TOPIC 1
Wolverine, a retired officer of the army, plans to open up a Pisang Goreng stall at the front
of Multimedia University Malacca. Identify the suitable business entity for his future
business venture, along with its advantages and disadvantages, and relevant procedures on
how to register such business.
The suitable business entity for his future business venture is sole proprietorship. It is commonly
known as Enterprise or Trading Co. This is because Wolverine is the only person to open the
pisang goreng stall. Furthermore, it is the simplest and most common structure chosen to start a
business. Moreover, it is an unincorporated business entity that is owned by one individual and
there is no legal distinction between the owner and the business. This means that the owner
directly owns the business, including every asset of the business such as the equipment,
inventory, and building. Even if Wolverine may be helped by his wife and family, or he may
employ other people to work for him, this does not alter the fact that the management is entirely
in his hands.
Pros and Cons
The first advantage of sole proprietorship is that it is easy and inexpensive to form. This form of
business is cheap, easy to set up and with minimal documentation. Only small amounts of capital
are needed to start and run a business. It is also easy to organise and the least expensive business
structure to establish. There is also no risk of fraud by a partner.
Secondly, the owner has complete control over all decisions since he is the only owner of the
business. He does not need to consult anyone else when making decisions or changes. Thus, this
gives a high degree of flexibility to the owner. The owner also receives all the profit of the
business.
Thirdly, it provides easy tax preparation for the owner. The business is not taxed separately, so it
is easy to fulfil the tax reporting requirements for a sole proprietorship. The tax rates are also the
lowest among all business structures.
Conversely, the first disadvantage is that the owner has unlimited personal liability. Since there is
no legal separation between the owner and his business, he can be held personally liable for the
debts and obligations of the business. This risk extends to any liabilities incurred due to
employee actions. He also has unlimited liability for business debt, so he is responsible for
paying all debts and damages of their business.
Secondly, it is hard for the owner to raise money. Sole proprietors often face challenges when
trying to raise long-term capital. Banks are hesitant to grant loans because they are afraid that the
sole owner is not capable of repaying the loan if the business fails due to limited assets.
,Thirdly, the owner needs to bear a heavy burden. The owner is ultimately responsible for the
successes and failures of the business. Thus, the enterprise may be affected or terminated if the
owner becomes ill. Since the business has the same legal entity as the proprietor, it ceases to
exist upon the proprietor's death. If the firm fails, creditors may force the sale of the proprietor's
personal property as well as their business property to satisfy their claim. When the owner dies,
the continuation of the business is difficult, because a new owner must typically accept all
liabilities of the business.
Registration
To start a business in Malaysia, a sole proprietor needs to register his new business under
Suruhanjaya Syarikat Malaysia (Companies Commission Malaysia) (SSM). Registration of a
new business must be done within 30 days from the date of commencement of the business.
According to S 5 of ROBA, Registration can be done at any SSM counter or through the
e-Lodgement services. Failure to register is an offence. S 12(1)(a) of ROBA provides that such
offender is liable to a fine not exceeding RM50k or to imprisonment for a term not exceeding 2
years or to both.
Secondly, the owner must be a Malaysian Citizen or a Permanent Resident who is 18 years old or
above. This is because foreigners are not allowed to register sole proprietorship in Malaysia.
Thirdly, businesses may be registered using personal names or using a trade name. A business
name that uses a personal name as stated in the identity card is not required to apply for business
name approval. However, if the owner intended to use a trade name, the owner must fill up Form
PNA.42 before registration, in order to obtain an approval from SSM for the proposed business
name. Business names approval is according to Rules 15 ROBR.
Fourthly, upon approval, the sole owner must complete the registration of the said business name
using Form A. In Form A, the sole trader must state the name, nature, date of commencement of
the business and the address of the place of business. If the business has more than one place of
business, the sole trader must state the addresses of the branches.
Fifthly, the owner must deliver such a form to the ROB with payment of the registration fee.
Business Registration can be made for a period of 1 year and not more than 5 years.
