BAEB510 Chapter 4: Form of Business Entities

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BAEB510 Chapter 4: Form of Business Entities

  1. 1. BAEB501 : ENTREPRENEURSHIPCHAPTER 4:Form of Business Entities © 2010 Cosmopoint
  2. 2. Chapter 4: Form of Business EntitiesTopic Outlines 4.1 Business Organization in Malaysia 4.2 Sole Proprietorship 4.3 Advantages of Sole Proprietorship 4.4 Disadvantages of Sole Proprietorship 4.5 Partnership 4.6 Advantages of Partnership 4.7 Disadvantages of Partnership 4.8 Corporation D 4.9 Advantages of Corporation 4.10 Disadvantages of Corporation © 2010 Cosmopoint Slide 2 of [11]
  3. 3. Chapter 4: Form of Business EntitiesLearning Outcomes  After completing this chapter, student should be able to:  Explain the main types of legal structure a business may operate under  Discuss the pros and cons of each type of legal structure  Describe the various forms of intellectual property © 2010 Cosmopoint Slide 3 of [11] Topics
  4. 4. Chapter 4: Form of Business Entities4.1 Business Organization in Malaysia  Business in Malaysia can be registered under any of the following.  Business Registration Act 1956 (Amendment 1978) and Procedures of Business Registration 1957:  There are two types of business that can be performed under this Act: Sole Proprietorship Partnership © 2010 Cosmopoint Slide 4 of [11] Topics
  5. 5. Chapter 4: Form of Business Entities4.1 Business Organization in Malaysia  Company Act 1965  There are 3 types of companies that can be formed under this Act:  Limited Company by Gurantee  Limited Companny by Share  Private Limited Company (Sendirian Berhad)  Public Limited Company  Foreign Owned Company  Unlimited Company  Cooperative Act 1948  Parliamentary Act or State (Government) Enactment © 2010 Cosmopoint Slide 5 of [11] Topics
  6. 6. Chapter 4: Form of Business Entities4.2 Sole Proprietorship  Solely owned by one person, where management rests on that person whose liability is unlimited.  The simplest business structure  Does not mean that the sole proprietorship has to be small.  May grow to any level in sales revenue  E.g: tailor shops, salons, restaurants. © 2010 Cosmopoint Slide 6 of [11] Topics
  7. 7. Chapter 4: Form of Business Entities4.3 Advantages of Sole Proprietorship  Simple to create  Least costly form of ownership to establish  Profit incentive  Total decision – making authority  No special legal restrictions  Easy to discontinue © 2010 Cosmopoint Slide 7 of [11] Topics
  8. 8. Chapter 4: Form of Business Entities4.4 Disadvantages of Sole Proprietorship  Unlimited personal liability  Limited access to capital  Limited skills and abilities  Feelings of isolation  Lack of continuity for the business © 2010 Cosmopoint Slide 8 of [11] Topics
  9. 9. Chapter 4: Form of Business Entities4.5 Partnership  A partnership is a legal business entity that carried out by more than one person but not exceeding 20 person.  However, in professional businesses, such as legal firms, architect and accounting firms, the members could number up to 50 person.  Partners carry out the business, share the capital, profits and losses.  Every partner is considered the company’s representative and acts on behalf of the company. © 2010 Cosmopoint Slide 9 of [11] Topics
  10. 10. Chapter 4: Form of Business Entities4.6 Advantages of Partnership  Easy to establish  Complementary skills  Division of profits  Larger pool of capital  Ability to attract limited partners  Little government regulation  Flexibility  Income tax is not imposed on the partnership itself but on the owners as individuals. © 2010 Cosmopoint Slide 10 of [11] Topics
  11. 11. Chapter 4: Form of Business Entities4.7 Disadvantages of Partnership  Unlimited liability of at least one partner  Capital accumulation  Difficulty in disposing of partnership interest without dissolving the partnership  Potential for personality and authority conflicts.  Partners should understand the law and regulation © 2010 Cosmopoint Slide 11 of [11] Topics
  12. 12. Chapter 4: Form of Business Entities4.8 Corporation  Obviously many corporations are big  Not only limits the liability of owners, it enables many people to share in the ownership (and profits) of a business without working there or having other commitments to it.  Corporate character  Establishment of years  Stockholders & Board of director © 2010 Cosmopoint Slide 12 of [11] Topics
  13. 13. Chapter 4: Form of Business Entities4.9 Advantages of Corporation  Limited liability of stockholders  Ability to attract capital  Ability to continue indefinitely  Transferable ownership © 2010 Cosmopoint Slide 13 of [11] Topics
  14. 14. Chapter 4: Form of Business Entities4.10 Disadvantages of Corporation  Cost and time involved in the corporation process  Double taxation  Potential for diminished managerial incentives  Legal requirements and regulatory  Potential loss of control by the founders. © 2010 Cosmopoint Slide 14 of [11] Topics
  15. 15. Chapter 4: Form of Business EntitiesActivity  Task: Select any three companies in any industry. Identify the advantages and disadvantages for 3 form of business entities. © 2010 Cosmopoint Slide 15 of [11]

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