DPB2012 - T3

DPB2012:
ENTREPRENEURSHIP
CHAPTER 3: BUSINESS OWNERSHIP
LEARNING OUTCOMES
At the end of this chapter, you will be able to;

1. Explain the factors to consider when selecting the form of business ownership
2. Discuss the four types of business ownership
3. List the advantages and disadvantages of each type of ownership
4. Describe the procedures involved in registering each type of ownership
LESSON LEARNING OUTCOMES
3.1 Categorize the principles and concepts of business ownership

3.1.1 Explain factors that influence the choice of entrepreneurial ownership
a. Capital
b. Personal assets
c. Span of control
d. Sharing information
FACTORS THAT INFLUENCE THE CHOICE
OF ENTREPRENEURIAL OWNERSHIP
Personal
Capital
assets
Span of Sharing of
control information
CAPITAL
 If the individual possess a small amount of capital, he

should venture in a sole proprietorship. This is because the
cost of forming a company is relatively high.
 Capital also determines the probabilities to obtaining credit
or loan from external sources.
PERSONAL ASSETS
 Personal assets are liable to the creditor if losses are

incurred either in a sole proprietorship or partnership.
 Meanwhile in companies, there is a separate entity
between the shareholders property. These assets will not
affected although the company incurs losses.
SPAN OF CONTROL
 Sole proprietorship have full authority and power in

carrying out his business.
 In a partnership, the span of control is shared among all
partners.
 In a company, the person who is responsible for initiating
the business will not necessarily be the director of the
company.
SHARING OF INFORMATION
 If an individual decides not to shares information with his

counterparts, it is advisable to form sole proprietorship
 In partnership and company, there is no confidential
information among partners, members of the company or
creditors
3.1Categorize the principles and concepts of business ownership

3.1.2 Identify types and characteristics of business ownership
a. Sole proprietorship
b. Partnership
c. Private limited company
d. Public limited company
3.1.3 Advantages and disadvantages of each business ownership
TYPES OF BUSINESS OWNERSHIP
Business ownership in Malaysia can be categorized into 4 types
Business established under the Business Registration Act 1956
(Amendment 1978) and the rules of the Registration of Businesses Act
1957.
All business must be registered with the Companies Commission of
Malaysia.
The entrepreneur should take into consideration the advantages and
disadvantages of every form of business ownership during the selection
process.
TYPES OF BUSINESS OWNERSHIP
Sole
Partnership
proprietorship
Private limited Public limited

company company
SOLE PROPRIETORSHIP
The simplest business structure with minimal legal requirements under
the Business Registration Act 1956 (Amendment 1978) and the
Procedures of Business Registration 1957.
Only Malaysian citizens who are permanent residents can register a
business as a sole proprietorship.
Solely owned and operated by 1 individual (single owner)
Sole proprietorship can have a large number of employees
E.g.: tailors, beauty salons, restaurants, mini markets etc
SOLE PROPRIETORSHIP
No. Characteristics Description
1 Possession Owned and operated by 1 person
2 Establishment Established under Business Registration Act

1956 (Amendment 1978)
3 Registration Easy to register

4 Capital Require small capital
Owner bear all profits/losses derived from
5 Distribution of profit/loss business
Business ceases operations if the owner
6 Business life span dies
SOLE PROPRIETORSHIP
Advantages Disadvantages
1. Ease of formation – legal requirements of 1. Unlimited liability – the owner have to bear all
establishing a sole proprietorship are minimal losses incurred by business and may loss
and has fewer formalities and restrictions his/her personal property
2. Full and total responsibility – the survival of 2. Lack of continuity – if the owner dies, the
the business rests on the shoulders of the sole business ceases its operations
proprietorship
3. Retaining all profits – the owner get full 3. Limited access to fund – funds may be
profits of the business insufficient if the owner wishes to expand the
business
4. Confidentiality – owner is not required to 4. Lack of experience and ability – business