Sixthly, upon receipt of the registration application, the ROB will register the business and issue
a certificate of registration for the business as in Form "D” under Rule 13 (1) of ROBR. The
certificate of registration must be kept exhibited in a conspicuous place at the principal place of
business under S 11A ROBA. Every letterhead, invoice, bill, or other document used by a
registered business and containing the name or names of such business must display the number
of the certificate of registration under Rule 13 (2) ROBR. S 5 of ROBA provides that a
certificate of registration is conclusive evidence that all the requirements under the Act in respect
,of the registration and matters precedent and incidental to such registration have been complied
with and the business referred to in the certificate is duly registered under the Act. Meanwhile,
according to S 6(4) of ROBA, a certificate of registration or a certified copy of any entry in the
register in respect of any business is a prima facie evidence of the truth of the facts stated therein.
Lastly, Rule 13A of ROBR states that the owner must put up a signboard displaying the business
name and registration number outside the place of business.
How a company is incorporated? Provide relevant authorities.
Company is a business corporation of 2 or more individuals and registered under the Companies
Act 2016. There are 2 sources of Malaysian Company Law: statutes and case law precedent.
Statutes refers to the Companies Act 2016 while case law precedent from Malaysia, UK &
Australia can be applied when the Act is silent and for interpretation. This is because S 5 of Civil
Law Act 1956 allows the application of English common law in commercial matters such as
insurance and business transactions when there is a lacuna in the local legislation.
Process of Incorporation
The first step is the lodgement of a name search application to SSM for approval of using the
chosen name in your new company.
Secondly, name reservation. Payment of a RM 50 fee for each name applies for every 30 days.
Reservation can be done for a period up to 180 days.
Thirdly, lodgement of application. Submission of incorporation documents under S 14(1) of CA
2016 which are declaration of compliance and additional documents.
Fourthly, incorporation fee. The minimum registration fee is RM 1,000 for companies limited by
share and RM 3,000 for companies limited by guarantee.
Fifthly, verification of incorporation which is the notice of approval and registration and
certificate of incorporation (upon request).
Lastly, post incorporation. The last step is to appoint a company secretary within 30 days and file
a constitution (if required), to obtain licence (if necessary), common seal and to register office.
Application
The relevant authority is S 14 of CA 2016 which provides the application for incorporation.
, According to S 14(1) of CA 2016, a person who desires to form a company shall apply for
incorporation to the Registrar.
Furthermore, S 14(2) of CA 2016 states that a company shall not be formed for any unlawful
purpose.
Next, S 14(3) of CA 2016 provides information that must be included in the application form
which are the name of the proposed company; the status of whether the company is private or
public; the nature of business of the proposed company; and the proposed address of the
registered office of the proposed company.
S 14(4) of CA 2016 states that the application for incorporation shall be accompanied by a
statement from each promoter or director confirming his consent to act as a promoter or to his
appointment as a director, as the case may be; and that he is not disqualified under this Act to act
as a promoter or a director, as the case may be
S 198 of CA 2016 provides persons disqualified from being a director.
According to S 198(1) of CA 2016, a person shall not hold office as a director of a company or
whether directly or indirectly be concerned with or takes part in the management of a company,
if the person is an undischarged bankrupt; has been convicted of an offence relating to
promotion, formation or management of a corporation; has been convicted of an
offence involving bribery, fraud or dishonesty.
S 199 of CA 2016 provides the power of court to disqualify persons from acting as director or
promoter. Under S 199(1)(a) of CA 2016, the registrar of the company can stop a person from
being a director when that person becomes a director of two companies which have closed down
due to insolvency within a 5 years period.
Lastly, S 196(1) of CA 2016 provides that the minimum number of company director is 1 for a
private company whereas 2 for a public company.
Registration
S 15 of CA 2016 provides the registration for incorporation. According to this provision, if the
Registrar is satisfied that the requirements of this Act as to the application for incorporation are
complied with and upon payment of the prescribed fee, the Registrar shall enter the particulars of
the company in the register; assign a registration number to the company as its company
registration number and issue a notice of registration in the form and manner as the Registrar
may determine.
S 17 of CA 2016 states that the Registrar may issue a certificate of incorporation upon
application by the company.
