Question

QUESTIONS:

⦁ Mind map.

⦁ Students are required to create a mind map explaining :

⦁ Legal aspects of business organizations in Malaysia (Types of Business Entities including LLP).

⦁ The mind map should be in the format:

⦁ A4-sized paper

⦁ Either digital design or handwriting.

⦁ Number of pages: Maximum TWO (2) .

Answer 1

Classification of business organisation

1.) Sole proprietor/ sole trader

2.) Company:- public company / private company

3.) Partnership:- including limited liability partnership

Sole proprietor/ sole trader: It is simplest and easy form to start any business in Malaysia. This business is owned and run by single person called sole proprietorship business. Some example of sole proprietor/ trader business are shop owner, food stall business etc. As per the definition of sole proprietor, there is no separation between sole proprietorship business assets and owner's personal assets. Owner is the entirely responsible for the same. The decision of owner is prime for his business and only he will be the responsible for the consequences occurs in future.
Owner is the manager, and CEO of his business.

Advantage

Minimum capital is required

All assets and liabilities belongs to owner only.

Easy to start.

No need to disclose his personal accounts.

He is manager for his business.

Disadvantage

Limited no of member in this business.

Inadequate funds.

Unlimited liabilities.

Limited managerial skills.

He is liable for his decision.

Limited liabilities Partnership (LLP)

A partnership is is an association of people carrying some business with an intention to earn common view to profit and sharing among them in their prescribed rate given in agreement.

Formation
Lawful purpose - the partnership must be formed for a lawful purpose. Act- partnership is formed as per the partnership act 1961.
Number of partner- the partnership act agreement should disclose the number of partners. Agreement- the partnership agreement should made between all partners and should be mentioned all the necessary terms and conditions and all substantial matters.

Advantage

Easy to formulation of partnership among partners.

There should be mutually understanding among partners.

Disadvantage

Difficult to find suitable partners.

Distribution of works among partners

Not a separate entity.

Company

It is artificial person created by law and there is a corporate veil between owner and company.

Legal frameworks of company

Company act 2016 Common law and common cases laws. Companies Commission of Malaysian Act 2001(CCM) Securities Commission Act 1993 Capital market and securities act 2007.

Non legal sources

Codes of conduct e.g. Malaysian Code on Corporate Governance (revised 2017) Best practices e.g. Best Practices in Corporate Governance.

Capital structure of company

The sources of that fund are referred to as the following capital.

The sources of capital comes from:

i. Contributions of capital from members.

ii. Credits advanced to the company by creditors.

iii. Profits of the co. (if any) and not distributed to members or shareholders.

Equity Capital- raised funds from shareholders.

Debt- raised funds from banks.