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CHAPTER 3: REGISTRATION OF BUSINESS ENTITIES, INTRODUCTION TO BUSINESS…
CHAPTER 3: REGISTRATION OF BUSINESS ENTITIES
List of Topics:
Business Entity Types in Malaysia
Benefits and Limitations
Registration Procedures
TYPES OF BUSINESS ENTITIES IN MALAYSIA
Sole Proprietorship
Owned and managed by one person.
The owner provides the capital and makes decisions.
Simple and easy to set up.
Registered under the Business Registration Act 1956.
Partnership
Owned by two or more people.
Usually has a maximum of 20 partners.
Professional firms may have up to 50 partners, according to the slides.
Partners share responsibilities and contribute to the business.
Registered under the Business Registration Act 1956.
Limited Liability Partnership (LLP)
Combines features of a partnership and a private limited company.
Has a separate legal identity from its partners.
Offers protection for partners' personal assets, subject to the law.
Has perpetual succession, meaning it can continue even when partners change.
Can be formed by at least two people, with no maximum stated in the slides.
Governed by the Limited Liability Partnerships Act 2012.
Private Limited Company (Sdn. Bhd.)
Has a legal identity separate from its owners.
Capital is contributed by members or shareholders.
Shareholders' liability is generally limited to their shares.
Can support business growth and expansion.
Requires more formal legal and financial reporting.
Cannot invite the public to buy its shares.
Uses “Sendirian Berhad” or “Sdn. Bhd.” in its name.
Cooperative
Formed by people who share common economic or social needs.
Owned and democratically controlled by its members.
A primary cooperative requires at least 100 members, while a farmers' cooperative requires 50, according to the slides.
Has a separate legal identity.
Profit distribution to members is usually limited.
Registered and supervised by SKM.
BENEFITS AND LIMITATIONS OF EACH BUSINESS ENTITY
SOLE PROPRIETORSHIP
Benefits
Owner keeps 100% of the profit.
Easy and simple to register.
Low registration cost.
Easy to manage because one person makes decisions.
Flexible with fewer reporting requirements.
Owner has full control over business decisions.
Limitations
Limited capital because it depends on the owner's resources.
Difficult to raise additional funds.
Owner is personally responsible for business debts and losses.
Difficult to make complex decisions alone.
Business may not continue if the owner dies or becomes unable to operate it.
Owner pays self-employment taxes.
PARTNERSHIP
Limitations
Partners may have unlimited liability for business debts.
Disagreements may occur between partners.
Partners may be responsible for actions taken by other partners.
Partners pay taxes in a similar way to sole proprietors.
Profits may be shared equally if there is no partnership agreement.
Benefits
Limited capital because it depends on the owner's resources.
Difficult to raise additional funds.
Owner is personally responsible for business debts and losses.
Difficult to make complex decisions alone.
Business may not continue if the owner dies or becomes unable to operate it.
Owner pays self-employment taxes.
LIMITED LIABILITY PARTNERSHIP (LLP)
Benefits
Can have an unlimited number of owners.
Registration is relatively inexpensive compared with a private limited company.
Has a separate legal identity.
Can own property and enter into contracts under its own name.
Simpler compliance requirements than a private limited company.
Business continues even when partners change.
Offers protection against certain business liabilities.
Allows flexibility in partners' contributions.
Limitations
Some businesses or clients may be less familiar with the LLP structure.
Tax arrangements may be more complicated.
Some clients may consider an LLP less credible than a corporation.
PRIVATE LIMITED COMPANY (SDN. BHD.)
Benefits
Shareholders have limited liability.
Gives the business a more professional image.
Has a more organised management structure.
May find it easier to obtain credit and financing.
Continues operating even if a shareholder dies or leaves.
Has a separate legal identity.
Can raise capital to expand the business.
Limitations
Registration involves more procedures and legal formalities.
Higher registration, legal and operating costs.
Must meet formal company reporting requirements.
Company information may be available to the public.
Closing or winding up the company can be complicated and expensive.
Company taxes must be paid according to the applicable requirements.
COOPERATIVE
Benefits
Relatively easy to establish compared with a joint-stock company.
Open to people who share common interests.
Members can vote and elect representatives.
Members' liability is generally limited to their capital contribution.
Helps members obtain goods or supplies without middlemen's profits.
May receive government assistance, loans or subsidies.
Can continue operating even when individual members leave.
Limitations
Limited capital because it depends on members' contributions.
Management may be inefficient due to a lack of experience.
Members may lack motivation to maximise profits.
Disagreements can occur among members.
May depend heavily on government support.
BUSINESS REGISTRATION PROCEDURES
Entrepreneurs must identify the appropriate agency for registration.
There are two registration organisations mentioned in the slides:
SSM (Companies Commission of Malaysia) – for the relevant business entities, including sole proprietorships, partnerships, LLPs and companies.
SKM (Co-operative Commission of Malaysia) – for cooperatives.
Entrepreneurs should understand the registration requirements for their chosen business entity.
Each business type has different legal requirements, capital needs and registration procedures.
Websites listed in the slides:
SSM: www.ssm.com.my
SKM: www.skm.com.my
OVERALL SUMMARY
Business registration is compulsory for entrepreneurs conducting business activities for profit, as explained in the chapter.
Malaysia has five business entity types covered in the slides.
Each entity has its own advantages and disadvantages.
Choosing the right entity depends on ownership, capital, liability, management and business goals.
Registration requirements and procedures differ between business entities.
Entrepreneurs should understand the legal responsibilities before starting a business.
INTRODUCTION TO BUSINESS REGISTRATION
Business owners need to register their businesses to operate legally.
Registration helps make business activities official.
Business registration is mainly handled by the Companies Commission of Malaysia (SSM).
Cooperatives are registered through the Co-operative Commission of Malaysia (SKM).
Entrepreneurs should choose a business type based on its advantages, disadvantages and business needs.