Wolverine, a retired officer of the army, plans to open up a Pisang Goreng stall at the front
of Multimedia University Malacca. Identify the suitable business entity for his future
business venture, along with its advantages and disadvantages, and relevant procedures on
how to register such business.
The suitable business entity for his future business venture is sole proprietorship. It is commonly
known as Enterprise or Trading Co. This is because Wolverine is the only person to open the
pisang goreng stall. Furthermore, it is the simplest and most common structure chosen to start a
business. Moreover, it is an unincorporated business entity that is owned by one individual and
there is no legal distinction between the owner and the business. This means that the owner
directly owns the business, including every asset of the business such as the equipment,
inventory, and building. Even if Wolverine may be helped by his wife and family, or he may
employ other people to work for him, this does not alter the fact that the management is entirely
in his hands.
Pros and Cons
The first advantage of sole proprietorship is that it is easy and inexpensive to form. This form of
business is cheap, easy to set up and with minimal documentation. Only small amounts of capital
are needed to start and run a business. It is also easy to organise and the least expensive business
structure to establish. There is also no risk of fraud by a partner.
Secondly, the owner has complete control over all decisions since he is the only owner of the
business. He does not need to consult anyone else when making decisions or changes. Thus, this
gives a high degree of flexibility to the owner. The owner also receives all the profit of the
business.
Thirdly, it provides easy tax preparation for the owner. The business is not taxed separately, so it
is easy to fulfil the tax reporting requirements for a sole proprietorship. The tax rates are also the
lowest among all business structures.
Conversely, the first disadvantage is that the owner has unlimited personal liability. Since there is
no legal separation between the owner and his business, he can be held personally liable for the
debts and obligations of the business. This risk extends to any liabilities incurred due to
employee actions. He also has unlimited liability for business debt, so he is responsible for
paying all debts and damages of their business.
Secondly, it is hard for the owner to raise money. Sole proprietors often face challenges when
trying to raise long-term capital. Banks are hesitant to grant loans because they are afraid that the
sole owner is not capable of repaying the loan if the business fails due to limited assets.
,Thirdly, the owner needs to bear a heavy burden. The owner is ultimately responsible for the
successes and failures of the business. Thus, the enterprise may be affected or terminated if the
owner becomes ill. Since the business has the same legal entity as the proprietor, it ceases to
exist upon the proprietor's death. If the firm fails, creditors may force the sale of the proprietor's
personal property as well as their business property to satisfy their claim. When the owner dies,
the continuation of the business is difficult, because a new owner must typically accept all
liabilities of the business.
Registration
To start a business in Malaysia, a sole proprietor needs to register his new business under
Suruhanjaya Syarikat Malaysia (Companies Commission Malaysia) (SSM). Registration of a
new business must be done within 30 days from the date of commencement of the business.
According to S 5 of ROBA, Registration can be done at any SSM counter or through the
e-Lodgement services. Failure to register is an offence. S 12(1)(a) of ROBA provides that such
offender is liable to a fine not exceeding RM50k or to imprisonment for a term not exceeding 2
years or to both.
Secondly, the owner must be a Malaysian Citizen or a Permanent Resident who is 18 years old or
above. This is because foreigners are not allowed to register sole proprietorship in Malaysia.
Thirdly, businesses may be registered using personal names or using a trade name. A business
name that uses a personal name as stated in the identity card is not required to apply for business
name approval. However, if the owner intended to use a trade name, the owner must fill up Form
PNA.42 before registration, in order to obtain an approval from SSM for the proposed business
name. Business names approval is according to Rules 15 ROBR.
Fourthly, upon approval, the sole owner must complete the registration of the said business name
using Form A. In Form A, the sole trader must state the name, nature, date of commencement of
the business and the address of the place of business. If the business has more than one place of
business, the sole trader must state the addresses of the branches.
Fifthly, the owner must deliver such a form to the ROB with payment of the registration fee.
Business Registration can be made for a period of 1 year and not more than 5 years.
