Sole Proprietorship
Short Write-up
A “Sole Proprietorship” is a business enterprise that is owned by a single person. It is the simplest to set-up, as it can be formed by registering a prescribed Form in the Registration of Business Act 1956 (Revised 1978). Changes in the business are also simple to make as it is done by registering other prescribed Forms. A sole proprietor must apply for and obtain the licenses that are required for his business. He can enjoy the profits but must bear all the losses.
- Ability to hold assets
Under the sole proprietorship, the business assets are the business owner’s own personal assets. Under the partnership structure, the partners will collectively own all the assets to the partnership.
- Liability for debts
Under the sole proprietorship, the sole proprietor is entirely responsible for all the debts and risks of the business. Any liability incurred by the business may be claimed from his own personal property. Conversely, however, he can count his business profits as personal property and is exempted from business taxes (although personal income tax is still payable).
- Legal proceedings
Sole proprietorships and partnerships have no separate legal personality. As such, legal action can only be instituted or defended in its member(s)’ names.
As a separate legal entity, the company has the benefit of acting in its own capacity to take legal action (or defend an action). Members of the company have no right to institute any legal proceedings on behalf of the company and therefore, cannot be sued as well.
- Dissolution of the business
Under the sole proprietorship, the moment the business owner dies, the business itself will be dissolved. Dissolving a partnership can be done by way of agreement, operation of law or in the event that any partner dies, resigns or becomes bankrupt.
- Raising capital
For sole proprietorships and partnerships, capital is raised through contribution of the owner or partners’ personal assets or through loans.
Departments & Agencies
Suruhanjaya Syarikat Malaysia (SSM) / Companies Commission of Malaysia
Related Web
Registration of Business Act 1956 (Revised 1978)
Description: The law that requires the registration of a “business” (sole proprietorship) is the Registration of Business Act 1956 (Revised 1978). The Act provides that any person who carries on a business without registering it, or continues to carry on his business after the registration has expired commits an offence (Section 12). Further, any person who makes any statement for furnishes any information to the Registrar – whether verbal or in writing – which is false in any material particular also commits an offence under the Act.
Effects of non-Compliance
On conviction, the offender is liable to a find not exceeding RM50,000.00 or to imprisonment for a term not exceeding 2 years or both.
The Act also provides that any person who carries on a business at a premise without displaying the certificate of registration (Section 11A) commits an offence and shall on conviction be liable to a fine of RM2,000.00 or to imprisonment for a term not exceeding 6 months or to both.
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