Please enable JavaScript.
Coggle requires JavaScript to display documents.
CHAPTER 2: REGISTRATION OF BUSINESS ENTITIES IN MALAYSIA - Coggle Diagram
CHAPTER 2: REGISTRATION OF BUSINESS ENTITIES IN MALAYSIA
INTRODUCTION
:
Business operator who run a business to earn profits are responsible for registering their businesses.
Business registration helps make the business legally recognised.
In Malaysia, business registration is handled mainly by two agencies:
:silhouettes: Companies Commission of Malaysia (SSM) - handles the registration of several types of business entities.
:silhouettes: Cooperativs Commission of Malaysia (SKM) - handles the registration of cooperatives.
Each type of business has its own advantages and disadvantages. Entrepreneurs should choose the type that best suits their needs.
TYPES OF BUSINESS ENTITIES IN MALAYSIA
LIMITED LIABALITY PARTNERSHIP (LLP)
DEFINITON
:
A business structure that combines features of a normal partnership and a private limited company.
CHARACTERISTICS
:
Has separate legal indentity from its partners.
Can own property and enter inti contracts in its own name.
Can sue or be sued.
Continues to exist even if a partner leaves or dies.
Provides limited liability protection, subject to the law.
Has simpler reporting requirements than a private company.
Governed by the Limited Liability Partnerships Act (2012).
Requires at least two partners, with no maximum number.
PRIVATE LIMITED COMPANY (Sdn Bhd)
DEFINITION
:
A business that is legally separate from its owner or shareholders.
CHARACTERISTICS
:
Owned by shareholders.
Shareholders contribute capital to the company.
Shareholders liability is generally limited to their shares.
Has more formal management structure.
Must use "Sendirian Berhad'' or "Sdn. Bhd'' in its name.
Cannot offer its shares to the general public.
Requires more legal documents and formal procedures.
PARTNERSHIP
DEFINITION
:
A business owned by two or more people who work together to run the business.
CHARACTHERISTICS
:
Usually has between 2 or 20 partners.
Certain professional partnerships may have up to 50 partners.
Partners can contribute money, skills, and knowledge.
Partners share the responsibilities of running the business.
Registered under the Business Registration Act (1956).
COOPERATIVE
DEFINITION
:
An organisation formed voluntarily by people who work together to meet their common economic, social and cultural needs.
CHARACTERISTICS
:
Owned and controlled jointly by its members.
Members participate in decision-making.
Uses a democratic system to choose representatives.
A primary cooperative requires at least 100 members, while a farmers cooperative requires at least 50 members.
Has a separate legal identity.
Profit distribution to members is usually limited.
Registered and supervised by SKM under cooperative laws.
SOLE PROPRIETORSHIP
DEFINITON:
A business owned, funded and managed by one person.
CHARACTERISTICS
:
Has only ONE owner.
Is one of the SIMPLEST types of businesses to start.
The owner receives ALL the profits.
The owner MANAGE the business and makes DECISIONS.
Registered under the Business Registration Act (1956).
BENEFITS AND LIMITATIONS OF EACH BUSINESS ENTITIY (ADVANTAGES & DISADVANTAGES)
LIMITED LIABILITY PARTNERSHIP (LLP)
BENEFITS
EASY COMPLIANCE
Reporting and compliance requirements are simpler than those private limited company.
CONTINUOUS EXISTENCE
The LLP can continue operating even if a partner leaves or dies.
SEPARATE LEGAL IDENTITY
An LLP can own property, sign contracts, sue and be sued in its own name.
LIMITED LIABILITY
Partners are generally protected from personal responsibility for LLP debts, subject to the law.
LOWER REGISTRATION COST
LLP registration costs RM500, compared with the higher costs associated with a private limited company.
TAX ARRANGEMENTS
Each partner may need to complete the relevant tax forms.
FLEXIBLE OWNERSHIP
There is no maximum limit on the number of owners.
FLEXIBILITY
Partners can decide how much to contribute and how to organise the business.
LIMITATIONS
ADDITIONAL TAX ISSUES
Managing tax matters and personal tax fillings may be complicated.
CREDIBILITY
Some customers and businesses may have more confidence in companies than in LLP's.
