Partnerships are jointly owned by two or more individuals. They have similarities to sole proprietorships but differ in two ways. They differ because partnerships are to either have self-created partnership agreements or be governed by the Partnership Act 1961.
Furthermore, sole proprietorship are run by one person, while partnerships are run between two and 50 people. In Malaysia, the businesses which make the best use of partnership structures are small and medium-sized enterprises (SMEs). This is because partnerships provide certain advantages for SMEs. These include a low startup cost, low maintenance costs, ease of incorporation with the Companies Commission of Malaysia (SSM), shared liability among all partners, and tax rates tailored to suit each partner.
However, partnerships also have certain disadvantages. The nature of a partnership prevents many partnerships from keeping proper accounting records. Tax planning with regard to a partnership may also be fairly difficult. The business continuity of the partnership will be affected if a partner dies, quits, or leaves the partnership in any other manner. In such a situation, the business could be closed or the beneficiaries might not receive what the departed partner left behind. Partnership owners also generally find it somewhat difficult to receive important bank loans.
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