Starting a business is a major step in life, one which is risky and has no certainty. Despite the pitfalls of being an entrepreneur, the potential rewards are well-worth the effort and sacrifices. Take a look at the list of the richest people in the world, and you’ll see that all of them made their fortunes by running their own businesses.
If you decide that doing business is your cup of tea and want to give it a shot, one of the first steps is to register your business or incorporate your company to make it a legal entity.
To start a business in Malaysia, you have three most common options – setting up a sole proprietorship, partnership or limited company. The type that’s most suitable for you depends very much on your nature of business and your personal preference.
GOING SOLO (SOLE PROPRIETORSHIP)
Thinking of starting your business on your own? The easiest way to go about it is to register a sole proprietorship. This is the simplest legal structure for owning your very own business and it’s also the lowest cost option.
However, a sole proprietorship is a business entity which legally has no separate existence from its owner, meaning that the owner is personally liable for all the debts and obligations of the business.
As a sole proprietor, you can run the business under your own name (as per identity card) or a trade name, eg, ABC Enterprise.
FINDING A PARTNER (PARTNERSHIP)
If you’d like to start a business with one or more partners, you can consider setting up a partnership. Partnerships in Malaysia are governed by the Partnership Act 1961 (Act 135). A partnership must comprise at least two members and the maximum number of members allowed is 20.
Under a partnership, the members share the profits and losses of the business. The partners can make their own agreement on the terms and conditions of the partnership. However, if no partnership agreement is made, the provisions of the Partnership Act 1961 (Act 135) will be applicable.
The main provisions as set out in Section 27 of the Act are as follows:
• Partners share profits and losses equally
• Any advances or loans extended by a partner, in addition to the amount of capital, is entitled to 8% interest per annum
• Partners are not entitled to interest on capital invested
• Every partner may take part in the management of the business
• No partner shall be entitled to any remuneration for acting in the business
• the firm must indemnify every partner in respect of payments made and personal liabilities incurred by him
(i) in the ordinary and proper conduct of the business of the firm; or
(ii) in or about anything necessarily done for the preservation of the business or property of the firm;
• No person may be introduced as a new partner without the consent of all existing partners
• Partnership books are to be kept at the principal place of business, and every partner may have access to them.