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Enterprise is one type of business organisation in
Malaysia which is the formation bound by the Registration
of Business Act. There are two type of enterprise – i.e.
Sole Proprietorship and Partnership.
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There is no legal status for the enterprise as it is
one-man show business where the owner and the business
considered as one entity. The owner will run the business
by himself and that is the reason why the business fortune
depend on how good he is running the business. After all
fund, effort and hard work devoted to the business in
return the owner would entitled for all of the net profit
generated from the business as a reward. But, one thing to
bear in mind is that the enterprise is not liable to pay
tax, as all income will be taxed personally to the owner.
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However, to maintain the enterprise is easier and
cheaper compared to company as there is no obligation to
appoint secretary and to do audited account. And the most
important thing is that it does not require more legality
to conform especially when it involves the raising of
capital for the business because there is no requirement
to inform the Registrar.
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Normally enterprise, whether sole proprietor or the
partnership running the business in a small to medium
industry compared to company because the business risk is
lower, but the effect is small profit margin generated
from the business. One of the main reason for remaining as
a small business is because of limited source of fund.
i.e. from the owner's saving or from the borrowings. That
is why most people converting from running the enterprise
to company because where there are more choices of getting
the funds for the business.
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Compared to enterprise, operation of business as a company
giving more advantages as the owner of the company, i.e.
the shareholders and the company are two different
entities. It can be considered artificial human being and
may act as natural human being such as buy and sell
properties in its own name, enter into any agreement, may
se or be sued except for being a director at any time.
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That means the company also would be liable for all of the
debts and it would not affected the shareholders at all.
However, in the case of the company be wound up, he will
only be liable for the unpaid shares to the company and if
the shares are fully paid, then there is no obligation to
contribute his personal assets to settle the company's
debt.
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The shareholders of the company don't have to worry for
the business risk or the financial risks, as those are the
director's responsibility and accountability to make sure
that the company is making profit. Since the directors is
the officer of the company and he must work to the utmost
good faith for the benefit of the company as a whole, and
not for the interest of shareholders only. So, any profit
generated from the business is belong to the company and
not the shareholders and the shareholders only entitled
for the dividend declared out of the distributable net
profit and not from the capital of the company.
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Even though to maintain the company is
costly as it must hire company secretary and the auditor
and it must follow the company law, which is governed
under the Companies Act, 1965 and it is duty of the
directors to ensure that the company is following the Act
and regulations. That is why the directors must appoint
company secretary to ensure that all requirements had been
complied with and to take care of all statutory books and
records.
