ABDM 3513 BUSINESS ORGANISATION AND MANAGEMENT

TUTORIAL 1

Interested to set up a business?

Decide the BEST form of business

Background:

William is a diligent computer programmer at the age of 28 years old. He has acquired
advanced programming skills over the years. However, he is rather introverted and therefore,
has few friends. Although he has performed system support services to many organizations,
he has not established very close contact with any of them.

William has been thinking of setting up his own business for some years. Being a frugal
person, he has managed to save Rm40,500.00 up to now. He intends to sell off his superbike
for Rm8,500.00. Unfortunately, he does not have much financial knowledge at all and he is
not an experienced manager.

Apply what you have learned in this chapter, decide which form of business ownership (i.e.
sole proprietorship, partnership or corporation) is most appropriate for William. You have to
critically evaluate the advantages and disadvantages of each decision.

I choose partnerships because :-

Advantages
William can share management and financial knowledge with the partners and Partnerships
have higher credit ratings due to the partner’s combined wealth. So William can fix the
financial problems with the partner Improve the decision making because partnerships can
react more quickly to changes in the business environment

Disadvantages
Distribution of profits with partner. It is difficult to sell a partnership interest at a fair price
the distribution of profits may not correctly reflect the amount of work done by each
partner.