Lecture 1

BUSINESS ORGANISATIONS
 Learning Outcomes
At the end of this lecture, students should
able to:

• Discuss every types of business

organisations in Malaysia.
• Distinguish several aspects on
types of business organisations
in Malaysia.
 Topic Outline

Differences
Types of business between types of
organisations business
organisations
 Introduction

Types of business

Sole
Partnership Company
proprietorship
Sole Proprietorship

• One person.
• Fully responsible.
• No hassle legal process.
• Subject to personal
laws.
• Own the asset and
capital.
• Has unrestricted
borrowing power.
Partnership

Section 3(1) PA

• The relationship that subsists between

PERSONS carrying on BUSINESS IN
COMMON with a VIEW OF PROFIT.
 Nature of Partnership
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 Characteristics of Partnership

• Persons include not only

Association NATURAL PERSONS, but
of persons also ARTIFICIAL PERSONS.

Must be • Include every trade,

carrying on occupation or profession.
a business
 Soh Hood Beng v
Khoo Chye Neo
(1897) (SSLR 115)
•Several persons had set up a LOAN
ASSOCIATION.
•The object of which was to grant
loans among themselves.
•Each member would get his turn to
receive the loans.
•Held: Not amount to the carrying on
of a business and could not
constitute a partnership.
 Keith Spicer Ltd v Mansell (1970)
1A11 ER 462
• X and Y intended to form a
company. Prior to that, X
purchased furniture from a third
party and had them delivered to
Y’s premises.
• The furniture was not paid for
and the third party thereupon
sued Y on the basis that he was
in partnership with X.
• Held: No partnership as X and Y
carrying on business in common
but were preparing to do so as a
company.
 The business •Possessed a COMMON
must be
INTENTION to carry on the
carried on in
business.
common
The business
•Must be carried on with a PROFIT
must be carried
MOTIVE.
on with a view •Not a non-profit oriented businesses.
of profit
 Company
• A legal personality that is
incorporated and treated
as a separate legal entity
from its members.

• An incorporated company
can take legal action
against a party as well as
assume full liability in its
own name.
Differences between Partnership and
Company
Separate legal persona

• Company – an independent legal entity separate

and distinct from its members.
• A member of a company is not personally liable for
the debts or obligations of the company.

Property

• Company – the property belongs to the company

itself and not its members.
Perpetual succession

• Company – may only be destroyed by a process of

the law.
• Partnership – dissolved in the event of the death or
bankruptcy of any partner.

Number of members

• Company – no limit.
• Partnership – max. 20 persons.
Management

• Company – the members cannot interfere in the

management of the company.
• Partnership – every partner may take part in the
management of the partnership business.

Transfer of shares

• Company – a member is entitled to transfer his shares in the

company to anyone he wishes.
• Partnership – no person may be introduced to be a partner
without the consent of all existing members.
Borrowing

• Company – has more avenues to borrow funds.

• Partnership – cannot create a floating charge.

Registration procedure

• It is more cumbersome to incorporate a company.

• Less publicity and lower costs are involved in operating a
partnership.

Inspection of accounts

• Company’s accounts must be lodged with the Registrar and are

open to public inspection.
 Summary
• There are THREE types of business
organisations available in Malaysia.

• The most common mode of business widely

operated is partnership.