FORMS OF BUSINESS ENTITIES AND

BUSINESS SUPPORT SYSTEM

 SESSION OBJECTIVES

At the end of the session, the students should be

able to:

understand various forms of business

organizations in Malaysia

understand the support system available for

businesses
 LEGAL FORMS OF
BUSINESSES IN MALAYSIA

Business Registration Act 1956

Amendment 1978) 7 Procedures
Of Business Registration 1957

Registration of Company Act 1965

Business Entities
Cooperative Act 1948

Parliamentary Act or State

(Government) Enactment
 LEGAL FORMS OF
BUSINESSES IN MALAYSIA

Sole proprietorship

Limited company

Partnership
 MAJOR CHARACTERISTICS

3 Major Characteristics:

Number Of Owner(s)

Liabilities Of Owner(s)

Life Span Of The Business / Company

 SOLE PROPRIETORSHIP/
SOLE TRADER

Major Characteristics:

Management rests on that

person

Solely owned by one person

Liability is unlimited

Life span depends on

owner’s
 PARTNERSHIP

Major Characteristics:

Min 2 and Maximum 20

Partners share management

responsibilities

Unlimited liabilities (also refer to

partnership agreement)
Life span depends on owners /
partners
Partnerships are governed by the Partnership Act 1961. If the
partners do not make their own agreement, the provisions of the
Act will become applicable, such as:

l profits & losses are to be shared equally

l no interest is payable on partners' capital
l every partner is entitled to participate in the management
of the business
l no partner is entitled to a salary for participating in the
partnership business
l expulsion of any partner must be in the form of expressed
agreement between the partners concerned introduction of
a
new partner must be by an unanimous consent from all
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 LIMITED COMPANIES

A limited company is incorporated under

the Companies Act 1965. It can be:
l A company limited by shares
- Private limited company (Sdn Bhd)
- Public limited company
- Foreign owned company
l A company limited by guarantee
l An unlimited company with or without
a share capital

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Company Limited By Share

The liability of a member's contribution to the company's

assets is limited to the amount specified, if any, unpaid
on his share. The personal assets of a shareholder would
not be available to the creditors of the company. Two
types of companies limited bu share:

m a private limited company (Sdn. Bhd.)

m a public limited company (Berhad)

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Private Limited company (Sdn. Bhd.)

1. Restricts the right to transfer its share

2. Limits the number of its members / shareholders
between 2 to 50
3. Prohibits any invitation to the public to subscribe
for any shares in the company
4. Prohibits any invitation to the public to deposit
money with the company for fixed periods

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Public Limited company (Bhd.)

A public limited company is any company other

than a private company whose shares may be
offered to the public for subscription. Such shares
are freely transferable.

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 ADVANTAGES AND
DISADVANTAGES OF EACH
BUSINESS FORM

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Sole Proprietor/Sole Trader

Advantages
1. Easy to set up - few formalities
2. Easy to manage - the owner is the boss
3. The owner keeps the profits
4. The owner is not required to disclose business
affairs to the general public
5. Few legal problems

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Sole Proprietor/Sole Trader

Disadvantages
1. The owner is totally responsible for any debts
incurred by the business – if the business fails or
goes bankrupt, the creditors are entitled to
seize and sell the owner's possessions - personal
as well as business
2. Few or limited resources
3. More responsibilities

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Partnership

Advantages
1. Easy to set up - few formalities
2. The owners are not required to disclose business affairs
to the general public
3. Contributions to capital can be increased through enlisting
additional partners
4. The risk is reduced - each partner will share
the loss
5. Better management - through skills, knowledge and
experience of each individual partner

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Partnership

Disadvantages

1. Each partner is liable for the debts of the

business - regardless of which partner is at fault
2. Risk of personal clashes between partners
3. The death or bankruptcy of any partner
automatically dissolves a partnership unless
there is an agreement otherwise

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Limited Company

Advantages

1. Shareholders are not liable for the company's debts

beyond the amount of share capital they have
subscribed.
2. Easier to transfer ownership, either wholly or
partially, through the selling of all or part of its total
shares, or through the issue of the new shares to
additional investors
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Limited Company

Disadvantages
1. The public will have access to the financial affairs of
the company
2. The company has to comply with the requirements
of the Companies Act 1965
3. The company has to appoint auditors to verify and
report its financial statements
4. Every limited company must have a company
secretary
5. The cost involved in forming a limited company is
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HOW TO REGISTER NEW BUSINESSES/COMPANIES

l All forms of sole traders and partnerships are

required under the Registration Of Business Act
1956 to be registered with the Registrar of
Business (ROB)

l Private limited companies must register with the

Registrar of Company (ROC) through company’s
secretary

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Sole Proprietorship

l Before registering a business, complete a name

search form to ensure that there is no duplication

l If the name is approved, proceed to the following

steps:

Step 1 : Obtain form "A" from ROB

Step 2: Complete Form "A"
Step 3: Have it verified by Commissioner for Oaths
Step 4: Submit Form "A" with a photo-copy of your i/c
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 Memorandum and Articles of
Association

The affairs of a limited company are

governed by these documents. These
are usually combined into one

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Memorandum of Association

This document defines the essential components of the

structure of the company. It contains:
l the name of the company
l the situation of the registered office
l the objects of the company
l that the liability of members is ltd.
l the nominal amount of authorized share capital
l the association clauses

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Articles of Association

This document constitutes the internal regulations

of a company. It contains:

l the name of the company

l the name of directors
l the minimum and maximum number of directors
l the share qualifications of each director
l name, address, identity card number and
occupation of each subscribers
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Procedures and Legal Aspects
License, Permit and Letter of Authority
License

m Business License
m Wholesaling License
m Manufacturing License
m Food Manufacturing License
m Sales Tax License
m Excise License
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Procedures and Legal Aspects

Permits

m Foreign Workers’ Entry Permit

m Transportation Permit

Letter Of Authority

m Certificate of Fitness

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Other Procedures To Be Considered
m Assembling of Machinery and Equipment
m Pollution Control
m Business Rights
m Trade Mark Protection
m Patent Protection
m Copyright
m Standards and Quality
m Hire Purchase Act
m Workers’ Social Needs
m Infrastructure Needs
m Import and Export
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 BUSINESS SUPPORT SYSTEM

Technical
Training, Marketing
Assistance
Seminar & Assistance
Workshop
Financial
Infra- Assistance
structure The Entrepreneur

Business
Information
Consultancy Services
& Advisory Extension Business
Services Services Research

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 Technical Assistance
SIRIM, MARA, MARDI, RRI, PORIM

Marketing Assistance
MITI, MATRADE, FAMA, NRC DISTRIBUTORS,
GUTHRIE, BESTA

Infrastructure
MARA, PKEN, SIRIM, UDA, KPLB, BPIMB, MIDA

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 Information Services
MATRADE, MITI, MARDI, SIRIM, MIDA, FRIM,
universities

Business Research
MARDI, SIRIM, universities

Financial Assistance
commercial banks, merchant banks, industrial
bank, financial institution, government
agencies
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Consultancy & Advisory Services MEDEC,
MARA

Training, Seminar and Workshop

MEDEC, PUNB, MARA, FDPN, SEDC

Extension Services
MEDEC, MITI, SIRIM, MARA, MATRADE,
MARDI, NPC
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