Sixthly, upon receipt of the registration application, the ROB will register the business and issue
a certificate of registration for the business as in Form "D” under Rule 13 (1) of ROBR. The
certificate of registration must be kept exhibited in a conspicuous place at the principal place of
business under S 11A ROBA. Every letterhead, invoice, bill, or other document used by a
registered business and containing the name or names of such business must display the number
of the certificate of registration under Rule 13 (2) ROBR. S 5 of ROBA provides that a
certificate of registration is conclusive evidence that all the requirements under the Act in respect
,of the registration and matters precedent and incidental to such registration have been complied
with and the business referred to in the certificate is duly registered under the Act. Meanwhile,
according to S 6(4) of ROBA, a certificate of registration or a certified copy of any entry in the
register in respect of any business is a prima facie evidence of the truth of the facts stated therein.
Lastly, Rule 13A of ROBR states that the owner must put up a signboard displaying the business
name and registration number outside the place of business.
How a company is incorporated? Provide relevant authorities.
Company is a business corporation of 2 or more individuals and registered under the Companies
Act 2016. There are 2 sources of Malaysian Company Law: statutes and case law precedent.
Statutes refers to the Companies Act 2016 while case law precedent from Malaysia, UK &
Australia can be applied when the Act is silent and for interpretation. This is because S 5 of Civil
Law Act 1956 allows the application of English common law in commercial matters such as
insurance and business transactions when there is a lacuna in the local legislation.
Process of Incorporation
The first step is the lodgement of a name search application to SSM for approval of using the
chosen name in your new company.
Secondly, name reservation. Payment of a RM 50 fee for each name applies for every 30 days.
Reservation can be done for a period up to 180 days.
Thirdly, lodgement of application. Submission of incorporation documents under S 14(1) of CA
2016 which are declaration of compliance and additional documents.
Fourthly, incorporation fee. The minimum registration fee is RM 1,000 for companies limited by
share and RM 3,000 for companies limited by guarantee.
Fifthly, verification of incorporation which is the notice of approval and registration and
certificate of incorporation (upon request).
Lastly, post incorporation. The last step is to appoint a company secretary within 30 days and file
a constitution (if required), to obtain licence (if necessary), common seal and to register office.
Application
The relevant authority is S 14 of CA 2016 which provides the application for incorporation.
, According to S 14(1) of CA 2016, a person who desires to form a company shall apply for
incorporation to the Registrar.
Furthermore, S 14(2) of CA 2016 states that a company shall not be formed for any unlawful
purpose.
Next, S 14(3) of CA 2016 provides information that must be included in the application form
which are the name of the proposed company; the status of whether the company is private or
public; the nature of business of the proposed company; and the proposed address of the
registered office of the proposed company.
S 14(4) of CA 2016 states that the application for incorporation shall be accompanied by a
statement from each promoter or director confirming his consent to act as a promoter or to his
appointment as a director, as the case may be; and that he is not disqualified under this Act to act
as a promoter or a director, as the case may be
S 198 of CA 2016 provides persons disqualified from being a director.
According to S 198(1) of CA 2016, a person shall not hold office as a director of a company or
whether directly or indirectly be concerned with or takes part in the management of a company,
if the person is an undischarged bankrupt; has been convicted of an offence relating to
promotion, formation or management of a corporation; has been convicted of an
offence involving bribery, fraud or dishonesty.
S 199 of CA 2016 provides the power of court to disqualify persons from acting as director or
promoter. Under S 199(1)(a) of CA 2016, the registrar of the company can stop a person from
being a director when that person becomes a director of two companies which have closed down
due to insolvency within a 5 years period.
Lastly, S 196(1) of CA 2016 provides that the minimum number of company director is 1 for a
private company whereas 2 for a public company.
Registration
S 15 of CA 2016 provides the registration for incorporation. According to this provision, if the
Registrar is satisfied that the requirements of this Act as to the application for incorporation are
complied with and upon payment of the prescribed fee, the Registrar shall enter the particulars of
the company in the register; assign a registration number to the company as its company
registration number and issue a notice of registration in the form and manner as the Registrar
may determine.
S 17 of CA 2016 states that the Registrar may issue a certificate of incorporation upon
application by the company.
