Business ownership refers to the legal structure of a business.
As an entrepreneur, choosing the right type of business ownership is important based on legal requirements, advantages, and disadvantages.
In Malaysia, there are four popular types of business ownership:
A sole proprietorship is a simple and attractive option for a new business.
Under the Business Registration Act 1956 (Amendment 1978) and the Procedures of Businesses Registration 1957, there are minimal legal requirements for this type of business ownership.
Only Malaysian citizens or permanent residents can register a sole proprietorship.
Partnership refers to a business owned by at least two individuals but not exceeding 20 persons.
Like sole proprietorships, only Malaysian citizens or permanent residents can register partnerships.
Partners contribute money, labour, or skills and share profits and losses. There are two main types of partnership:
- General Partnership: In this type, all partners have unlimited liabilities for the business’s debts.
- Limited Partnership: In this type, some partners have limited liabilities and do not actively manage the company.
Private Limited Company
A private limited company is owned by people with at least two or more individuals but not exceeding 50 people.
The shares of a private limited company cannot be sold to the general public. Shareholders are not liable as individuals for business debts beyond the paid-up value of their shares.
The board of directors establishes the corporation’s policies and appoints key company officers.
The name of a private limited company ends with the words ‘Sendirian Berhad’ or ‘Private Limited’ with its abbreviation ‘Sdn Bhd’ or ‘Pte Ltd’, which means that a group of people owns it.
Public Limited Company
A public limited company is limited by shares with at least seven or more individuals, and there is no maximum limit in terms of membership.
Public limited companies raise capital by selling shares to the public. They are run by a board of directors elected by shareholders. The shares of a public limited company can be easily purchased or sold by investors.
A public limited company can be listed or unlisted on the stock exchange. To become a listed company in Malaysia, the company needs a paid-up capital of at least RM60 million.
A public limited company shows its status by using the word ‘Berhad’ or ‘Limited’ with its abbreviation ‘Bhd.’ or ‘Ltd.’ after the company’s name.
When identifying the type of business ownership that best suits your business, consider each form’s legal requirements, advantages, and disadvantages. It is advisable to seek professional advice before making a decision.
To access relevant information, check out the following blogs: