Please enable JavaScript.
Coggle requires JavaScript to display documents.
REGISTRATION OF BUSINESS ENTITIES - Coggle Diagram
REGISTRATION OF
BUSINESS ENTITIES
Business Entity Type in Malaysia
Sole Proprietorship
One owner
Owner funded
Owner managed
Popular and simple
Examples
1.Homemade Cookies
2.Personal Hair Salon
Partnership
Owned by two people or maximum 20 people
Professional business- members could up to 50 people
Examples
1.Family Restaurant- owned by 3 siblings
2.Tuition Centre - managed by 2-3 partners
Limited Liability Partnership (LLP)
Regulated by LLP Act 2012
Separate legal entity-private limited company
Limited liability
Perpetual succession and offers benefits
Combines the private company and conventional partnership
Support start-ups & SMEs
Support joint ventures and venture capital
Formed by two persons and unlimited members
-Examples
1.Law Firm
2.Accounting Firm
Private Limited Company
Companies Act 1965 & 2016
Legal entity separate from members or the founder
1 Director and 50 members
Combines contributions to create larger capital
Management and financing are contributed by ownership percentage and members
Two legal document
1.Memorandum of Association
2.Articles of Assocation
Cannot invite the public to buy company shares
Examples
1.Technology/Construction Company Sdn.Bhd
Cooperative
Voluntary association of people with common interests
Meets economics, social and cultural needs
Jointly owned and democratically controlled
Minimum 100 members for primary cooperative
Has a seperate legal entity
Members are generally not liable for any debts
Must registered under cooperatives law, such as Malaysia Co-operative Society Commission (SKM)
Example
1.Farmers' Cooperative
Benefits and Limitations
Sole Proprietorships
Benefits
Profit
-Owner has 100% control on the profits earned
Registration
-Easy and can be done by the owner
Cost
-Cost is low-only RM60(plus RM10 for documentation)
Management
-Easy since only the owner will make decisions
Flexibility
-Less regulated by law
-No audited account to be submitted to SSM
Decision-making
-Complete control decision-making power over the business
Business affairs
-Any transactions or business affairs is private
Limitations
Sources
-Capital limited to the ability of the owner
-Do not issue stocks or other money-generating investment like corporations do
Decision-making
-Problems encountered are complex
-Owner might difficult to making decisions
Liability
-Owner will be held directly responsible (losses, debt, violations)
Lack of Business continuity
-Business will stop if owner deceased or incapacitated
Taxes
-Owner must pay self-employment taxes
Partnership
Benefits
Capital
-More partners, more capital available
Responsibility
-Partners can share skills, knowledge and responsibility
Flexibility
-Less regulated - no audited accounts to submit to SSM
Decisions-making
-Partners can share opinions and make better decisions
Business affairs
-Business transactions are private
Limitations
Liability
-Each partner can be responsible for debt caused by other partners
Disagreement
-Different opinions may cause conflicts
Unlimited liability
-Partners share the financial risks and liabilities
Taxation
-Partners need to pay tax like sole traders
Profit sharing
-Profits are shared equally if there is no partnership agreement
Limited Liability Partnership (LLP)
Benefits
Owners
-No limit on the number of owners
Inexpensive
-Cheaper to register compared to a private limited company
Separate legal identify
-LLP can own property, make contracts and sue/be sued under its own name
Easy compliance
-Compliance requirements are simpler than a private limited company
Perpetual succession
-Business continues even if a partner dies or resigns
Limited Liability
-Partners are generally not personally responsible for debts caused by another partner
Tax benefits
-Partners handle their own tax matters
Flexibility
-Partners can decide their contributions and number of partner
Limitations
Recognition
-Some people/businesses may not fully recognize LLP as a business entity
Additional taxes
-May involve additional tax issues
Credibility
-Some clients may see LLP as less credible than corporations
Private Limited Company (Sdn.Bhd)
Benefits
Limited Liability
-Shareholders' personal assets are protected from company debts
Professional status
-More professional and has better credibility
Better management
-More systematic management structure
Credit terms/financing
-Easier to obtain financing from banks/creditors
Existence
-Company continues even if members die or leave
Separate legal entity
-Company is legally separate from its members and can own property
Expansion scope
-Can raise capital from individuals or investment company
Limitations
Registration & formalities
-Registration process is more complicated and time-consuming
Costly
-Higher registration, legal and operating costs
Secrecy
-Company information may need to be disclosed and can be accessed by the public
Winding-up
-Closing the company is complicated and costly
Taxes
-Company must pay tax to the government every years
Cooperative
Benefits
Easy formation
-Easy to form by registering with the Cooperative Commission
Open membership
-People with common interests can join
Democratic control
-Members can vote and elect representatives
Limited Liability
-Members liability is limited to their capital contribution
Elimination of middleman profits
-Members can control their own supplies and reduce middlemen profits
State assistance
-Government provides loans, subsidies and other assistance
Stable life
-Cooperative can continue even if members die, resign or become insolvent
Limitations
Limited capital
-Capital may be limited because membership is restricted
Management problems
-Lack of skilled managers may affect efficiency
Lack of motivation
-Members may lack motivation to work efficiently
Lack of cooperation
-Conflicts between members can affect the cooperative
Government dependence
-May depend on government grants, loans and subsidies
Registration Procedures
IMPORTANT
Start-up entrepreneurs will know where and how to register the business entity
There are 2 place to register:
1.Companies Commission of Malaysia (SSM)
2.Cooperative Commission of Malaysia (SKM
Objectives
To identify the types of business entities in Malaysia
To provide an understanding of the importance of registering a business
To explain business registration procedures
To discuss legal aspects related to business formation