Question

Explain the legal status of a partnership and compared to company in tax law in malaysia. [8 marks]

Answer 1

Partnership in Malaysia:

PARTNERSHIP. Partnership consist of two or more business partners (minimum 2, maximum 20) combining their resources to carry out a legal business with a view to profit.
In Malaysia Similar with sole proprietorship, only Malaysia citizens Similar or permanent residents can register to form this type of business entity.

PARTNERSHIP:

Capital contributions: Partners
Ownership : Owned by two (2) or more persons but not exceeding 20 persons
Legal status :not a separate legal entity.
Liability:Partners
Management responsibility: Partners
Personal liability: unlimited liabilities jointly and
severally liable.
Risk: risk contribution to partners.
Advantage: easy to set up
Disadvantage:unlimited liabilities
Business termination: easy to terminate and shorter procedure.

Company:

Capital: Private Company At least one (1) director who ordinarily reside in Malaysia by having a principal address of residence in Malaysia and one (1) shareholder
Public Company At least two (2) directors who ordinarily reside in Malaysia by having a principal address of residence in Malaysia and minimum one (1) shareholder

Legal status : separate legal entity.
Liability :Company (liability is limited to the amount of shares invested or guarantee)
Management responsibility: Board of directors

Personal Liability : Private Company Limited By Shares Public Company Limited By Shares & Company Limited by Guarantee
No liability against directors or shareholders. Liability of members is limited to the amount of capital invested in the company
Liabilities incurred by directors or shareholders to the extent of the non-paid capital

Risk: investment risk does not involve personal Assets

Advantages:
-Company shares may be traded with the approval of other shareholders.
-Higher capital.
-Long lifespan (owner and companies are separate entities).
-Shareholders are protected by law.

Disadvantages:
-Longer procedure of incorporation.
-The cost of incorporation is quite high.

Termination: Takes longer time and procedure to dissolve the company.

I hope the above provided information is beneficial to you.

Thank you.