UCS 102

Entrepreneurship
in Asia
Week 5
Starting a Business
 FOR THIS WEEK….
- DEFINE WHAT IS A BUSINESS OWNERSHIP

- FACTORS FOR SELECTING A BUSINESS

- TYPES OF BUSINESS OWNERSHIP

FACTORS IN SELECTING

BUSINESS
OWNERSHIP
 CAPITAL PERSONAL ASSETS

FACTORS IN SELECTING A BUSINESS

OWNERSHIP

SHARING OF
SPAN OF CONTROL
INFORMATION
 • Main element that determines the type of business one
should venture in.
CAPITAL • Also determines the probability of an individual
obtaining credit or loans from external sources.

• Are liable to the creditor if losses are incurred either in a

sole proprietorship or a partnership.
PERSONAL ASSETS • Different to company, all losses will be borne by the
company.
 • Bigger span of control > Sole proprietorship
• Lesser span of control > Partnership
SPANCAPITAL
OF CONTROL

• Sole proprietorship does not need to share information to

others (Capital etc)
SHARING OF • Partnership or companies, there’s no confidential
PERSONAL ASSETS
INFORMATION
information among the partners.
TYPES

OF

BUSINESS
OWNERSHIP
TYPES OF BUSINESS OWNERSHIP
TYPES OF BUSINESS OWNERSHIP
• The simplest business structure with minimal legal requirements under the
Business Registration Act 1956 (Amendment 1978) and the Procedures of
Business Registration 1957.
• Solely owned and operated by one individual, which means it has a single
owner.
• Can have a large number of employees.
• E.g. Restaurants, beauty saloon, mini markets, tailors etc.

• A business owned by at least two or more individuals but not exceeding the
maximum number of 20 persons.
• Owners of the business are called partners.
• Each partners contributes money, labour, or skills, and each shares the profits
and losses.
• 2 types of Partnership:
• General Partnership: all partners have unlimited liabilities for the debt of
business. Manages the company, receives salary and shares.
• Limited Partnership: Does not take an active role and have limited liabilities.
Only be liable to the extent of their contribution (capital).
TYPES OF BUSINESS OWNERSHIP
• A company limited by shares and owned by a group of people with at least
two or more individuals but not exceeding 50 people.
• The shares cannot be sold to the general public.
• “Limited” refers to it has a legal identity to its own that is separated from the
people who own it.
• Even in liquidation, the creditor’s claim are restricted to the asset of the
company.
• The owners of the company are called shareholders.
• The name of the company ends with “Pte Ltd” or “Sdn Bhd”

• A company limited by shares with at least seven or more individuals and

there is no maximum limit in terms of membership.
• Very large in size.
• Raise or source their capital by selling shares to the public and are run by a
board of directors elected by shareholders.
• The shares of stock can be easily purchased or sold by investors and public.
• To become listed company in Malaysia, the company needs a paid-up capital
of not less than RM60 million (KLSE main board)/RM40 million (KLSE
Second Board)
Activity

Discuss on the advantages of Partnership and a

Public Listed Company
Choosing a Legal Form of Business Organization

Choose Your Register Register with

Business Your State
Name Agencies
Business
Name
Factors to Consider when Starting a New
Business Venture
Factors to Consider when Starting a New Business Venture

Interest/
Capital Location
Knowledge

Size of Law &

Business Competitors Regulations
 • Sources of capital are personal funds, funds from family and
Capital friends, retirement accounts and banks.
• To convince the relevant bank on the ability to pay the debts.

• Choose a strategic location.

Location • Selection is influenced by factors such as availability of
capital, rental, competitors, infrastructure and regulations.
Obtaining Initial Capital
Obtaining Initial Capital

• Definition of Initial Capital

The initial investment or money used to start a business.
The funds, or capital, may come from a bank loan, a government grant,
outside investors, or the business owner's personal savings.

The money is used to cover such startup costs as purchasing building,

purchasing equipment and supplies, and hiring employees.
Selection of the Location
 • Those who have a strong interest in the business will sustain in
Interest/ the industry for longer time.
Knowledge • They must have specific knowledge and experience related to
the business.

