Sole Proprietorship

- An attractive form of legal status for a new business

- Business Registration Act 1956

- Individual in business on his own

- The owner may transfer his business to someone else

- Owner managers the firm himself.

- One person

- No agreement is necessary

- The owner may withdraw capital, but his liability for the business’s debt is unlimited.

- A sole proprietorship may be dissolved informally by the owner himself.

Advantage

- Ease of information: business can be started fairly easily with minimal capital requirements.

- Total independence in decision making: he can make decisions and run the business the way he wishes.

- Total responsibility: he is willing to accept total responsibility for the firm’s performance.

- Taxation advantage: he only needs to pay personal income tax and not business tax.

Disadvantage

- Unlimited liability: failure in the business may mean a loss of personal property.

- Lack of continuity: if the owner dies, insane, the business ceases operations.

- Lack of experience and ability: business operations depend on one individual and his ability.

- Limited skills: he may find himself forced to make decision in areas of business operations which he lack expertise.

Partnership

- 2 or more persons doing business with a view of profit.

- Business Act 1956

- Cannot transfer his title to someone else without the consent of the other partner.

- A partnership must have an agreement.

- Partner’s may withdraw capital, but their liability for the firm debts is unlimited

- A partnership may be dissolved informally by agreement of the partners.

Advantages

- Taxation advantage: most partnership pay taxes as individuals, not corporative tax.

- Ease of formation: established by meeting only a few legal requirement.

- Combined talents and business acumen: all the partners’ abilities are combined to cover a wide range.

Disadvantages

- Unlimited liability: all partners are personally liable for the debts of the business

- Limited life span: partnership may end if any one of the partner suffers from dies, mental disorder.

- Lack of continuity: if any one of the partner dies, partnership arrangement ceases.

- Shared profit: any profit earned by the partnership will be shared among all partners.

Private Limited Company

- Limited by shares, shares can’t be sold to the general public.

- 2 persons until 50 persons

- Limited: legal identity of its own that is separated from the people who won it.

- Shareholders are not liable as individuals for the business debts beyond the paid-up value of their shares.

- Sdn. Bhd. or Pte Ltd

Advantages

- Limited liability: limited to the capital contributed to the company

- Perpetual life: not dependent upon the resignation of its members

- Ease of expansion: easier to expand and develop a private limited company because of its simplicity in equity participation.

- Attracts skilled employees: attract the interest of skilled employees.

Disadvantages

- High taxation: pay corporate tax as well as personal income tax.

- High set-up costs: cost setting up a private limited company is high.

- Limited membership: not more than 50 individual.

- Regulations: not allowed to offer or sell any shares or debentures to the general public.

Public Limited Company

- Limited by share, no maximum limit.

- Raise source (capital) selling shares

- Easily sell and purchase the shares of company

- Bhd & Ltd

Advantages

- Limited liability: limited to the individual’s investment in the company.

- Perpetual life: separates and distinct life from that of its owners.

- Transfer of ownership: transfer through the sale of stock to interest buyers.

- Ease of expansion: public limited company has a great potential for expansion.

Disadvantages

- High set-up cost: a large amount of organizing expenses involved in forming a corporation.

- High taxation: various taxes must be paid by the company.

- Financial disclosure: to disclose more information about its operations and financial status than it would desire.