Business Ownership

OFPS Entrepreneurship 3e All Rights Reserved
© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1

8
Chapter
BUSINESS OWNERSHIP

BUSINESS OWNERSHIP
 AT THE END OF THIS CHAPTER, YOU WILL BE

ABLE TO:
– Explain the factors to consider when selecting the form of
business ownership.
– Discuss the four types of business ownership.
– List the advantages and limitations of each type of ownership.
– Describe the procedures involved in registering each type of
ownership.
– Highlight the critical factors that need to be taken into
consideration in starting a new business venture.
– Discuss the various ways to establish a new venture.
– Explain the advantages and disadvantages of each alternative in
starting a new venture.
INTRODUCTION
 One of the first things an entrepreneur must decide on

before embarking on his venture is the proper form of
business ownership.
 Selecting the right form of business ownership is
important because the form of business ownership will
determine how the business is organized.
 They should also be aware of the rules and
regulations governing business organizations and the
business support system available for them.

FACTORS IN SELECTING A
BUSINESS OWNERSHIP
 Capital
 Personal assets
 Span of control
 Sharing of information

TYPES OF BUSINESS
OWNERSHIP
 In Malaysia, there are four popular types of

business ownership for an entrepreneur to
choose from:
– Sole proprietorship
– Partnership
– Private limited company
– Public limited company

SOLE PROPRIETORSHIP
 It is owned by one individual, but it need not be

carried out by that individual alone.
 Can have a large number of employees.
Examples of sole proprietorship: Tailors, beauty

salons, restaurants and mini markets. Only
Malaysian citizens who are permanent residents
can register a business as a sole proprietor.

PARTNERSHIP
 A partnership refers to a business owned by at

least two or more individuals but not exceeding
the maximum number of 20 persons.
 Only Malaysian citizens or permanent residents
can register partnerships.

PRIVATE COMPANY
 The most common type of company or corporation

formed by small or large-scale entrepreneurs is the
Corporation limited by shares. This corporation can be
categorized as a Private Company or Private Limited
Company if they meet the following regulations:
– The number of its members must not be less than two but not
more than fifty persons at any time.
– Must have authorization to transfer its members' shares.
– Not allowed to have the option of selling or subscribing shares or
debentures to the public.
– The public is not allowed to deposit money with the corporation
for a certain period.
– The corporation or company must use the words "Sdn. Bhd." or
"Sendirian Berhad" or Private Limited Company at the end of the
words.
PRIVATE COMPANY
 Other than the regulations mentioned, a

Private Limited Company or Corporation must
have a clear documentation of internal
regulations for references in performing their
business activities and guidance for further
implementation.

THE REQUIREMENTS OF A PRIVATE LIMITED
COMPANY OR CORPORATION
6. Registered office 1. Memorandum of

association
7.Corporation secretary 2. Articles of association
8. Corporation auditor 3. Capital shares
4. Board of directors
9. Corporation seal
10. Power of attorney 5. Shareholders

ADVANTAGES OF A PRIVATE
COMPANY
 Limited Liability
– The stockholder's liability is limited to the individual's
investment. This is the most amount of money the
person can lose.
 Transfer of Ownership
– Ownership can be transferred through the sale of
stocks to interested buyers.
 Unlimited Life
– The Company has a life separate and distinct from
that of its owners and can continue for an indefinite
period.

ADVANTAGES OF A PRIVATE
COMPANY
 Increased Ability and Expertise
– The corporation is able to draw on the expertise and
skills of a number of individuals, ranging from major
stockholders to the professional managers who are
brought on board.
 Relative Ease of Securing Capital in Large
Amounts
– Capital can be acquired through the issuance of
bonds and shares of stock and through short-term
loans made against the assets of the business or
personal guarantees of the major stockholders.

DISADVANTAGES OF A
PRIVATE COMPANY
 Restriction of Activities
– Corporate activities are limited by the charter and by
various laws
 Lack of Representation
– The majority stockholders in the corporation outvote
the minority stockholders.
 Regulations
– Extensive governmental regulations and reports
required by the state and federal agencies often
result in a great deal of paperwork and red tape.

