Question

Question 2 In considering which business vehicle to be ability in a private limited company (Sendirian Berhad on Sun many. It allows the founder/shareholder to sleep better at night knowing personal wealth is not at stake if the company is, for whatever rea liquidated. ness vehicle to be used in Malaysia, the feature of a limited any (Sendirian Berhad or 'Sdn. Bhd.') appeals to sleep better at night knowing that his the company is, for whatever reason, sued or What are the difference between limited companies and unlimited liability companies? Explain the difference in accordance to Companies Act 2016. [8 marks] Question 3

Answer 1

As per The Companies Act 2016 (CA 2016), companies are classified as (1) limited and unlimited liability companies; and (2) public and private companies.

We are taking about companies limited & unlimited companies and differences between them

So 1st what is Limited company

Limited company :

Limited liability is when the liability of the investors or owners of a company is limited to the amount of money that they have contributed/invested in the business. The owners of a company that is registered as a limited liability company will be safer in the event that the firm faces bankruptcy. The meaning ‘limited liability’ is that the owner’s losses are limited to their specific share of contributions and cannot be held responsible for losses beyond their share of contribution. The most popular and well known form of a limited liability company is a corporation.

• Owners in a corporation are shareholders, and the liability of shareholders are only limited to the amount of funds that they invested. If the company goes bankrupt, the shareholders will lose their entire investment in the firm but are usually not held liable for losses beyond their contribution.
• Alongside the advantages, there are also disadvantages of a limited liability company. Managers of a limited liability company are protected against personal liability (their personal assets cannot be seized to pay for losses)

Unlimited company :

Unlimited liability is quite the opposite of limited liability, and the liability of the owners or investors are not limited to the amount that they have contributed. This means that there is no limit to the losses that might have to be borne by the investors or owners.

However, there are benefits to investing in a company with unlimited liability. The popular phrase in financial management ‘higher the risk higher the return” is quite relevant for companies with unlimited liability. Since the risk of investment is higher, there is a possibility for a higher rate of return in the event that the company succeeds.

The difference between limited and unlimited liability is significant for business owners. Limited liability means you don't face much personal financial risk for debts of your business. Unlimited liability means you are exposed to potential losses based on company obligations

• Limited and unlimited liability are concerned with the obligations of the owners; whether their obligations are limited to the amount of funds invested, or whether they are held personally liable.
• Limited liability is when the liability of the investors or owners of a company is limited to the amount of money that they have contributed/invested in the business.
• Unlimited liability is quite the opposite of limited liability, and the liability of the owners or investors are not limited to the amount that they have contributed. The owners of a company with unlimited liability can be held personally responsible to pay for the company’s losses.