OVERVIEW DIFFERENT TYPES OF BUSSINESS ENTITIES.

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TYPE OF BUSINESS ENTITIES
Unincorporated Associations
– Sole Proprietorship – Partnership

Incorporated Associations/Companies
– Public Limited Companies – Companies Limited by Guarantee – Private Limited Companies

Differences between A Company and A Sole Proprietorship Or Partnership
Indicators Sole Proprietorship Partnership Company

Number of members

One person Max : < 20

Min: 2 persons Max: 50 persons Partners own the assets collectively

Min: 2 members Max: Public: No Limit Private: 50 members Company possess its own property. Members do not have interest in the company’s property as they do not legally own them.

Ability to hold property

Business assets are his assets

Members’ liability for debts

Solely responsible for all the debts of the firm. Liability is unlimited. Any legal proceedings brought in the name of the sole proprietor not the name of the firm itself. No legal entity. When the sole proprietor dies the firm will be closed

Mode of taking legal proceedings

Collectively responsible for all the debts of the firm. Partners liability to pay the firm’s debt is unlimited No legal entity.

Liability of members is limited to the amount of capital invested in the company Can sue and be sued in its own name to enforce its rights or liabilities owned by it Can only be dissolve in accordance with the provisions of the Companies Act 1965

Duration and dissolution

Dissolved in accordance with the partnership agreement.

CLASSIFICATION OF COMPANIES
2. Companies limited by shares 3. Companies limited by guarantee 4. Unlimited companies

Liability of the Members
• Liability in respect of its debts may be limited or unlimited. • The company’s own liability for its debts is never limited; must pay off its creditors. • The question of members’ liability only becomes relevant if the company goes into liquidation and the debts cannot be fully discharged out of its assets.

Companies Limited By Shares
• Liability of the members to contribute towards the assets of the company on winding up its limited. • Limited by shares, a member cannot be asked to pay more than the amount unpaid on his shares when liquidate. • If he has paid in full for his shares, he cannot be asked for any further contributions.

Companies Limited By Guarantee
• Where the liability of the members is limited by the Memorandum of Association to the amount the members have guaranteed to contribute to the assets of the company on winding up. • Sec 14A, CA (amendment) 1985, prohibits the formation of a company limited both by shares and guarantee.

Unlimited Companies
Company which the liability of the members to contribute to the assets of the company on winding up is not limited in any way. When a company is wound up every present and past member is liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities.

Private Companies
A company with a share capital may be incorporated as a private company if its memorandum or articles (M&A) of associations contains all of the followings:
A restriction on the right to transfer shares A limitation on the number of members to not more than 50 people A prohibition against raising money from the public

Differences Private and Public Company
INDICATORS Name of Company PRIVATE COMPANY Must end with the word ‘Sendirian Berhad’ PUBLIC COMPANY Must end with the word ‘Berhad’

Commencement of the business

Can commence business and exercise borrowing powers as soon as they incorporated

Can only commence business after the issue of the certificate for commencement of business by ROC Must hold a statutory meeting and lodge statutory reports with ROC

Statutory meeting Does not apply

Differences Private and Public Company
INDICATORS Issue of shares PRIVATE COMPANY PUBLIC COMPANY Does not issue prospectus Must issue a prospectus or Statement in lieu of prospectus Director need not retire at Director must retire the age 70 at the age of 70

Age limit of director

Removal of director

Rules regarding removal of directors are found in Articles of Association

Section 128 of Companies Act stipulates that a director can be removed by ordinary resolution.

TYPE OF BUSINESS ENTITIES
• Unincorporated Associations
– Sole Proprietorship – Partnership

• Incorporated Associations/Companies
– Public Limited Companies – Companies Limited by Guarantee – Private Limited Companies

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