TUTORIAL 1

1. Distinguish between small and large businesses. Give an example of a real company to
illustrate each.

Small businesses Large businesses

(sole proprietorship, partnership) (Corporation: Private Limited
Company/Public Limited Company)

Low start up costs (small size basic and less High startup costs (large size basic and more
complicated legal formality) complicated legal formality)

Fewer numbers of employees (Usually less Large numbers of employees (Usually more
than 500 employees) than 500 employees)

Source of capital is raised from capital Stocks of company can be sold in order to
injection from owner instead of share raise capital funds.
issuance

Low annual revenue High annual revenue

Non-separate legal entity (as the business Separate legal entity (the business continue
owner dies, business ends or dissoluted) to run as one of the owners or directors dies)
Limited life span Perpetual life

Unlimited liability (owner is allowed to sell Limited Liability (the potential loss of
their own professions and assets to pay off shareholders is the amount of shares paid)
the debt if business fails to operate
continually)

Example : Sauce Lab /mini market Example: Prego Malaysia / Pos Malaysia

2. Outline the three legal forms of business ownership.

Sole proprietorship is a business owned, managed and controlled by one person. The owner
could make own business decisions and keep the company profits. Small businesses likely
belong to this legal form of business ownership such as tailor shops and convenience stores.

Partnership is a business owned and controlled by two or more people in a common view of
sharing the profits and losses of the business. The co-owners will form a legal partnership
agreement which would outline the ratio of profit and loss sharing and the ratio of capital
invested. For example, KPMG Malaysia.

Corporation is a separate legal entity with authority to act and have liability apart from its
owner. Private limited company is a corporation that cannot sell shares to the general public and
denoted by the words ‘Sendirian Berhad’ such as Samsung Malaysia Electronics Sdn. Bhd.
Public limited company is a corporation that can sell shares to the general public to raise capital
and denoted by the word ‘Berhad’ such as Dutch Lady Milk Industries Berhad.

3. Describe mergers, acquisitions, and joint ventures. Give an example of a real company to
illustrate each.

Merger refers to the union of two corporations to form a new corporation. In terms of size of
business, the companies that agree to merge are usually comparable. For example, Bank of
Commerce (Malaysia) Berhad merged with Bank Bumiputra Malaysia to form Bumiputra-
Commerce Bank Berhad in 1999.

Acquisition occurs when one company purchases another company to gain control of it.
Example: In 2005, CIMB Berhad acquired GK Goh Securities in Singapore.

Joint venture is a business entity formed by two or more parties for the purpose of shared
ownership, shared returns and risks. For example, Sony Ericsson is a joint venture of Sony
Corporation and Ericsson Telecommunication Company which was formed in 2001.