Dormant companies, on the other hand, are companies that have been formed but have never actually traded. This could be because the business idea never got off the ground, or because the company is simply not active at the moment. Dormant companies can still be used for a variety of purposes, such as holding assets or intellectual property.
Dormant companies are not always shelf companies, but shelf companies are always dormant companies. In other words, all shelf companies are dormant, but not all dormant companies are shelf companies.
According to the regulations by MASB, a company is categorized as a Dormant Company for a particular financial year if not involved in any business activities or set no account transactions during the same period.
We shall start by defining the term ‘dormant’. According to the Cambridge dictionary, dormant means that something is currently inactive and does not grow or sleep but it might be active later on.
How do people choose to leave a dormant company, and why does anyone bother leaving it dormant if he or she is aware of its condition? To begin with, a dormant company does not experience any significant change but it remains inactive. In terms of the question on why people do not shut down such firms, it is the potential costs involved in closing company. For a company to be closed down, some costs may have to be incurred. Alternatively, it is also costly to remain in a dormant status that demands shareholder audits purposes of application for audit exemptions and annual return submissions.
Since keeping a dormant company open has monetary consequences similar to those of shutting down it, an individual might wonder why entrepreneurs choose to maintain their companies active. The basis for this decision is the fact that some of the entrepreneurs open businesses with a view to sell them as shelf companies.
A shelf company, also known as a shell or aged company, is a legal body created which has not been conducting business operations and transactions. Basically, the company is in a dormant state waiting on the shelf for either disposal or future use.
Usually, these firms are formed by business formation agencies and sold to entrepreneurs or investors who want to begin a new project or enlarge their already operating businesses. The entrepreneur or investor is able to save both costs and time that would have been incurred in starting a new company from scratch when he acquires the shelf company. In addition, they are able to start working immediately with the name and registration of the already existing company.
From the perspective of material value, there are three main benefits from purchasing a shelf company these advantages include credibility and credit score as well as time saving.
A shelf company normally has an adequate standing within its own industry or marketplace which help create a new organization look plausible and valid. This reputation is often complemented by a stronger credit history, which makes it easier to borrow money from banks. Moreover, entrepreneurs who choose to buy shelf companies can save much time and cost especially if compared with the process of setting a new company.
Nevertheless, it is important to note that buying a shelf company comes with some risks. The company may be secretly burdened with bad reputation or legal debts that the young entrepreneur could as well inherit. Therefore, it is highly advisable that businessmen should make thorough due diligence before buying such an entity. This due diligence could include the scrutiny of the company’s financial and legal track record, background checks on its main personnel, consulting with legal and financial experts.
Dormant companies and shelf companies are similar in that they are both legally registered companies that are not currently conducting any business. However, there are some key differences between the two:
Shelf companies are specifically formed with the intention of being sold to someone who wants to start a new business. They are typically pre-registered with a generic name and standard articles of association. This means that the buyer can quickly and easily get started with their new business without having to go through the entire incorporation process.
Dormant companies, on the other hand, are companies that have been formed but have never actually traded. This could be because the business idea never got off the ground, or because the company is simply not active at the moment. Dormant companies can still be used for a variety of purposes, such as holding assets or intellectual property.
The name of the company you choose to have a great impact on how people and investors respond to your business. Different languages can have similar spellings but mean different things, hence the importance of selecting a name that suits your brand identity. Moreover, the creation of business accounts on sites like Shopee, Lazada and Alibaba requires an appropriate company name. Consider the following company name suggestions in Malaysia.
When naming a company, it is important to follow the regulations given by The Companies Commission of Malaysia (SSM). First of all, ensure that the selected name is not already in use. Also, do not choose a name that is the same as an already registered business entity. Do not include words that suggest the word ‘company.’
You can choose English, Bahasa or even foreign names for your company name. You can also incorporate the names of directors within your company name and some symbols are allowed under such circumstances. But remember to avoid an acronym that may cause you confusion.
Secondly, it is necessary to avoid any offensive words in the company name as well as refrain from usage of words specified in gazettes. Also, refrain from using managed words that are limited due to national and public interest. Finally, avoid intimating connections with activities governed by laws, government agencies and regulations bodies to guarantee compliance and peaceful incorporation.
It is a challenge to choose a business name which will grab the attention instantly and stay fresh over time. Trends and preferences change, as time constantly continues to change people. To address this hurdle, it is important to release creativity and delve into innovative business name concepts that transcend traditional limitations. Do not box yourself in, and pursue a name that not only is striking at first sight but also has classical features, to ensure longevity of its appeal in the changing world.
Hong Kong Company SecretaryIn choosing the name of a business, it is necessary to consider the words that can be easily spelled and pronounced by customers. If other companies choose to use peculiar word writings, it will be difficult for some consumers in their search for such a company or even pass it to others. However, given the many words that are available in English, using traditional spellings avoids unrequired complexity. By opting for familiar and meaningful word shapes, you increase the assimilability of your audience, thus making them easier to find and cite your business.
Given the trends set up by many well-established companies, choosing a shorter company name with two syllables is rational. Companies such as Facebook, Google, Uber and Shopee have shown the power of short two-syllable name. Shorter names are recommended because shortening creates more chances for easy recollection.
Further, it is advisable to eliminate the hyphens and special characters from your company name. This shortens the name, making it more user-friendly and easy to pass on. Using a succinct and simple nomenclature helps create a favorable image of the brand as well as easier recognition within the market.
In cases that involve word mashing, do not combine words into something totally gobbledygook. Connecting the words has a positive impact on an efficient and meaningful brand. Although a differentiated marketing approach or good fortune may pay off, it is recommended to select a name that has some basis of what type of business you’re in.
Look for a company name that, if feasible, at least partially reflects the services or products you provide. One significant example in Malaysia is the company known as “Plumber Damansara.” The name of the website “Plumber Damansara” suits perfectly and matches harmoniously with plumbing services available in Johor, Malaysia. Your company name is consistent with your business/services, which aids customers in equating the nature of services they acquire from you.
Avoid names that impose a restriction on future relocation or expansion of your business. Do not add specific geographic locations or product categories when coming up with a Malay name of your shop. This caution becomes essential when thinking of future growth in business or diversification. For example, if the tourism firm operating in Kuala Lumpur city is a sole proprietorship business named Kuala Lumpur Tourism, then to expand this company to other nearby cities like Malacca or Seremban is an almost impossibility because of the name’s specificity.
Select a name that does not limit you with regards to geographical location or products, considering the sustainability and scalability of your business. Plan for the eventualities of future expansions and advancements in offered products and services, allowing room to grow your business.
Select a name that does not limit you with regards to geographical location or products, considering the sustainability and scalability of your business. Plan for the eventualities of future expansions and advancements in offered products and services, allowing room to grow your business.
Moreover, there are also practical implications of choosing a name that begins with an alphabet closer to A than Z for this decision matches some algorithms as well as directory listings based on the principle of sorting names alphabetically. As is not effective everywhere, starting with the earliest letter can provide some benefits in terms of visibility and accessibility across different systems and platforms.
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