make any public disclosure of trading figures operations depends on 1 individual’s ability,
training and expertise
PARTNERSHIP
Business owned by at least 2 or more individuals but not exceeding the
max number of 20 persons.
Is formed under the Business Registration Act 1956 (Amendment 1978)
Only Malaysian citizens or permanent residents can register partnerships.
The owners are called ‘partners’. Each partners contribute capital, labour,
or skills and shares profits/losses of the business
A partnership agreement outlines the roles of partners, responsibilities,
ratios of profit sharing and others.
PARTNERSHIP
General Limited
Partnership Partnership
 All partners have unlimited  Partners have limited liabilities

liabilities for the debts of the – they share the firm’s
business profit/losses but do not take an
 They are personally liable for all active role in managing the
obligations of the firm company
 General partners manages the  The limited partners will only
company, receives a salary & be liable to the extent of their
shares the firm’s profit/losses contribution
PARTNERSHIP
1. Ease of formation – a partnership can be 1. Shared profits – any profits earned by the
established by meeting only a few legal partnership will be share among all partners
requirements
2. Taxation advantage – partnerships pay taxes 2. Conflict – the tendency for disagreements and
as individuals, thus escaping the higher tax conflicts to happen is high
rate
3. Unlimited liability – all partners are liable for
3. Increase in resources for capital – more than 1 the debts of the business even if those debts
individual is providing funds for the business were incurred by one partner’s
mismanagement
4. Combined talents & business acumen – all 4. Limited life span – partnership may end if any
the partners’ abilities are combined to cover 1 of the partners suffers from metal disorder,
a wide range of skills, ideas & expertise resign, dies etc.
LIMITED COMPANY
Private Limited Public Limited
Company Company
 Limited by shares and owned by a  Limited by shares with at least 7 or
group of people with at least 2 or more more individuals and no limit in terms
individuals but not exceeding 50 of membership.
people.  Public – the shares can be purchase or
 The shares cannot be sold to the sold by investors.
general public.  The business is run by a board of
 Limited – it has a legal entity of its own directors
that is separated from the owner.  Can be either a listed or unlisted
 In liquidation, creditor’s claims are company on the stock exchanges.
restricted to the assets of company  Company name must ends with ‘Bhd’
 Company name ends with ‘Sdn. Bhd’ or ‘Ltd’.
or Pte. Ltd
PRIVATE LIMITED COMPANY
1. Limited liability – the liabilities are limited to 1. High set-up costs – the cost of setting up a Pte.
the capital contributed to the company Ltd. company is high
2. Perpetual life – the life span of the business is 2. High taxation – the company must pay
not dependent upon the age or resignation of corporate tax as well as personal income tax
its members
3. Ease of expansion – it is easier to expand and 3. Limited membership – the maximum
develop because its simplicity in equity members cannot exceed 50 individuals
participation
4. Ease of capital rising– funds are easily 4. Regulations – is subject to more rules and
required by exchanging share of ownership or regulations. Must always abide by the rules
obtaining loans from financial institutions and fulfil the terms set by the CCM
PUBLIC LIMITED COMPANY
1. Limited liability – the liabilities are limited to 1. High set-up costs – a large amount of
individual’s investment in the company organizing expenses is involved in forming a
corporation
2. Perpetual life – has a separate and district life 2. High taxation – various taxes must be paid by
from its owner & can continue for indefinite the company
period
3. Transfer of ownership – can be transferred 3. Restriction of activities – corporate activities
through the sale of stock to interested buyers are limited by the charter and by various laws
4. Ease of expansion – a public limited company
has a great potential for expansion 4. Financial disclosure – the company is required
to disclose its information regarding its
operation and financial status
3.1Categorize the principles and concepts of business ownership

3.1.4 Display information of the procedure of registration for business
ownership

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DPB2012:

At the end of this chapter, you will be able to;

3.1 Categorize the principles and concepts of business ownership

 If the individual possess a small amount of capital, he

 Personal assets are liable to the creditor if losses are

 Sole proprietorship have full authority and power in

 If an individual decides not to shares information with his

3.1Categorize the principles and concepts of business ownership

Private limited Public limited

2 Establishment Established under Business Registration Act

3 Registration Easy to register

4. Confidentiality – owner is not required to 4. Lack of experience and ability – business

 All partners have unlimited  Partners have limited liabilities

3.1Categorize the principles and concepts of business ownership

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