhd.)
2) Limited Public Company
Company Features Sdn. Bhd
 Subject to the companies act 1965

 Members range from 1 to 50 people
 Shares cannot be bought and sold on the stock exchange
 Transfer of ownership of shares must be approved by the ALP
 Big capital
 Additional capital through share issuance
 Limited liability
 If bankrupt-loss to the extent of invested capital only
 Personal property is not used to pay debts
 Most shareholders can control the company.
Big capital Limited share offer-max 50 people
Limited liability High tax burden-company tax
Company affairs are confidential Shares cannot be transferred at will
Characteristics of Public Limited Company
 Members between 2 people to no maximum limit

 Shares are sold on the stock exchange
 If someone buys shares in large quantities, the original shareholders bear the
risk of losing control of the company.
Greater capital The company body process is complicated
The economy of large-scale enterprises High tax burden-company tax
Limited liability Separate owner and management
Eternal existence There is no secrecy
Cooperative
 Established by a certain group of people

 Voluntarily
 Goal-to protect the interests of its members
 The Concept of “Common Property”
 Example:
(a) School cooperative whose members are students and school staff
(b) Fisherman's cooperative whose members are fishermen
(c) Farmer's cooperative whose members are farmers
Characteristics of Cooperatives
 Carry out economic activities to meet the needs of its members

 Not political
 Managed based on acts, regulations and cooperative bylaws
 Capital contributed by members
 Members can make decisions in business
 Limited liability
Two aspects of cooperative membership
1. Number of members
 The number of members is at least 50 people

 Each member must buy share capital
2. Member rights
 Voting at the annual general meeting

 Involved in the decision making process
 Take back the share capital when leaving the cooperative
 Receive dividends
Advantages and disadvantages of cooperatives

Limited liability Low rate of return
Democratic administration-members Management and owners are separated-
have no
voting rights incentive to advance the business
Limited share ownership-no more than
Exempt from tax
20%
Rebate-incentives for cooperative
Shares are not transferable
customers

Form of Business Ownership

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Form of Business Ownership

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Form of Business Ownership

Form of Business Ownership

 Owned and controlled by one individual only.

Advantages and disadvantages of Sole Proprietorship

 Collaboration between 2 or more individuals

Content of the partnership agreement

 How to terminate a business

 The number of partners ranges from 2 to 20 people

 Partners enter into an agreement through a partnership agreement

Types of Partners and Liability

 liability to the extent of the capital invested only

 no business management authority

 can review business records and accounts

 do not withdraw capital

 Protect the interests of other partners

 Solve business problems (give ideas and opinions)

1) Ordinary Partnership- Number of partners between 2 to 20 people

Advantages and disadvantages of Sharing

 Registered with ssm under the companies act 1965

 Consists of board members and shareholders

Limited Company Membership

1. Members of the Board of Directors

Two types of limited company:

1) Private Limited Company (Sdn. Bhd.)

2) Limited Public Company

Company Features Sdn. Bhd

 Subject to the companies act 1965

 Most shareholders can control the company.

Characteristics of Public Limited Company

 Members between 2 people to no maximum limit

 Established by a certain group of people

 Carry out economic activities to meet the needs of its members

Two aspects of cooperative membership

 The number of members is at least 50 people

 Voting at the annual general meeting

Advantages and disadvantages of cooperatives

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