Podcast
Questions and Answers
What is the main advantage of setting up a company over being a sole trader or partnership?
What is the main advantage of setting up a company over being a sole trader or partnership?
- Increased personal wealth
- Limited liability (correct)
- Unlimited liability
- Lack of accountability
What happens to shareholders' private wealth in the event of company collapse?
What happens to shareholders' private wealth in the event of company collapse?
- It is seized by the creditors
- It is used to pay company debts
- It is confiscated by the government
- It is unaffected (correct)
What is a characteristic of a member-governed body?
What is a characteristic of a member-governed body?
- Run by the government
- Run by a single individual
- Run by its members for the benefit of the members (correct)
- Run by external stakeholders
What is the key difference between an incorporated and unincorporated member-governed body?
What is the key difference between an incorporated and unincorporated member-governed body?
What is the term for the maximum amount of money a shareholder can lose in the event of company collapse?
What is the term for the maximum amount of money a shareholder can lose in the event of company collapse?
What is the main benefit of a company being listed on a public stock exchange?
What is the main benefit of a company being listed on a public stock exchange?
What is an example of a public listed company?
What is an example of a public listed company?
What is a key benefit of incorporation for a member-governed body?
What is a key benefit of incorporation for a member-governed body?
What is the minimum number of owners required for a sole proprietorship?
What is the minimum number of owners required for a sole proprietorship?
What happens to a partnership when one of the partners dies?
What happens to a partnership when one of the partners dies?
What is a characteristic of a company in terms of liability?
What is a characteristic of a company in terms of liability?
How many owners can a company have?
How many owners can a company have?
What is a benefit of incorporation for a business?
What is a benefit of incorporation for a business?
What is the typical structure of a company?
What is the typical structure of a company?
What type of reporting standards do companies follow?
What type of reporting standards do companies follow?
What is a characteristic of a company in terms of existence?
What is a characteristic of a company in terms of existence?
What is the main difference between MPERS and MFRS?
What is the main difference between MPERS and MFRS?
What is an advantage of a sole proprietorship business?
What is an advantage of a sole proprietorship business?
What is a disadvantage of a sole proprietorship business?
What is a disadvantage of a sole proprietorship business?
What is one of the two major functions of accounting?
What is one of the two major functions of accounting?
What is the definition of accounting?
What is the definition of accounting?
What is the main benefit of incorporating a business?
What is the main benefit of incorporating a business?
What is the role of a shareholder in a company?
What is the role of a shareholder in a company?
What is the primary structure of a company?
What is the primary structure of a company?
Study Notes
Types of Business Entities
- A public company offers shares to the general public and trades on a public stock exchange, allowing individuals to buy shares easily.
- Shareholders in a public company have limited liability, which means they can only lose the amount of money they invested in the company.
Advantages of Companies
- Limited liability for shareholders, making it a more attractive option for investors and businessmen.
- Shareholders' personal wealth is protected from creditors, who can only claim against the company's assets.
- Larger resources can be pooled from a larger group of investors.
Examples of Public Listed Companies
- Genting Berhad
- Nestle (Malaysia) Berhad
- Public Bank Berhad
Member-Governed Bodies
- These entities are run by their members for the benefit of the members.
- Examples include mutual building societies, sports clubs, social clubs, churches, and life assurance companies.
- Members' liabilities are limited by guarantees if the entity is incorporated.
- Incorporated member-governed bodies have a separate legal entity, allowing them to own assets and incur debt.
Comparison of Business Entities
- Sole proprietorships: one owner, unlimited liability, business ceases to exist at the owner's death or choice.
- Partnerships: 2-20 owners, unlimited liability, business ceases to exist at the partner's death or choice.
- Companies: 1-50 owners for Sdn Bhd, no limit for Bhd, limited liability, perpetual existence.
- Member-governed bodies: not applicable, limited liability for incorporated, unlimited for unincorporated, perpetual existence.
Accounting for Business Entities
- Financial accounting and management accounting are the two major functions of accounting.
- Accounting is an information system that identifies, records, and communicates relevant, reliable, and comparable information on an organization's business activities.
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Description
This quiz covers the benefits of setting up a company, particularly the concept of limited liability for shareholders. Learn why businessmen prefer companies over sole trader or partnership setups.
