Forms of Business Organization

There are three main forms of business organization, namely:
(a) Sole proprietorship
(b) Partnership
(c) Limited company

Sole proprietorship
1. This business is owned by an owner who invests money into the business as a capital.
2. Owners take care of their business or assisted by their family members or shop assistants.
3. Owners enjoy all the benefits and bear all losses.
4. Single owner liability is not limited. If business assets are insufficient to pay for business debt, a single trader is forced to use his personal assets to settle business debt.
5. Examples of sole proprietorships are retail stores, service businesses such as laundry shops, barber shops, tailor shop, car workshop and professional services such as clinics, law firms, and accountants.

1. Sharing is a business established by at least 2 partners who do business for profit.
2. The number of members for each type of partnership is summarized in the following table:

3. Each partner contributes capital and the idea of ​​sharing profit or loss according to the terms of the partnership agreement.
4. Sharing is established under the Partnership Act 1961. Where partners do not make any partnership agreements, the sharing of travel is guided by the regulations in the act.
5. Partner liability is unlimited.
6. Sharing is not permanent and must be disbanded if one of the partners dies, insane, or bankrupt.
7. Examples of partnerships are restaurants, medical centers, supermarkets, banks, and more.

Company limited
1. There are two types of limited companies, namely:
(a) private limited company
(b) public companies limited
2. Own company limited is established by a minimum of 2 persons and a maximum of 50 shareholders. There is no maximum limit on the number of shareholders of public limited companies.
3. The Company is established under the Companies Act 1965.
4. The company’s capital consists of investments by shareholders. The shareholder is the owner of the company.
5. The company’s profits are enjoyed by shareholders in the form of dividends.
6. Shareholder’s liability is limited to the amount of capital invested in the company only.
7. The limited company is managed by a professional manager but the company’s policy is determined by a Board of Directors appointed by the shareholders (the owner).
8.The limited company is permanent and continuous. Legally, a limited company is a legitimate entity.
9. The difference between the private limited company and the public limited company is shown in the following table:

Type of PartnershipNumber of Members (Partners)
Ordinary Shares220
Joint Service Partnership2No limit
Bank share210
CharacteristicPrivate Limited CompanyPublic Companies Limited
Number of members2 to 50 peopleAt least 2 people but no maximum
CapitalFrom private personFrom public person
Company shareNot listed in stock exchangeListed in stock exchange
Transfer of sharesWith the consent of the other shareholdersFree. No need to consent from other shareholders
Business lifeLife is affected by the death or retirement of a shareholderLife is not affected by the death or retirement of a shareholder
Company managementShareholders may participate directly in terms of managementShareholders may not participate directly in terms of management