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The Basics of Setting Up A Business Entity in Malaysia Isn
The Basics of Setting Up A Business Entity in Malaysia Isn
of Business Entities. There are three (3) different types of business entities to choose from: Sole Proprietorship (also known as Sole Trader) Partnership business entity Limited Company (SDN. BHD. or Sendirian Berhad or BHD. or Berhad)
Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed) Price of entity formation is much cheaper and is not required by the Malaysian government to be audited. Not required to disclose financial statements to the public. Easy to convert into limited company (SDN BHD)
Partnerships
The Partnership business entity is a joint-entity holder with two or more persons to carry out a legal business in Malaysia. The Companies Commission of Malaysia requires that partnership entities MUST comprise of at least two (2) members and a maximum twenty (20) members. Partners in a partnership business entities are also bounded by unlimited liability.
Differences
Generally, the Sole Proprietorship & Partnership business entity is similar to each other in many ways. Some of the differences include: Own partnership agreements are to be made Or set to default, governed by Malaysias Partnership Act 1961. Sole Proprietors are owned by ONE (1) owner whereas Partnerships are owned by TWO (2) or more.
Liability of members contribution to this company is limited to the amount specified on their unpaid shares. Should the company becomes insolvent or goes into liquidation, members are not obligated to pay off the companys debts if and unless any one of the members gives a personal guarantee. Also, members personal assets, employment and personal income are not liable to any of the companys debts. This type of business entity is the most common one in Malaysia.
In a limited companys Memorandum and Articles of Association, members liability is limited to the amount they guarantee or undertake during winding up In which the amount is specified in the Memorandum, agreed and signed by all members. In many cases, companies limited by guarantee are often registered by non-profit organizations, public societies and clubs.
Unlimited Companies
Unlimited companies are no different from sole proprietorship and partnership business entities. One of the only differences is that they have a special articles of association and are free to return capital to its members.
Members (also called Shareholders) are not liable for the companys debts beyond the amount of share capital theyve subscribed to. But in this case, the public will have access to financial affairs of the company. In event of death or changes among shareholders and/or directors of the company, it need not be winded up (striked-off). Every limited company has to appoint: (1) Auditors to verify & report financial affairs, records, accounts and statements; (2) Must have at least a company secretary for AGM, board & shareholders meetings.