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Difference Between Partnership and Incorporate a Company

Essay by   •  November 15, 2016  •  Essay  •  1,816 Words (8 Pages)  •  1,530 Views

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1 (a)    

     The difference between partnership and incorporate a company is partnership consists of two or more members carry out the business with the main objective to earn profits and the debt is jointly liable among the partners. For incorporated a company,it can have maximum 50 member for private company and unlimited member for public company.It is also separate legal entity which separate from its member.It’s very important to decide which type of business vehicle should be choose because it may affect your entire business operation.

     For my opinion, they should incorporate a company. This is because incorporate a company can create floating charges which is the current property by use it as security and pledge it to the shareholder to get loan from them. It allows a company have more funds or capital to run its business and also can generate money without remove the property  and would not interrupting the business operations since they are lacking RM10,000 for start up the business. By choosing incorporate a company they can have enough capital to start their business.

Other than that, incorporate a company also include an advantage which is perpetual succession. This is because they have a vision to expand their business to other states and country so the business will expand furthermore. It is a safety precaution for them if any accidents occur during the expanding of the business the company still will continue to exist so their hard work will not gone off.

Conclusion, it’s better choose to incorporated a company due to the situation facing by my brother and fiancée than partnership. This is because lacking of the capital and have vision to expand the business by incorporated a company can solve these problem.

1 (b) There are five type of companies under the Companies Act 1965.

Private Company

    A private company’s name needs to end with the words ‘Sendirian’. According to Section 15 of Companies Act 1965, a private company is company which must be having between 2 members to 50 members. Besides, the share employee holding are not included. Next, it must also restrain the shareholders right to transfer shares. Private company prohibits public to subscribe its shares or to deposit money with it. A private company also must have a share capital. It means that company limited by guarantee only cannot be a private company.

The advantage of it compare to the public company is it can immediately start the business when it receives its certificate of incorporation while disadvantage is it cannot advertise its shares for sale to the public.It mean that cannot raise fund form the public.

The private company is separate into two part.

(i) Private limited

    Company limited by shares will carry the name end with ‘Sendirian Berhad’ according to the Section 22(4) of the Act. The meaning of private limited company is that the liabilities of its members are limited based on the share amount holding according to Section 4(1) CA.

The most important advantage is the liability of shareholders is limited. Any debts beyond their shareholdings, they will not personal liable.

The disadvantage is private company is not allow to transfer of share. A shareholder who wants to sell his shares can only sell to the existing members or subject to directors.

Private Unlimited

    Private unlimited company is a company members having no limit placed on the liability. The members may need to be made liable for debts without limit on their liability. The existence of this company is very rare because it similar with partnership but a lot of rules and regulation need to follow.

Public company

There is three types of public company which is limited by share, limited by guarantee and unlimited. A Public Company is defined in Section 4 of Companies Act 1965 as any company other than the private company. A public company may have legal limitation in their note or record that make for future use or article of association except company that had been listed in Bursa Malaysia. Public company can be further categories in listed or unlisted company. The shares of the company are listed in Bursa Malaysia for the stockholder to know the share whether worth to purchase and the stock exchange in the market such as the total value of the share. Unlisted company is a company of the securities that not listed in the stock exchange in the Malaysia and cannot traded to the public.

Public limited by shares

Typically, members are usually shareholders and their liability is limited to the nominal. The company’s name that ends with the word ‘Berhad’ or in short form ‘Bhd’ is called public limited company. The minimum number for the public company is two persons and the maximum is unlimited persons. The company must include at least three directors and they are subject to retire by rotation.The public company must require both the certificate of incorporation and certificate of commencement. The company can only start the business when it has received the Certificate of Commencement from the Registrar under Section 52 Companies Act 1965. It may be harder to start a business compared to the private companies. The transfer of the share in public company is not restricted and such shares can be freely traded if the companies are listed on the Bursa Malaysia Market. There have a prohibition of age for the director of a public company must retire when he was 70 years old even though he can be re-elected. The advantage of public limited company is the company can raise large amount of money for the capital and the shares of the company are traded freely on the stock exchange over the market. The disadvantage of public limited company is the company has many rules and regulation that need to follow to protect the public investor.

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