crg530- different types of bussiness entities
Post on 15-Nov-2014
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OVERVIEW
DIFFERENT TYPES OF
BUSSINESS ENTITIES.
PREPARED FOR :
TYPE OF BUSINESS ENTITIES
Unincorporated Associations– Sole Proprietorship– Partnership
Incorporated Associations/Companies– Public Limited Companies– Companies Limited by Guarantee– Private Limited Companies
Differences between A Company and A Sole Proprietorship Or Partnership
Indicators Sole Proprietorship Partnership Company
Number of members
One personMax : < 20
Min: 2 personsMax: 50 persons
Min: 2 membersMax:Public: No LimitPrivate: 50 members
Ability to hold property
Business assets are his assets
Partners own the assets collectively
Company possess its own property. Members do not have interest in the company’s property as they do not legally own them.
Members’ liability for debts
Solely responsible for all the debts of the firm. Liability is unlimited.
Collectively responsible for all the debts of the firm.Partners liability to pay the firm’s debt is unlimited
Liability of members is limited to the amount of capital invested in the company
Mode of taking legal proceedings
Any legal proceedings brought in the name of the sole proprietor not the name of the firm itself. No legal entity.
No legal entity. Can sue and be sued in its own name to enforce its rights or liabilities owned by it
Duration and dissolution
When the sole proprietor dies the firm will be closed
Dissolved in accordance with the partnership agreement.
Can only be dissolve in accordance with the provisions of the Companies Act 1965
CLASSIFICATION OF COMPANIES
1. Companies limited by shares2. Companies limited by guarantee3. Unlimited companies
Liability of the Members
• Liability in respect of its debts may be limited or unlimited.
• The company’s own liability for its debts is never limited; must pay off its creditors.
• The question of members’ liability only becomes relevant if the company goes into liquidation and the debts cannot be fully discharged out of its assets.
Companies Limited By Shares
• Liability of the members to contribute towards the assets of the company on winding up its limited.
• Limited by shares, a member cannot be asked to pay more than the amount unpaid on his shares when liquidate.
• If he has paid in full for his shares, he cannot be asked for any further contributions.
• The creditors of company are not entitled to take a member’s personal assets in satisfaction of corporate liabilities.
Companies Limited By Guarantee
• Where the liability of the members is limited by the Memorandum of Association to the amount the members have guaranteed to contribute to the assets of the company on winding up.
• Sec 14A, CA (amendment) 1985, prohibits the formation of a company limited both by shares and guarantee.
• Guarantee companies must be public and without having a share capital like trade associations, charitable bodies, professional societies and social and sports clubs which by subscription of their members.
Unlimited CompaniesCompany which the liability of the members to contribute to the assets of the company on winding up is not limited in any way.When a company is wound up every present and past member is liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities.
Private Companies
A company with a share capital may be incorporated as a private company if its memorandum or articles (M&A) of associations contains all of the followings:
A restriction on the right to transfer sharesA limitation on the number of members to not more than 50 people A prohibition against raising money from the public
Differences Private and Public Company
INDICATORS PRIVATE COMPANY PUBLIC COMPANY
Name of Company Must end with the word ‘Sendirian Berhad’
Must end with the word ‘Berhad’
Commencement of the business
Can commence business and exercise borrowing powers as soon as they incorporated
Can only commence business after the issue of the certificate for commencement of business by ROC
Statutory meeting Does not apply Must hold a statutory meeting and lodge statutory reports with ROC
Differences Private and Public Company
INDICATORS PRIVATE COMPANY PUBLIC COMPANY
Issue of shares Does not issue prospectus Must issue a prospectus or Statement in lieu of prospectus
Age limit of director Director need not retire at the age 70
Director must retire at the age of 70
Removal of director Rules regarding removal of directors are found in Articles of Association
Section 128 of Companies Act stipulates that a director can be removed by ordinary resolution.
TYPE OF BUSINESS ENTITIES
• Unincorporated Associations– Sole Proprietorship– Partnership
• Incorporated Associations/Companies– Public Limited Companies– Companies Limited by Guarantee– Private Limited Companies
THANK YOU……..
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