Legal Forms of Business Ownership (Malaysia)

Legal Forms of Business Ownership (Malaysia)

• Four types of legal business entities in Malaysia are highlighted: Sole Proprietorship, Partnership, Private Limited Company (Sdn Bhd), and Limited Liability Partnership
• The Companies Commission of Malaysia (SSM) regulates companies in Malaysia, ensuring compliance with legislation.
• SSM provides business information to the public.

Legal Form Characteristics

• Sole Proprietorship:
  • Registered under the Registration of Businesses Act 1956 (ROBA 1956) and Registration of Businesses Rules 1957
  • Owner's personal name is used as the business name (e.g., Mohd Hery Bin Bahador) or a trade name (e.g., ABC Enterprise)
  • Ownership and management are entirely with the sole proprietor.
  • Owner is fully responsible for all business debts (unlimited liability).
  • Capital contribution comes from the owner.
  • Only one owner.
• General Partnership:
  • Registered under the Registration of Businesses Act 1956 (ROBA 1956), and Registration of Businesses Rules 1957.
  • Can have 2 to 20 partners
  • Trade name used for the business
  • Partners share responsibility for debts (unlimited liability).
  • Capital contribution is from all partners.
• Limited Liability Partnership (LLP):
  • Regulated by the Limited Liability Partnerships Act 2012 (LLPA 2012).
  • Entity's name typically ends with "PLT" (Perkongsian Liabiliti Terhad).
  • Must have at least two partners.
  • Partners have limited liability, meaning their personal assets are protected from business debts.
  • Partners share contribution.
• Private Limited Company (Sdn Bhd):
  • Regulated by the Companies Act 2016 (CA 2016).
  • Company name ends with "Sendirian Berhad", "Sdn. Bhd.", "Berhad", or "Bhd."
  • One or more owners (shareholders).
  • Has limited liability, protecting personal assets from company debts.
  • Company share capital is contributed by shareholders.

Business Entity Appearances

• Sole Proprietorship:
  • Business name is the owner's personal name or a trade name.
• General Partnership: Trade name typically used.
• Limited Liability Partnership: Business name commonly ends with "PLT."
• Private Limited Company (Sdn Bhd): Company name ends with "Sendirian Berhad" or similar suffixes.

Capital Contributions

• Sole Proprietorship: Sole owner contributes capital.
• General Partnership: Partners contribute capital.
• Limited Liability Partnership: Partners contribute capital.
• Private Limited Company (Sdn Bhd): Shareholders contribute capital.

Number of Shareholders/Partners

• Sole Proprietorship: Only one owner.
• General Partnership: Two to twenty partners.
• Limited Liability Partnership: Two or more partners.
• Private Limited Company (Sdn Bhd): Minimum one, maximum fifty shareholders.

Registration Fees

• Sole Proprietorship: Personal name registration RM30/year, Trade name registration RM60/year
• General Partnership (2-20 Partners): Trade name RM60/year.
• Limited Liability Partnership (LLP): RM500
• Private limited company (Sdn Bhd): RM1000

Personal Liability

• Sole Proprietorship: Unlimited liability, extending personal assets to cover business debts.
• General Partnership: Unlimited liability extending to partnership debts.
• Limited Liability Partnership: Limited liability protecting partners' personal assets from business debts, except for specific actions.
• Private Limited Company (Sdn Bhd) Limited liability, personal assets are not exposed to company debts

Management Responsibility

• Sole Proprietorship: Sole proprietor manages the business.
• General Partnership Partners jointly manage the business.
• Limited Liability Partnership (LLP) Partners contribute to management.
• Private Limited Company (Sdn Bhd) A board of directors manages the company.

Advantages and Disadvantages of Business Ownership

• Sole Proprietorship:
• Advantages: Simple to manage, financial details are private, owner has full control.
• Disadvantages: Owner is fully liable for all debts, raising capital can be challenging.
• General Partnership:
• Advantages: Simple to manage, Financial details are private
• Disadvantages: Owners personally liable for debts, limited ability to raise money, limited number of partners.
• Limited Liability Partnership (LLP):
• Advantages: Partners have limited liability, relatively easier to manage than a company, exists even if owners change.
• Disadvantages: Must have a local compliance officer, registration fees, harder to raise a lot of money.
• Private Limited Company (Sdn Bhd):
• Advantages: Limited liability, can raise capital more easily and continue if ownership changes.
• Disadvantages: Higher costs, more complex paperwork, financial details are public.

Explore the various legal forms of business ownership in Malaysia including Sole Proprietorship, Partnership, Private Limited Company (Sdn Bhd), and Limited Liability Partnership. This quiz will cover the characteristics, responsibilities, and regulatory requirements set by the Companies Commission of Malaysia (SSM). Test your knowledge on how these entities operate within the legal framework.