Topic 6 - STARTING A NEW VENTURE (ENT530)

STARTING A NEW VENTURE
Module for
Principles of Entrepreneurship (ENT 530)
BBA, Faculty of Business Management, UiTM
© Fauziah Pawan, Sept. 2012 (ENT530) 1

Module Focus
• This module will focus on:
1. The main business forms that appeal to
new own-venture entrepreneurs & their
key features
2. Key licenses & permits to operate a
business
3. Key forms of intellectual property & its
protection
©Fauziah Pawan, Sept. 2012 (ENT530) 2

Introduction
• Starting a new venture requires the entrepreneur to
make informed decisions regarding several key issues
that will impact on the entrepreneur ‘s ability and
capacity to extract the best potential from the target
opportunity.
• Some of the key initial decisions include the form of

business to register, the business licenses & permits
required to operate and protecting unique assets or
intellectual property that impact greatly on the
company’s competitive edge and ability to make
money.
Section 1:
Business Forms
&
Governing Legislations

Registration a Business Entity
• Registering a business entity is a key initial step to creating a
new venture to exploit entrepreneurial opportunities
• To register a business, the entrepreneur(s) need to first

determine the form of business or legal structure that best
suits the entrepreneur’s aspirations
• Entrepreneurs need to know the implication of choosing one

form of business over another form particularly in terms of the
– ownership implication,
– share of profits and liabilities,
– management control and
– continuity of business life (see Table 2 for a summary)
Business Forms & Legislations
• Entrepreneurs looking to create their own new venture often
choose one of the following business forms:
– Sole Proprietorship
– Partnership
– Private Limited Company or ‘Sendirian Berhad’
• The registration of these forms of businesses are governed by

two key parliamentary legislations:
– Registration of Businesses Act 1956 (Amendment 1978)
– Companies Act 1965
• Table 1 summarizes the legislations governing the registration of

specific business forms.

Table 1
Summary of Business Forms & Governing Legislations
Business Form Governing Legislation
Sole Proprietorship Registration of Businesses Act 1956
(Amendment 1978)
Partnership Registration of Businesses Act 1956

(Amendment 1978)
Private Limited Company Companies Act 1965

(Sendirian Berhad)

Sole Proprietorship
• The most basic business entity in terms of ease of registration
and relatively simple business structure and management
requirements
• Sole proprietorship allows only one person to be registered as

the legal owner
• This single owner is also considered the manager for the overall
business and is often referred to as the owner-manager.
• The size and scope of business is often relatively small and as

such the owner-manager may run the business activity by
himself or with the help of not more than 5 full time workers
Fauziah Pawan, Sept. 2012 (ENT530) 8
Sole Proprietorship….cont.
• The sole ownership entitles the owner-manager to
all profits earned by the business
• On the other hand the owner-manager has to also

bear the entire business risk and unlimited liabilities.
Unlimited liability implies that personal assets can be
seized to settled outstanding business debts.
• Death of the sole owner will result in termination of

the business

Partnership
• This business form involves two or more partners in a single
business concern
• The maximum number of partners allowed is 20 persons
• Professional business (e.g. legal firms, architect firms or

accounting firms) are allowed to have up to 50 partners
• Like the sole proprietorship, a partnership also allows the owners

(partners) to manage freely with all profits being shared by the
partners.
• Partners also bear unlimited liabilities that means their personal

assets can be seized toFauziah
settle business debts.
Pawan, Sept. 2012 (ENT530) 10
Partnership…cont.
• Partnerships are encouraged to have a Partnership
Agreement outlining details of ownership, entitlement
to profits and share of liabilities.
• Partnership Agreements are not required by law but are

very useful in case of disputes between partners.
• Death or withdrawal of any of the partner may result in

termination of the business unless stipulated otherwise
in the Partnership Agreement
Private Limited Company
• Registered under the Company Act 1965 and is recognized by the affix
‘Sdn. Bhd.’ (Sendirian Berhad) behind the registered trade name
• Registration process is much more complex & costly
• Registration has to be through a registered Company Secretary
• Among the key documents that the Company Secretary must present
for registration is the Memorandum of Association and the Articles of
Association
• The Memorandum of Association outlines how the money invested in

the company is to be utilized while the Articles of Association focuses
on the laws governing the internal management of the company
Private Limited Company….cont.
• The Private Limited Company can have up to 50 members or
shareholders
• Control of day-to day operations is in the hands of a management team

that may or may not be major shareholders.
• Shareholders can indirectly affect operation decisions through

representatives in a Board of Directors (BOD)
• A BOD consist of representatives from the major shareholders, key

members of the management team and the Company Secretary.
• A key role of the BOD is to ensure shareholders business interest and

investments are effectively represented
Fauziah in management direction and
Pawan, Sept. 2012 (ENT530) 13
Private Limited Company…cont.
• A Private Limited Company registration renders the business as having
its own ‘life’ separate from that of the life of the shareholders.
• As such the company is a legal ‘person’ able to bear its own liability
arising from the business operations
• This means that the business assets can be seized to settle outstanding
debt or other legal claims
• The individual shareholder is liable only to the extend of his investment