RECOGNITION
Some people may not be familiar with theLLP business structure.
PRIVATE LIMITED COMPANY (Sdn Bhd)
BENEFITS
EASIER FINANCING
Banks, creditors and financial institutions may have more confidence in the company.
CONTINUOUS EXISTENCE
The company can continue operating even if a shareholder dies or leaves.
BETTER MANAGEMENT
Work can be divided among employees according to their skis and abilities.
SEPARATE LEGAL IDENTITY
The company can own property and enter into legal agreements.
PROFESSIONAL IMAGE
A private limited company may appear more established and trustworthy.
BUSINESS EXPANSION
The company can obtain funding from permitted investors to expand its business.
LIMITED LIABILITY
Shareholders personal assets are generally protected from company debts, subject to the law.
LIMITATIONS
LESS PRIVACY
Certain company information must be disclosed according to legal requirements.
COMPLICATED CLOSURE
Closing the company can be costly and time-consuming.
HIGH COST
Registration, professional services and operating costs can be expensive.
TAXES
The company must pay the applicable company taxes and meet its tax obligations.
COMPLICATED REGISTRATION
Setting up the company requires more documents and legal procedures.
PARTNERSHIP
LIMITATIONS
FIANCIAL RISKS
Partners may share responsibility for business debts and financial risks.
TAXATION
Partners must handle their tax obligations according to the relevant rules.
DISAGREEMENTS
Partners may have different opinions about how to run the business.
PROFIT SHARING
Partners may face disagreements about profits is there is no clear partnership agreement.
UNLIMITED LIABILITY
In an ordinary partnership, partners may be personally responsible for business debts.
BENEFITS
FLEXIBLE MANAGEMENT
The business has fewer formal requirements than a private limited company.
DECISION-MAKING
Partners can share ideas before making decisions.
SHARED RESPONSIBLE
Partners can devide tasks according to their skills and knowledge.
PRIVACY
Business matters can be handled privately.
MORE CAPITAL
Each partner can contribute money to the business.
COOPERATIVE
BENEFITS
LIMITED LIABILITY
Members liability is generally limited, subject to the law.
NO MIDDLEMAN'S PROFIT
Members can manage their own supplies and reduce dependence on middleman.
DEMOCRATIC CONTROL
Members vote to choose representatives who manage the cooperative.
GOVERNMENT ASSISTANCE
Cooperatives may receive financial help, low-interest loans, subsidies and other support.
OPEN MEMBERSHIP
People with common interest can join if they meet the membership requirements.
STABLE EXISTENCE
The cooperative can continue operating even when a member dies or leaves.
EASY FORMATION
A cooperative can be easier to establish than a joint-stock company.
LIMITATIONS
MANAGEMENT PROBLEMS
May struggle if its leaders lack management skills or experience.
LACK OF MOTIVATION
Some members may not put enough effort inti managing the cooperative.
LIMITED CAPITAL
may have limited funds because it depend on contributions from members.
LACK OF COOPERATION
Difference in opinions and personalities may cause conflicts among members.
DEPENDENCE ON THE GOVERNMENT
Some cooperatives depend heavily on government grants, loans, and subsidies.
SOLE PROPRIETORSHIP
BENEFITS
MANAGEMENT
The business is easier to manage because there is only one owner.
DECISION-MAKING
The owner has full control
LOW COST
Only RM60 + RM10 for documentation
PRIVACY
Any business matters can be handled privately
EASY REGISTRATION
The owner can register the business without needing other owners.
FLEXIBILITY
Has fewer requirements
PROFITS
The owner receives 100% of the business profits.
LIMITATIONS
LIABILITY
The owner is personally responsible for business debts and losses.
LACK OF BUSINESS CONTINUITY
The business may be affected if the owner dies or becomes unable to manage it.
DECISION-MAKING
The owner may find it difficult to solve complicated problems alone.
TAXES
The owner must pay the relevant taxes on business income.
SOURCES
Limited capital. The business depends mainly on the owner's financial resources.
REGISTRATION PROCEDURES
COMPANIES COMMISION OF MALAYSIA (SSM)
MALAYSIA CO-OPERATIVE SOCIETIES COMMISION (SKM)