• Must able to determine the nature and size of the proposed

business venture.
Size of • The nature of business has to accommodate the capital,
Business capabilities, knowledge as well as experience of the
entrepreneur.
• Must be in line with the capital, knowledge and experience.
 • Must know the size, strength and weakness of the competitors.
Competitors

• Must constantly update himself on the laws, regulations, and

Law & acts related to running a business.
Regulations • Update with Local Councillors and the kind of licenses
required.
Starting a New Business
• The advantages of starting a new business

Ability to
determine business Flexibility Cost minimization
direction

Business chance
New lifestyle
when purchasing is
goals
not an option
The Disadvantages of starting a
New Business

Lack of established
Raising capital
customer base

Cash flow shortages Learning curve expenses

Alternatives in Starting a New Entrepreneurial
Venture
 Buying Existing
Start-up Company
Company/Acquisition

Franchise
Cost of Start-up Venture
Any starting business will need to meet the following cost:
• Licenses and permits required to operate the business

• Working capital

• Communication equipment : example: telephones, computers, fax machines

• Operating plan and equipment

• Staff recruitment expenses

• Insurance

• Raw materials (or trading stock)

• Rental of premises (unless working from owner’s home)

• Stationery
Purchasing an Existing Business

Advantage of purchasing an existing business is that allows a proprietor to begin

trading immediately, since established business operation, cash flow, staff, product
range and customer base already exist.

Easier to arrange finance for the venture.

Types of Franchise
Trading name Franchise
• Allows the franchisee to use the franchisor’s trade name without distributing the
products exclusively under the franchisor’s name.
• E.g: Automobile business, Soft drink industry
Types of Franchise

Product distribution franchising

• A franchisor licensing a franchisee to sell specific products under the franchisor’s
brand name and trademark through a selective, limited distribution network.
• To obtain these rights, store owners must pay fees or buy minimum amounts or
products.
• E.g. LEGO Certified Store in Malaysia, Tyres store.
Types of Franchise
Pure/Business format/System Franchising
• Most common type of franchise.
• A company expands by supplying independent business owners with an established
business, including its name and trademark.
• The franchisor company will assists in launching and running their businesses.
• In return, the business owners pay fees and royalties.
• Also buys supplies from the franchisor.
• E.g. McDonalds, Shell, Marry Brown, Tea Live
January 2017: The initial fallout between La Kaffa and Loob Holding

The dispute began in January 2017 when La Kaffa, the Taiwan-based company behind Chatime, terminated Loob
Holding’s contract as the franchise holder for Chatime in Malaysia based on an alleged breach of contract on Loob’s
part. Despite having more than 20 years to go in the contract, La Kaffa alleged that Loob had begun sourcing
unapproved raw material, which violated the terms of the master franchisor contract, prompting the company to act.

Loob accepted the termination, but here’s where things took a remarkable twist: it “rebranded” virtually all Chatime
outlets in Malaysia into its own brand, Tealive, and ran the outlets as usual. Naturally, La Kaffa sued Loob in the
Malaysian courts, seeking an injunction to stop the Tealive outlets from operating.
What Loob Holding CEO Bryan Loo basically did was to set up Tealive as a rival to Chatime, which is against both the
terms of the master franchise agreement as well as the Franchise Act 1998. When La Kaffa brought this case to the High
Court, it sought a mandatory injunction and a prohibitory injunction against Loob Holding.
•The mandatory injunction was for Loob to return all the confidential information and documents related to Chatime back
to La Kaffa.
•The prohibitory injunction was to restrain Loob from continuing its trade as a competitor of La Kaffa for two years, as
agreed in the post-termination terms of the franchise and in accordance with the law.
La Kaffa was successfully granted the mandatory injunction, but failed in obtaining the prohibitory injunction. The judge
said that forcing Tealive to shut down its business would negatively affect the livelihood of over 800 employees of Loob, as
well as the suppliers, landlords, and families of the employees. The judge also believed the damages that Tealive would
have to pay Chatime in compensation would make up for any loss Tealive has inflicted on Chatime’s business.
Thus, at this point of the legal battle, Tealive triumphed over Chatime.
• Discuss the ethical issues pertaining to the Tealive vs
Chatime case

• How did it broke the Franchisor and Franchisee agreement?

MR. ARIF FAHMI ADNAN
arif.adnan@aeu.edu.my

017-662 0085

Contact Hours
8:30 a.m. – 6:30 p.m.