in the company but his personal assets cannot be seized to settled
company debts or claims
• Since the life of the company and the shareholder is separate, the
death or withdrawal of any shareholder has no effect on the life of the
business.
Table 2: Factors in Business Forms
Factors Sole Proprietorship Partnership Private Limited
Company
Ownership One individual Up to 20 individuals Up to 50 individuals
Share of Owner receives all Profits depend on amount of Shareholder receives

profits & profits & bears all losses investment or as specified in share of profits through
losses partnership agreement dividend payouts
Liability of Unlimited liability Unlimited liability unless Shareholder liability

owners extending to personal otherwise specified in a limited to amount of share
assets partnership agreement or capital contribution
Management Owner makes all All partners have equal In the hands of a
control management decisions control unless otherwise management team guided
and acts freely specified in a partnership by a Board of Directors
agreement
Continuity of Death of owner Death of any partner Death or withdrawal of

business dissolves the business dissolves the business unless shareholder has no effect
otherwise specified in a on existence of company
partnership agreement

Section 2:
Business Licenses
& Permits

Business Licenses & Permits
• While a business registration brings a venture into
existence, the new business needs various
licenses and permit to operate legally or to carry
out certain business related activities
• The licenses needed are basically divided into two

key categories of:
– General business premise license and signboard
license
– Special licenses & permits

General Business Premise & Signboard Licenses
• A business in Malaysia needs to obtain a business premise license
in order to begin operations in a particular location and legally
erect a signboard for the business premise
• Both licenses can be applied for from the relevant local authorities
(e.g. Majlis Bandaraya Shah Alam; Dewan Bandaraya Kuala Lumpur)
• Premise license applications often need to be accompanied by the

premise Certificate of Fitness document, Fire Department support
letter and premise rental agreement or a sales & purchase
agreement.
• Signboard license application need to be accompanied by

photographs of the proposed location of the signboard and
samples of the signboard design and colors
Special Business Licenses
• Some categories of businesses require special licenses
to enable them to carry out a specific business
operation
• Businesses involved with manufacturing, construction

and wholesale are among the businesses requiring
special licenses
• Table 3 summarizes examples of categories of

businesses and the special licenses needed to operate.

Table 3: Examples of Special Business Licenses
Business Category Example
Manufacturing Manufacturing license required for manufacturing

business with at least 75 full-time employees. Apply
for license from Malaysian Investment Development
Authority (MIDA).
Wholesale, retail, trading, Wholesale & Retail Trade (WRT) license. License is
import & export business applied for from the Ministry of Domestic Trade &
Consumer Affairs
Building & Construction Need a specific license from the Construction

Industry Development Board (CIDB) to undertake
any building and construction activities

Business Permits
• Business permits allows business to undertake
certain business related activities that are
regulated by governing authorities at either
the federal, state or local level
• Table 4 summarizes examples of business

permits

Table 4: Examples of Business Permits
Business Activity Example
Foreign worker entry permit Allows a business to bring into the country
workers from other countries to work in
their business operations
Retail sale event Allows a retail or wholesale business to

advertise and conduct a sale of goods at
prices below normal retail prices for a
specific time frame.

Section 3:
Protecting Intellectual Property

Intellectual Property as a Business Right
• A business that has invested time, money and intellectual capital to
produce something unique or different has the right to protect the
outcome.
• The outcomes are considered as company assets that are able to

keep the company ahead of its competitors and lead to greater
money making capacities
• These assets are often categorized as intellectual property and can be

legally protected as patents, copyrights and trademarks or brands.
• Registering the company’s intellectual property gives the company

the exclusive right to use the property and to take against any
unauthorized use of the registered property
Patent
• Patents are used primarily to protect inventions that represent a new
way of doing things
• Inventions normally involve some level of technology and can be in

the form of a product or process
• A registered patent gives exclusive right to the patent owner to make,

use and sell the patented product or process for up to 20 years
• A patent owner can still retain all rights to the invention but license
another party to use the patent within certain agreed upon
conditions and stipulations
• The patent owner can also choose to sell the patent to another party
hence severing all rights to the invention concerned.
Patent… cont.
• Patent rights are noted by the words “Patent”
followed by the patent registration number.
• Because patents take time to register, companies

can deter infringements by displaying the words
“Patent Pending” or “ Patent in Progress”.
• Even so these deterrents have no legal impact until

the patent is fully registered and given a patent
number.
Copyright
• Copyrights are used to protect a wide range of original creative,
intellectual or artistic works or authorship
• This can include original works of art and literature, music

composition, audio recordings, drawings, sculptures, broadcasts films
and computer programs.
• The idea behind the creative work is itself not protected and as such
some else can use the same idea but it must be in a significantly
different form or composition so as to not infringe on an existing
copyright.
• A copyright can exist for up to 50 years after the death of the

registered author
• The symbol © is universally

Fauziah Pawan, Sept. 2012 (ENT530)
used to denote a copyright 27
Trademark or Brand
• Trademarks are any distinctive name, mark, symbols, words,
shapes and colors
• A trademark is sometimes also referred to as a brand to indicate a

distinctive representation of a company
• In Malaysia it is not compulsory to register a trademark but a

company can still rely on common law to protect against
infringement or imitation.
•
Symbols used in to indicate trademarks include ® indicate an
unregistered trademark and ™ to show a registered trademark

