APRIL 2015 SEMESTER

6.0 Coursework

1. There are three popular forms of business ownerships which are: (a) sole
proprietorship, (b) partnership, and (c) company.
A company can be categorised into two types, which are private limited company and
public limited company. In Malaysia, a business may be carried out in any one of these
forms.
Sole Proprietorship Definition
A sole proprietorship is an attractive form of legal status for a new business. It is formed
under the Business Registration Act 1956 (Amendment 1978) and the Procedures of
Businesses Registration 1957.
This form of business structure is solely owned and operated by one individual, this
means that it has a single owner. The sole proprietor is also known as a sole trader. The
sole proprietorship is by far the simplest business structure. It is owned by one
individual, but it need not be carried out by that individual alone. A sole proprietorship

can have a large number of employees. Examples of sole proprietorships are tailors,
beauty salons, restaurants, and mini markets. Only Malaysian citizens who are
permanent residents can register a business as a sole proprietor.
Characteristics of a successful sole proprietor
There are several characteristics of a successful sole proprietor which are as follows: He
is willing to accept sole responsibility for the firm's performance. Success or failure of
the firm rests on the shoulders of the sole proprietor. He is willing to work long hours.
The owner must often work longer than the typical working hours put in by his
employees. He is on call at all times and may have to fill in for a sick worker. A
successful sole proprietor has strong organizational skills, leadership skills, and
communication skills.
He has had previous experience working in the industry in which he is competing in at
present. This experience would give him an edge in understanding the competition and
the wants and needs of his customers.
Partnership Definition
A partnership is formed under the Business Registration Act 1956 (Amendment 1978)
and the Procedures of Businesses Registration 1957. It is a business owned by at least
two or more individuals but not exceeding 20 people. The owners of the business are
called partners. Each partner contributes money, labour, or skills, and each shares the
profits as well as the losses of the business.

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Partners of a firm are always recommended to prepare an agreement on the articles of

partnership. This is because, unless otherwise agreed in writing, the court assumes an
equal partnership, that is the equal sharing of profits, losses, asset management, and
other aspects of the business. A partnership agreement clearly outlines the financial and
managerial contributions of each partner and carefully delineates the roles of partners in
the partnership.
Types of partnership
In a general partnership, all partners have unlimited liabilities. They are personally
liable for all obligations of the firm.
In a limited partnership, some of the partners have limited liabilities, that is, they share
the firm's profits or losses but do not take an active role in managing the company. The
limited partners will only be liable to the extent of their contribution. Their
responsibilities would not extend to the management of the company, but they would
share the company's profits and losses. However, a limited partnership must have at
least one general partner who accepts unlimited liability. The general partner manages
the company, receives a salary, and shares the firm's profits or losses.
Company Definition
Companies are registered as legal entities and are formed by several individuals who
own property, draw contracts, and employ people. All companies in Malaysia are

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governed by the Companies Act 1965. There are two types of companies which are: (a)
private limited companies, and (b) public limited companies.
Private limited company A private limited company is a company limited by shares and
owned by a group of people with at least two or more individuals but not exceeding 50
people who pool their capital and work together to form a company. A private limited
company is medium in size.
In this type of company, the members' personal liabilities are limited to the par value of
their shares. It cannot sell shares to the general public. The name of a private limited
company ends with the word `Sendirian Berhad' or with its abbreviation `Sdn. Bhd.'
which means that it is owned by a group of people.
The term 'limited' means it has a legal identity of its own that is separated from the
people who own it. Even in liquidation, the creditor's claims are restricted to the assets
of the company. The principal advantage is the shareholders are not liable as individuals
for the business debts beyond the paid-up value of their shares. This applies even if the
shareholders are working directors, unless the company has been trading fraudulently or
wrongfully.
The owners of a company are called shareholders. The shareholders elect a board of
directors who are responsible for establishing the general policies of the corporation and
appointing the president and other key officers of the company. In a private limited

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company, ownership is held by a small number of investors and the stock is not readily
available to other investors.
Public limited company
A public limited company is a company limited by shares with at least seven or more
individuals and there is no maximum limit in terms of membership. A public limited
company is very large in size and raises capital through the sale of shares and is run by a
board of directors elected by the shareholders. The company shows its status by using
the word `Berhad or it's abbreviation `Bhd. after the company's name.
The term 'public' means publicly held. In other words, the shares of stock can be easily
purchased or sold by investors. The public can also buy and sell the shares of the
company. The company would publish a prospectus if it is not listed in the stock market.
However, if it is listed in the Malaysian stock market the public can buy and sell the
shares.

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