Business Ownership Types in Malaysia

Legal Forms of Business Ownership (Malaysia Perspective)

• Four types of legal business entities in Malaysia are: sole proprietorship, general partnership, limited liability partnership, and company (Sdn. Bhd.)
• The Companies Commission of Malaysia (SSM) regulates companies and businesses in Malaysia to ensure compliance with legislation.

Learning Outcomes

• Identify legal forms of business ownership
• Determine characteristics of business ownership
• Explain advantages and disadvantages of business ownership

Types of Legal Form Business Entity in Malaysia

• Sole Proprietorship: Owned solely by one person. Business owner's personal assets are liable for business debts.

• Partnership: Owned by two or more individuals. Partners' personal assets are liable for business debts. Partnership agreements are usually required.

• Private Limited Company (Sdn Bhd): Separate legal entity from the owners. Owners' personal assets are not liable for company debts. More complex structure than sole proprietorship or partnership.

• Limited Liability Partnership (LLP): Separate legal entity from the owners. Owners' personal assets are not liable for company debts. Less complex than public company.

Characteristics of Legal Form of Business Entity

• Sole Proprietorship Registration: The Registration of Businesses Act 1956 (ROBA 1956), and the Registration of Businesses Rules 1957.

• General Partnership Registration: The Registration of Businesses Act 1956 (ROBA 1956), and the Registration of Businesses Rules 1957 applies.

• Limited Liability Partnership Registration: The Limited Liability Partnerships Act (2012) and the Limited Liability Partnerships Regulations (2012) apply.

• Company Registration: Company Act 2016 (CA2016) and the Company Regulations 2017 (or equivalent).

Entity Name Appearances

• Sole Proprietorship: Use personal name as per identity card. Can use trade name.

• General Partnership: Use trade name only.

• Limited Liability Partnership: Use name ending with "PLT" (Perkongsian Liabiliti Terhad).

• Company: Use name ending with "Sdn. Bhd.", "Berhad" or "Bhd."

Capital Contribution

• Sole Proprietorship: Contributions by the owner.

• Partnership: Contributions by all partners

• LLP: Contributions by partners, according to agreed contribution terms within the partnership agreement

• Company: Provided capital through share capital paid by the shareholders.

Number of Shareholders/Partners

• Sole Proprietorship: Only one owner.

• Partnership: Range from 2 to 20 partners.

• Limited Liability Partnership: Minimum 2 partners

• Company: Minimum 1 shareholder; maximum number depends on company structure (e.g., Sdn. Bhd. - 50, Bhd - no maximum).

Registration Fees

• Sole Proprietorship: RM30 for Personal Name and RM60 for Trade Name per year.

• Partnership: RM60 (for trade name) per year for 2 to 20 partners.

• Limited Liability Partnership (LLP): RM500

• Company: RM1000

Personal Liability

• Sole Proprietorship: Unlimited liability, which extends to personal assets.

• Partnership: Unlimited liability, extending to partner's personal assets. Liability is joint and several.

• LLP: Limited liability, which does not extend to personal assets.

• Company: No personal liability for company debts. Limited to the extent of unpaid shares, for shareholder's.

Responsibility for Management

• Sole Proprietorship: Sole proprietor is responsible.

• Partnership: All partners are collectively responsible

• LLP: Partners are jointly and severally liable for debts, except for their own wrongful actions.

• Company: Board of Directors is responsible.

Advantages and Disadvantages of Business Ownership

• Sole Proprietorship: Simple and cheap, full control, private financial details. Disadvantages: owner is personally liable for all debts, harder to raise money.

• General Partnership: Simple and cheap, private financial details. Disadvantages: owners liable for debts, limited ability to raise money.

• Limited Liability Partnership (LLP): Less complex than a company, owners are not personally liable. Disadvantage: must have a local compliance officer.

• Company (Sdn. Bhd.): Owners are not personally liable for company debts. Can raise significant capital; complex, higher costs, and paperwork; financial details must be public.

Explore legal business entities in Malaysia: sole proprietorships, partnerships, and private limited companies (Sdn Bhd). Understand the characteristics, advantages, and disadvantages of each type, emphasizing liability and regulatory oversight by the Companies Commission of Malaysia (SSM).