sole proprietorship
A sole proprietorship is the simplest and cheapest to set-up. Unlike private limited companies, a sole proprietorship is only required to pay an annual fee to the Companies Commission of Malaysia to keep its business renewed from year to year. There is no audit and annual filing requirement. However, the danger of this set-up is that it has unlimited liability. That is to say that if the sole proprietorship cannot meet its liabilities, the creditors may go after the owner’s personal assets. There is no protection to the owner’s personal assets. There is no separation between the owner and its personal assets.
Tax Gains or profits made from carrying on a business, trade, vocation or profession under this business structure is considered a business income under individual income. Only expenses directly incurred to generate the business income is allowed for the purpose of calculation of chargeable income. Personal expenses such as phone bills, personal car, pre-incorporation expenses is not allowable.
Tax Gains or profits made from carrying on a business, trade, vocation or profession under this business structure is considered a business income under individual income. Only expenses directly incurred to generate the business income is allowed for the purpose of calculation of chargeable income. Personal expenses such as phone bills, personal car, pre-incorporation expenses is not allowable.
partnership
Partnership is the same as sole proprietorship except there are more than 1 owner. It is an extended version of a sole proprietorship. This form of set-up is usually for professional firms such as lawyers and auditors.
limited liability partnership (llp)
LLP is a hybrid between a private limited company and partnership. It is similar to conventional partnership but with the advantages of a private limited company. Set out below are the salient features of LLP:-
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- It is body corporate and is a separate legal entity from its partners.
- LLP has perpetual succession.
- It is capable of suing and being sued, acquiring, owning, holding and developing or disposing of property.
- LLP has lesser compliance requirements and is therefore a more affordable business vehicle. For example, LLP is not required to audit its accounts annually.
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private limited company (sdn Bhd)
Private Limited Company is the most common form of companies in Malaysia, due to the following:-
1. Separate Legal Entity : Unlike sole proprietorship, a private limited company is a separate legal identity. It can acquire assets, go into debt, enter into contracts, sue or be sued in its own name and has a perpetual succession until the directors and shareholders decide to dissolve the company.
2. Limited Liability: The liability of the members/owners is limited to the amount that they each have contributed as capital to the company. There is a separation between the owners and its personal assets. If the company fails to meet its liabilities, the creditors will not be able to go after the owners’ personal assets.
3. Credibility: A private limited company (Sdn Bhd) gives credibility to the business owners.
Usually entrepreneurs toy between setting up a private limited company (Sdn Bhd) and a sole proprietorship. The impression of sole proprietorship is the impermanence of such a set-up. Sole proprietorship can be closed down by merely filing a form to the Registrar informing the cessation of business. Furthermore, death of the owner will also cause the sole proprietorship to be terminated.
Therefore, a private limited company (Sdn Bhd), is the preferred structure by business associates as opposed to sole proprietorship, particularly so if you are conducting B2B business.
1. Separate Legal Entity : Unlike sole proprietorship, a private limited company is a separate legal identity. It can acquire assets, go into debt, enter into contracts, sue or be sued in its own name and has a perpetual succession until the directors and shareholders decide to dissolve the company.
2. Limited Liability: The liability of the members/owners is limited to the amount that they each have contributed as capital to the company. There is a separation between the owners and its personal assets. If the company fails to meet its liabilities, the creditors will not be able to go after the owners’ personal assets.
3. Credibility: A private limited company (Sdn Bhd) gives credibility to the business owners.
Usually entrepreneurs toy between setting up a private limited company (Sdn Bhd) and a sole proprietorship. The impression of sole proprietorship is the impermanence of such a set-up. Sole proprietorship can be closed down by merely filing a form to the Registrar informing the cessation of business. Furthermore, death of the owner will also cause the sole proprietorship to be terminated.
Therefore, a private limited company (Sdn Bhd), is the preferred structure by business associates as opposed to sole proprietorship, particularly so if you are conducting B2B business.
public limited company (berhad)
Without going in to too much detail, for the purpose of this website, suffice to say that a public limited company (Berhad) is rather similar to private limited companies except that it may offer its shares to the public and has more than 50 members. Although not necessarily so, public limited companies are usually listed companies. A public limited company (Berhad) is also govern by the Securities Commission of Malaysia.
This type of entity is usually the type selected by large businesses.
This type of entity is usually the type selected by large businesses.
company limited by guarantee
A company limited by guarantee is one which the liability of the members are limited to the amount which the members have undertaken or guaranteed to contribute. A company limited by guarantee is usually the type of entity used by non-profit organisations such as charitable bodies, foundations etc.
foreign company
A foreign company is equivalent to a foreign branch in Malaysia. A branch office is registered as an extension of the parent company and is not a separate legal entity. The liabilities of a branch office extend to its parent company.
Foreign branch is not allowed to carry out trade related businesses be it retail or wholesale. Wholesale or retail trade businesses with foreign interests are required to operate through a locally incorporated private limited company (see above).
Foreign branch is not allowed to carry out trade related businesses be it retail or wholesale. Wholesale or retail trade businesses with foreign interests are required to operate through a locally incorporated private limited company (see above).