There Are Various Types of Business in Private Sector

1398 words (6 pages) Essay in Company Law

02/02/18 Company Law Reference this

Last modified: 02/02/18 Author: Law student

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Private Sector is actually business organizations that owned and run in private individuals. There are various types of business in private sector, like Sole Proprietor, Partnership, Limited Companies, Cooperatives, Franchise, and Charities. In spite of various types of these, but actually their aim was almost the same just they did it in different ways. The main reason of all these business is to earn profit and increase their market’s shares. And these various types of business are mostly appear in Malaysia’s commercial market.

Sole Proprietor is the easiest and oldest type of business that can start with a low cost capital, for example doctors, mechanics, beauticians and etc. This is an individually owned business, it is a type of business which owned and run by one owner. The owner normally is the boss and the worker; they can also employ others or even work in their own business. The owner can make their own decision without discuss with any other partner, it is fast and more efficient. They earn more profits compare to other type of business but oppose this benefits they must also take all the responsible, losses and risks alone. In sole proprietor, there are two type of liability: the unlimited liability and the limited liability. The unlimited liability is more important, the owner’s business assets and his personal assets will be owned by the creditors when the business faces financial losses. Unlike limited liability, the shareholders only liable for the amount that they invested but not their personal owned assets.

A partnership is a business that runs by two to twenty members, and it is defined by Partnership Act 1890. There are two type of partnership; they are ordinary partnership and limited partnership. Ordinary partnership is similar to sole proprietor, all partnerships assets will be taken if there is any losses and we called this as unlimited liability. For limited partnership the bank or creditors have a limit, the partnerships pay their losses according to their shares that they invest. Normally the people who invest most earn most interests and also have to bear most losses. Before the business start, they must prepare the Partnership Agreement. Inside this agreement, they must list out the name and business address, name and address of partners, capital contribution, distribution of profit and losses and etc. Partnerships need to show how much income and taxes individually.

The limited companies are also named as ‘Joint Stock’ Company, they are required to apply a companies Act 1965 and governed by Registrar of Companies. This would need a memorandum of Association, Certificate of Incorporation to the public limited company and some other related documents to apply before start a company. Limited Companies are also divided into two types, the private limited and the public limited.

In Malaysia, private limited are normally those companies with ‘Sdn Bhd’; in Singapore they called as ‘Pte’. For private limited, they only have to register with ROB (Registrar of Business) and ROC (Registrar of Companies). Private limited normally have only two to fifty people and their shares can only sell to limited numbers of people like their friends or families. They are not allowed to sell or trade in their own shares to general public and creditors. The company can still continue working even one of the parties pass away or quit, unlike sole trader and partnership need to end their business if anyone of the parties quit. In this type of business organizations, their board directors are normally selected by all the shareholders. For private limited companies they have limited liabilities for the shareholders, it means if the companies have to pay for losses they can only take limited amount for the companies assets and not the shareholders own assets. If the companies earn profits, all of the profits will be share; but losses only to shareholders. The private limited companies need to send the copy of audited accounts to the Registrar of Companies to show their accounts. Limited growth on their business is also one of the problems they face on due to lack of capital, because their shares can only be sold to their friends or families. If they want to transfer the shares to other person, they need the approval of other shareholders.

Another type of limited companies is the public limited. Most of the public limited are the banks or some big public organizations like Genting or Digi. In Malaysia, the public limited companies short forms are actually ‘Bhd’; in Singapore they called it as ‘Plc’. Public limited companies normally don’t have a limit for members and they can sell their shares to the public unlike private limited companies. Before start business, they must also register with the ROB (Registrar of Business), ROC (Registrar of Companies) and Securities Council, and this Securities Council need to register at Kuala Lumpur Stock Exchange (KLSE). Furthermore unlike private limited, they must publish their documents in the newspaper to let the public know. They minimum share capital are RM1 million. It is easier for them to raise the capitals to expand their organization because most of their members are public and they don’t have a limit for members. Moreover, if their organization is famous and well-known enough they can loan from the banks easier. The opposite of these benefits, they also have some disadvantages like if their firm turn larger, it is hard for them to manage and control. Many conflicts might come across if any there were any bad rumors spreading around and the shareholders will crack their brain because sure many of the public investors will come and ask for an explanation. Besides, they also might be taken over by other bigger companies because their shares are sold to the public and can easily buy over.

Apart from those types of business organizations in private sector, there are also cooperatives. This association is formed by peoples who want to improve their lifestyle or to earn their own benefits. Peoples who interested in this type of organizations need to pays member fees to join as a member of this organization. The fees that the members paid for is to provide the capital for this business organization, it can make the organization become efficiently if the capital are strong and it is easier to fight against for benefits. This business normally organizes to provide the services or benefits to those who needs. If any of the member face a problem or have conflicts with others, their organizations will stand up and help them to fight against for their rights. Cooperatives businesses actually face some difficulties in expand their organizations and improve their services to their members; they have to compete with many other types of business organizations.

Franchise is a business organization which already created successfully and has their reputations. This type of business organizations normally sell their copyright to public who interested in. They usually use the same method to run the companies, the same recipes or same services. Franchises are all over the world and businessmen can buy the copyrights from the franchise companies to be the own boss. Most commonly seen for this type of business are McDonalds, Subway, Coffee Bean and etc, these are easily found in now social market. Of cause they have their certain rules and regulations for those who interested to buy their copyrights, these franchisees must follow the rules that established by the franchise companies when they operate their business.

Lastly it‘s the charities, this is a non-profit organizations. They normally are doing charity and assist those who need financials help, like education institutions, hospital or the public charity. These are the examples of business organizations that give helps public that need financial help and didn’t earn any profit. These organizations can enjoy deduction tax on their federal income tax returns. Most charities organizations are tax exempt, they are not allowed to distribute shares to all stockholders.

So basically these are the main private sector business organization types that found in Malaysia business areas. Although they run the businesses in different way, but their objective are the same. Earn profits to develop a better country and also help the economic development.

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