FINANCIAL ACCOUNTING “TYPES OF OWNERSHIPS”

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Presentation transcript:

FINANCIAL ACCOUNTING “TYPES OF OWNERSHIPS” MOHD ZARIR BIN YUSOFF

Sole proprietorship Sole proprietorship is a business owned by one person who is involved in running and managing the business for profit. The law does not recognise sole proprietorship as a legal entity. Among the advantages and disadvantages of this type of business are listed below

ADVANTAGES AND DISADVANTAGES OF SOLE PROPRIETOR SHIP Easy to establish and dissolve. The owner has sole control over the business. No profit sharing. Flexible regulations compared to other types of business. Difficult to expand due to limited skill and capital. The risk is solely on the owner. Unlimited liability.

PARTNERSHIP Partnership exists when two or more (2 - 20) individuals share the ownership of a single business for profit. Contractual relationship can be formed through written or verbal agreement. The details of the agreement normally cover the management of the business such as capital contributions and how profits/losses are to be shared. In Malaysia, this type of business is registered under the Partnership Act 1961. Legally, partnership is not a separate entity. Partners are jointly responsible for their business. This means that anyone with outstanding payment from the company can claim payment from any or all of the partners. Each of the partners is liable towards the partnership’s debt.

ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP Larger capital as the owner is more than one. Partners with skills and abilities can strengthen the business. Not bound by requirement on disclosure of business information to public as imposed on limited company. Unlimited liability. Possible clashes among the partners that can affect the stability of the management. Problem on business continuity arising from the death of a partner.

CORPORATION A corporation is a legal entity that is established by a group of private individuals (2 - 5 or more) to carry out business activities. In Malaysia, a corporation is an entity incorporated under the Companies Act 1965. Generally, the owners of corporation are called shareholders. There are two types of corporation in Malaysia namely private limited company and public limited company.

ADVANTAGES AND DISADVANTAGES OF CORPORATION Limited liability. More ability to expand due to extensive capital through issuance of shares. Continuity of business as the existence of corporation does not rely on the existence of the owners. Share transfer can be easily done. Bound by government regulations. Shareholders do not have direct control on the management. High establishment cost. Strict requirements on the formation. Double taxation.