Chapter 6 forms of business ownership
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Sole proprietorships are owned and controlled by a single individual who is entitled to all profits and responsible for all losses. They are easy to set up but have limited access to capital and unlimited liability. Partnerships allow multiple individuals to pool resources and share profits and losses. However, each partner has unlimited liability and decisions can be made without consulting others. Corporations are legally distinct entities with shareholders having limited liability. They are managed by a board of directors elected by shareholders. Corporations can access greater capital but are subject to more regulations and higher taxes.
Chapter 6 forms of business ownership
- 1. Form of Business Ownership Sole Proprietor/Sole Trader/Milikan Tunggal.Syarikat Ah Seong, Kedai Makan Mek Nab & Joul Enterprise Partnership-Perkongsian-Dr Wong and rakan-rakan. Companies-Syarikat:Sdn Bhd, Berhad Co-operative-Koperasi-Koperasi Angkatan Tentera Malaysia, Angkasa, Koperasi Safeguards etc..
- 2. Sole Proprietor/Sole Trader/Milikan Tunggal. Business ownership is a single business carried on by individuals and owned by individual full. Business owner have a power to control the business operations. Owners and business is referred to as one of the same entity. No separation between them. Owners will received all the profits and bear for all losses from business. Unlimited liabilities
- 3. Advantages Easy to set up. The owner has absolute power to control the business. Fast decision make by the owner of the business. Individual Tax. No need the complex financial reports.
- 4. Disadvantages Difficult to grow because of the limited capacity of capital Difficult to get capital financing from the financial institution because they need a strong assurance from the business. Liability is unlimited. Business will disband itself if the owner died.
- 5. Partnerships A partnership is defined as the relationship that exist between person carrying on business. These person agree to combine some or all their property, labor and skill. This relationship is based on contract. Business owned by minimum of two persons and maximum of 20 persons. Professional service partnerships consist of maximum 50 persons. There are two types of partnerships: -Active partner -Sleeping partner
- 6. Partnerships Strictly follow the Partnerships Act 1961 and partnerships contract of agreement for profit and loss distribution. Liability for partnerships is unlimited except for the limited partnerships. General partners have unlimited liability for partnerships debts, and the partnerships terminates when a general partner wishes to sell out or dies.
- 7. Advantages Partnerships allow for a greater amount of money, skill and other resources to be pooled. They are relatively easy to organize. They are subject to limited government regulations and do not face high tax rates.
- 8. Disadvantages Partnerships have a limited life. Each partner is subject to unlimited liability. This means that if the company fails, creditors can take action against both the partnership and the persons who are in it. Partners have mutual agency. This means that one partner can make decisions without consulting to other(s).
- 9. Co-operative It is a business organization owned and operated by a group of individuals for their mutual benefits. A community based business Eg: Bank Rakyat, Koperasi Angkatan Tentera Malaysia and Angkasa.
- 10. Corporation A business created as a distinct legal entity composed of one or more individuals or entities. In Malaysia, corporations are follow strictly under Company Act 1965. Corporation are divide into two -Private Limited -Public Limited
- 11. Corporation Private limited can be held by minimum of 2 and maximum of 50 shareholders. There is no maximum shareholders for Public limited company. Shareholders will received their profit in the form of dividend. Corporation managed by Board of Director that appointed by shareholders in AGM. Liability of shareholders is limited base on the paid up capital. Tax is paid, base on company profit. Eg: Tenaga Nasional Berhad, Safeguard Securicor Sdn Bhd.