DISADVANTAGES OF A
PRIVATE COMPANY
 Organizing Expenses
– A large amount of expenses is involved in forming a
corporation.
 Double Taxation
– Income taxes are levied both on corporate profits
and on individual salaries and dividends

PUBLIC LIMITED COMPANY
 A public limited company is a company

limited by shares with at least seven or more
individuals and there is no maximum limit in
terms of membership. Public limited
companies are very large in size.
 The companies raise or source their capital
by selling shares to the public and are run by
a board of directors elected by the
shareholders.

Factors to Consider When Starting
a New Entrepreneurial Venture
 Capital
 Location of business
 Interest, knowledge and experience
 Size of business
 Competitors
 Laws and regulations

Alternatives in Starting a New
Entrepreneurial Venture
 Start-up
 Buying a business
 Franchise

START-UP BUSINESS
 A start-up company is a venture

whereby an entrepreneur creates a
completely new business starting
from scratch.

START-UP BUSINESS
 Prestart-up phase
 Start-up phase
 Post start-up phase

START-UP BUSINESS
Advantages Disadvantages
Complete freedom Long process
Tendency to be creative Maximum risk
Authority Difficulty in obtaining funds
Free from government intervention Extra effort
Immediate operations No historical record

Buying Existing/ Acquisition
 Buying an existing business involves

purchasing an existing business by
buying or acquiring either the shares of
the existing company or all the assets in
the company.

 5 factors need to be considered before buying

an existing business:
– Conducting self-assessment
– Evaluating business opportunities
– Reviewing a potential target
– Exploring financing options
– Ensuring a smooth transition

 7 steps to begin the acquisition process:

– Identify type of business
– Sign non-disclosure document
– Sign letter of intent/make an offer
– Conduct due diligence/investigation
– Draft/preparation of purchase agreement/formal
agreement
– Close the final deal/matters
– Begin the transition/ready for business

– Immediate operations – Business may be
– Existing intangible overpriced
assets/equipment – Equipment and goods
– installed and may be obsolete or
productive capacity is inefficient
known – ‘Inherited’ employees
– Employees may be unsuitable
established – Uncollectible receivables
– Supplier relationships – Outstanding contracts
– Less competition – Inherent problems
– Easier financing – Location may have
– Quick cash flow become unsatisfactory

FRANCHISE
 A business structure comprised of semi-

independent business owners
(franchisees) that pay fees and royalties
to a parent company (franchisor)

TYPES OF FRANCHISE
 Trade name franchising

 Product distribution franchising
 Pure/business format/system
franchising

Franchise
 The following steps help entrepreneurs to

buy a franchise:
– Self evaluation
– Conduct market research
– Consider the franchise options
– Ask the franchiser some tough questions

Franchise
– Proven track record on – Unsatisfactory training
products and business programmes
formats – Franchise fees
– Standardized quality of goods – Strict franchisor control
and services – Limited product line
– Management training and
support
– Brand name appeal


Business Ownership

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Ownership

Uploaded by

Copyright:

Available Formats

OFPS Entrepreneurship 3e All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1

OFPS Entrepreneurship 3e All Rights Reserved

 AT THE END OF THIS CHAPTER, YOU WILL BE

 One of the first things an entrepreneur must decide on

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

 In Malaysia, there are four popular types of

OFPS Entrepreneurship 3e All Rights Reserved

 It is owned by one individual, but it need not be

Examples of sole proprietorship: Tailors, beauty

OFPS Entrepreneurship 3e All Rights Reserved

 A partnership refers to a business owned by at

OFPS Entrepreneurship 3e All Rights Reserved

 The most common type of company or corporation

 Other than the regulations mentioned, a

OFPS Entrepreneurship 3e All Rights Reserved

6. Registered office 1. Memorandum of

7.Corporation secretary 2. Articles of association

8. Corporation auditor 3. Capital shares

10. Power of attorney 5. Shareholders

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

 A public limited company is a company

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

 A start-up company is a venture

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

 Buying an existing business involves

OFPS Entrepreneurship 3e All Rights Reserved

 5 factors need to be considered before buying

OFPS Entrepreneurship 3e All Rights Reserved

 7 steps to begin the acquisition process:

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

 A business structure comprised of semi-

OFPS Entrepreneurship 3e All Rights Reserved

 Trade name franchising

OFPS Entrepreneurship 3e All Rights Reserved

 The following steps help entrepreneurs to

OFPS Entrepreneurship 3e All Rights Reserved

OFPS Entrepreneurship 3e All Rights Reserved

You might also like