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Business Entity and Classification of Company - Coggle Diagram
Business Entity and Classification of Company
Types of Business Organizations/
Entities in Malaysia
Company
An incorporated association
Once it is formally incorporated, it becomes a separate legal person.
Section 2 of the Act defines a company as a company incorporated under the Companies Act 2016 or under any corresponding previous law.
Since the company has its own personality, it can enter into a legal contract. It can sue and be sued in its own name.
Limited Partnership
Limited Liability Partnership
Available throughout Malaysia
Hybrid concept of partnership and company
Limited Liability Partnership (LLP) is an alternative business vehicle regulated under the Limited Liability Partnerships Act 2012 which combines the characteristics of a company and a conventional partnership.
Limited Partnership
Available only in Labuan
2 Types of Partners
General Partners
Limited Partners
Partnership
Profits shall be shared among partners
This form of set-up is usually for professional firms such as lawyers and auditors
Two or more persons to carry out similar nature of business with the agreement
Section 3(1) defines partnership as follows: Partnership is the relation which subsists between persons carrying on a business in a common with a view of profit
Minimum number of persons is two persons and maximum number is 20 according to s.14(3) of the Companies Act 1965 (Revised 1973).
Sole Proprietorship
simplest structure of business– Formed, managed and owned by one individual with no distinction between the business and the owner
Unincorporated- Not a legal entity. -no legal distinction between the owner and the business
Unlimited liability- the owner shall be liable for all the business debts
Use own to resources to provide skill, labor, capital, and other resources to run the business.
Less regulated- No special rules governing sole proprietorship.
If not registered, sole proprietor has committed an offence for which he is liable under Section12 of the Act to a fine of not exceeding RM50,000 or imprisonment of a term not exceeding two years or both
Classification of Company
Public Company
All the companies that are listed in the Bursa Malaysia Securities Berhad must be public companies with share capital.
Section 2 : “public company means a company other than a private company”.
Limited and Unlimited Company
Limited Company
Company limited by guarantee
Section 10(3): the liability of its members is limited to such amount as the members undertake to contribute in the event of it being wound up.
This type of company is formed for non-profit-making objectives such as promoting charity or any similar activity useful to the community not involving the acquisition of gains by the company.
Being a public company the company’s name shall have the word “Berhad” or “Bhd.” as provided under Section 25(1)(a) of Company Act 2016.
Company limited both by shares and guarantee
Section 12: no company shall be formed as, or become, a company limited by guarantee with a share capital.
Company limited by shares
Section 10(2): the liability of its members is limited to the amount, if any, unpaid on shares held by the members.
The names of such companies must have the words “Sendirian Berhad” or “Sdn. Bhd.” for private companies, and “Berhad” or “Bhd” for public companies
Unlimited Company
Section 10(4) : a company formed on the principle that no limit is placed on the liability of its members.
It may or may not have a share capital. If there is no share capital mentioned in the constitution, then the members are liable to meet all the debts and liabilities of the company.
Section 11(3) : an unlimited company shall either be a private company or a public company.
Private Company
Section 42(1): A company limited by shares having not more than fifty shareholders may be registered as a private company.
Section 42(2) : A private company shall restrict the transfer of its shares.
Section 43 (1): Private companies are prohibited to offer shares or debentures or invite to deposit money.
Exempt Private Company
Section 2: A private company in the shares of which no beneficial interest is held directly or indirectly by any corporation and which has not more than twenty members none of whom is a corporation
Exempted from prohibitions related to loans to director.
Holding and Subsidiaries Company
Section 6: A corporation shall be deemed to be a wholly-owned subsidiary of another corporation of it has no members other than a wholly-owned subsidiary of that other corporation or its nominee.
Section 4(1): a company is a subsidiary of another company.
Foreign Company
The foreign company’s “carrying on business” in Malaysia includes establishing or using a share transfer or share registration office or administering, managing or otherwise dealing with property situated in Malaysia
Foreign companies must comply with Sections 561 – 579 of Company Act 2016.
A company registered under Company Act 2016 in Malaysia, but having its incorporated status outside Malaysia.