Where to Register an Intellectual Property
• In Malaysia, a patent, copyright or trademark must be
registered with Intellectual Property Cooperation of
Malaysia (MyIPO).
• For international protection, an intellectual property may

need to be registered in multiple countries or with the
World Intellectual Property Organization (WiPO)
• The WIPO is a United Nations agency based in Geneva

that represents mainly patent protection agreements
valid in over 100 member nations. Malaysia is one of the
member countries
Summary
• In starting a new venture, an entrepreneur must
make decisions regarding fundamental issues such
as the form of business registration, understanding
business licenses and permits needed to operate
legally as well as protecting intellectual properties
• Making these decisions in an informed manner

are important to ensure a business structure that
can operate legally to optimize its entrepreneurial
opportunities
References
• http://www.malaysia.gov.my
• http://ssm.com.my
• Hisrich, Robert D., Peters, Michael P. & Shepherd, D.,

(2006). Entrepreneurship, New York: McGraw-Hill / Irwin,
8th Edition, International Edition, 2010.
• UiTM Entrepreneurship Study Group (MEDEC), (2004).

Fundamentals of Entrepreneurship, Petaling Jaya:
Pearson-Prentice Hall Sdn. Bhd. 2004
©Fauziah Pawan, Sept. 2012 (ENT530) 31/27

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STARTING A NEW VENTURE

© Fauziah Pawan, Sept. 2012 (ENT530) 1

©Fauziah Pawan, Sept. 2012 (ENT530) 2

• Some of the key initial decisions include the form of

©Fauziah Pawan, Sept. 2012 (ENT530) 4

• To register a business, the entrepreneur(s) need to first

• Entrepreneurs need to know the implication of choosing one

• The registration of these forms of businesses are governed by

• Table 1 summarizes the legislations governing the registration of

©Fauziah Pawan, Sept. 2012 (ENT530) 6

Partnership Registration of Businesses Act 1956

Private Limited Company Companies Act 1965

©Fauziah Pawan, Sept. 2012 (ENT530) 7

• Sole proprietorship allows only one person to be registered as

• The size and scope of business is often relatively small and as

• On the other hand the owner-manager has to also

• Death of the sole owner will result in termination of

Fauziah Pawan, Sept. 2012 (ENT530) 9

• The maximum number of partners allowed is 20 persons

• Professional business (e.g. legal firms, architect firms or

• Like the sole proprietorship, a partnership also allows the owners

• Partners also bear unlimited liabilities that means their personal

• Partnership Agreements are not required by law but are

• Death or withdrawal of any of the partner may result in

• Registration process is much more complex & costly

• Registration has to be through a registered Company Secretary

• The Memorandum of Association outlines how the money invested in

• Control of day-to day operations is in the hands of a management team

• Shareholders can indirectly affect operation decisions through

• A BOD consist of representatives from the major shareholders, key

• A key role of the BOD is to ensure shareholders business interest and

• The individual shareholder is liable only to the extend of his investment

Ownership One individual Up to 20 individuals Up to 50 individuals

Share of Owner receives all Profits depend on amount of Shareholder receives

Liability of Unlimited liability Unlimited liability unless Shareholder liability

Continuity of Death of owner Death of any partner Death or withdrawal of

Fauziah Pawan, Sept. 2012 (ENT530) 15

Fauziah Pawan, Sept. 2012 (ENT530) 16

• The licenses needed are basically divided into two

Fauziah Pawan, Sept. 2012 (ENT530) 17

• Premise license applications often need to be accompanied by the

• Signboard license application need to be accompanied by

• Businesses involved with manufacturing, construction

• Table 3 summarizes examples of categories of

Fauziah Pawan, Sept. 2012 (ENT530) 19

Manufacturing Manufacturing license required for manufacturing

Building & Construction Need a specific license from the Construction

Fauziah Pawan, Sept. 2012 (ENT530) 20

• Table 4 summarizes examples of business

Fauziah Pawan, Sept. 2012 (ENT530) 21

Business Activity Example

Retail sale event Allows a retail or wholesale business to

Fauziah Pawan, Sept. 2012 (ENT530) 22

Fauziah Pawan, Sept. 2012 (ENT530) 23

• The outcomes are considered as company assets that are able to

• These assets are often categorized as intellectual property and can be

• Registering the company’s intellectual property gives the company

• Inventions normally involve some level of technology and can be in

• A registered patent gives exclusive right to the patent owner to make,

• Because patents take time to register, companies

• Even so these deterrents have no legal impact until

• This can include original works of art and literature, music

• A copyright can exist for up to 50 years after the death of the