Wonder Woman Asia
It was a busy Saturday for me but nothing gives me more pleasure than to be in the company of really talented enterprising woman. I was asked to speak on matters that could assist these women in their business and I told 
I was a general litigator which means I deal with all and sundry and a bulk of my work involves around company setups and how we evaluate a good or a bad company.
Getting Down to Basics
(photos borrowed from
I was pleasantly surprised because almost all of the women that attended are good orators and had a good comprehension of a business setup. The questions posed to me were engaging and spot on.
If I can summarise the points that were delivered last Saturday, it is as follows:
Business can operate in the form of sole proprietorship, partnership, private limited company, public limited company and limited liability partnership (a creature of the Limited Liability Partnership Act)
The difference between a sole proprietorship/partnership and limited companies is the concept of the veil of incorporation. The company has a separate existence from its human incorporators. So there is a protection from liability to its investors.
Partnershop and sole proprietorship are what we call business setups and the partners and proprietors are liable to be sued because they are one and the same entity. There is no separate legal entity and there goes the management of risk.
First Rule of Thumb
Business is all about management of risk. Whether it is to protect the stakeholders behind a business from potential suits or buying insurance, potential liability is a real threat that will take a chunk off the wealth of unsuspecting entrepreneurs.
Risk management is best done through limited companies where the liability stops at the company level and will not pass the veil of incorporation, unless of course the company was used to perpetrate a criminal act.
Then there is the introduction of a hybrid business setup in the form of limited liability partnership. This act is mostly to cater for professionals who now wants to limit their exposure to risk. The rationale behind it is, in Malaysia, Professionals like lawyers and doctors must be exposed personally to any risk of negligence and be made personally liable to their clients for reason of accountability. Hence the concept of limited liability cannot exist.
The second rationale is the people in the same profession are in a better position to check and balance their partner as part of maintaining a good accountability to their clients. But today we know that a criminal lawyer will know nuts about conveyancing practices and vice versa. So the simplistic argument that one partner can check on the other is thrown out of the window. Limited liablity partnership is to cater for this need to limited liability for professionals whereas in the past they are unable to do so.
Why Paying Taxes is Good
We all know that we have limited resources. If I have $500 and I can only trade with $500, my reach would be limited by my resources and that cannot be good for business. So the reason why we pay taxes because people who pay taxes are either gainfully employed and is a contributing member of the society (from the point of an individual) and if taken from the perspective of a company, the company is earning a profit.
So, banks in evaluating the credit worthiness of a company looks back at a record of taxes. A company that fails to file for its tax returns are dubious and shady and a company that files losses can either be badly managed and therefore not a good borrower or they are merely dishonest with their accounting. So paying taxes is the first sign that the company is reliable and is earning a positive cashflow.
So, to avoid being visited by the man in black (the IRS) it is better to have a clean and accountable tax returns filed and it also goes towards showing good management. A company that files profit over a period of 10 years would be treated differently for a few reasons:
- no company can continue to survive for 10 years unless it is profitable
- a company that has an existence for 10 years is definitely not a sham business or a fly by night setup
- a company that has existed for 10 years is likely to have a stable and consistent income, so business stability is a plus factor.
Good Company
I am glad to be part of this initiative. The coffee was good, the crowd is engaging and an enlightened one as well. Definitely they don't seem like they really need to be pushed hard to succeed.
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