1. Formation Of A New Business
DFP6013 Cyberpreneurship
Formation Of A New Business

2. Learning Outcome At the end of this class, student will be able to:-
Identify the types and characteristic of business ownership in Malaysia such as sole proprietorship, partnership, limited liability partnership(LLP), private limited company and public limited company.
List the requirements in starting a business
Explain the procedure in registering a business
Describe the various ways to start a business:-
Establish a new business
Buying an existing business
Running a franchise

3. INTRODUCTION There are many types of business defined in the
legal systems of various countries.
These include :-
Sole Proprietorship
Partnership
Limited Liability Partnership(LLP)
Private Limited Company
Public Limited Company

4. Sole Proprietorship
A sole proprietorship, also known as the sole trader, is a type of business that is owned and run by one individual and in which there is no legal distinction between the owner and the business.
The owner receives all profits and has unlimited responsibility for all losses and debts.
Every asset and all debts of the business is owned by the proprietor or owner.
A sole proprietor also may use a trade name or business name other than his or her legal name.
Examples: tailor shops, beauty saloons, restaurants, and mini market

5. Characteristic of Sole Proprietorship
Easy Setup
As a sole proprietor, you have absolute freedom in decision making.
Unlimited Liability
All profits will be your personal property, but “unlimited liability” for any debts of the business. This means that, if anybody has a reason to sue your business, they’ll be able to come after your personal assets and you could end up of losing almost all of your personal properties.
— your car, your savings, and possibly even your home.
Management
No reports of accounts are required.
Income Taxes
You only need to pay personal income tax and not business tax.

6. Partnership
A partnership occurs when you decide to pool capital and work together with at least one more person. In this form of business, you and your partners are joint- owners of the business and therefore will share the business profits and risks

7. Characteristic of Partnership
Agreement
Without agreement partnership cannot be formed. "No agreement no partnership." But only competent persons are entitled to make a contract.
Competence to enter into contract
Partnership means having more expertise and more resources for capital. Partnership means business risks can be distributed and shared among partners.
Number of partners
The minimum number of partners must be 2, while the maximum number can be 10 in case of banking business and 20 in all other types of business.
Sharing of profits
This profit is distributed among the partners according to agreed proportion.
Unlimited liability
All partners are responsible for all debts earned by the partnership.
Team spirit
The business of the partnership cannot be conducted successfully without the element of mutual confidence and cooperation of partners. So the members must have trust and confidence in each other.
banking business = commercial banking provides business loans, credit, savings and checking accounts specifically for companies and not for individuals.

8. limited liability partnership(LLP),
Private Limited Company + Partnership = Limited Liability partnership.
A minimum of two partners will be required for the formation of an LLP with no limit on the maximum number of partners.
Partnerships, private limited companies and unlisted limited companies may convert into LLPs.
Any change in the partners will not affect the existence, rights or liabilities of the LLP (the share in company can be transfered).
Liability of the partners on an LLP will be limited to the extent of investment made by them in the LLP.

9. Private Limited Company
Sendirian Berhad (SDN BHD) is a private limited company,
it prohibits/bars of any invitation or offer to the public to subscribe to any of its shares, deposit money with the company for investment or subscription or contribution.
Minimum members in a private limited company is TWO (2) and maximum is FIFTY (50).

10. Characteristic of Private Limited Company
Limited Liability
Any debts are borne by the company and will not involve personal property
Shareholders
Shareholders are a company's owners. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly. A shareholder may also be referred to as a "stockholder".
Capital
To raise capital – Bank loan

12. Public Limited Company
Berhad (BHD) is a public limited company where its shares can be offered to the public for fixed periods and any other forms of subscription.
The minimum amount of members’ (shareholders) are TWO (2) and maximum of unlimited amount of members.

13. Characteristic Public Limited Company
Board of Directors
Public limited companies are headed by a board of directors that act as the representatives of the shareholders in the management of the company.
Limited Liability
Shareholder liability for the losses of the company is limited to their share contribution only. The business can be sued on its own and not involve its shareholders. 
Life Span
Death of one of its shareholders not affected the company, but her/his shares are transferred to the next of kin and the company continues to run its business as usual.
Financial Privacy
Strictly regulated and are required by law to publish their complete financial statements annually. This ensures that they reveal their true financial position to their owners and to potential investors so that they can determine the true worth of its shares.
Capital
Increased ability to raise capital since they can issue shares to the public through the stock market.

14. In Class Activity
Discuss and explain about the advantages and disadvantages of business ownership in Malaysia.

15. Starting a business Evaluate Your Idea Market Research
Develop A Business Strategy
Financing
Business Structure
Business Name
Register Business
Website
Business Licence
Insurance

16. Procedure in registering business (conventional)
Registration can be done at any SSM counter (Suruhanjaya Syarikat Malaysia)or through the e- Lodgement services (
Complete the Business Registration Form.
Business may be registered using personal name or using a trade name. Personal Name : Business name using personal name as stated in the Identity Card(IC) (not required to apply for business name approval). Trade Name : Complete business name approval (form (Form PNA.42)). 
Business names approval is according to Rules 15, Rules of Business Registration 1957.

17. Procedure in registering business (conventional)
Business Registration can be made for a period of one (1) year and not more than five (5) years.
Fee
Trade Name – RM60 per year Personal Name - RM30 per year Branch (s) - RM5 per year for each branch

18. Procedure in registering business (ONLINE)
Start a Business
Register a Domain Name
Select a Web Host
Design Your Website
Begin Advertising and Marketing
Comply with Online Business Regulations
Understand Local Tax Requirement and International Trade Laws

19. Start a business Entrepreneurs have many ways to start investing.
There are three ways to start a business:-
Establishing a new business
Buying an existing business
Running a franchise

20. Establishing a new business
To start a business, we need to have a lot of experience, knowledge, skills and passion.
It is often involved in the invention of new products or services.
There are three critical factors that should be considered :
The size of the initial investment.
Expected sales and profit.
Availability of product

21. Buying an existing business
buying a business that has been established is the most safe and effective for entrepreneurs to venture into business.
By purchasing an existing company, it allows the company to expand and provide the opportunity to enter new markets.

22. Steps to purchase an existing business:
Identify Your Interests :
If you have absolutely no idea what business you want to invest in, first eliminate businesses that are of no interest to you.
Consider Your Talents :
Being honest about your skills and experience can help you eliminate unrealistic business ventures.
List Conditions for Your Business:
Consider if a business has a condition that is unfavourable to you, such as location and time commitment.
Quantify Your Investment:
Finding profitable businesses for sale at reasonable prices can be difficult.   Ask yourself why this business is for sale in the first place.

23. Running a franchise
A franchise is a business model that involves one business owner licensing trademarks and methods to an independent entrepreneur.
It is an arrangement/agreement in which the original owners allow trademark , trade names or copyrights to be use and sale.
Franchisor and franchisee have an ongoing relationship, and the franchisor often provides a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing

24. Step to running a franchise
Decide what kind of franchise you want to open.  
Select the franchise owner you want to work with.
Schedule an appointment with a franchise representative to find out what the requirements are to open a franchise.
Review all of the information and incorporate it into a business plan.
Raise the investment capital you need to open a franchise.
Sign your contract with the franchise owner when you're confident you meet all requirements.

25. Step to running a franchise
Follow all training procedures offered by the franchise owner to make sure you fully understand the business strategy. 
Rent or buy a location for your franchise.  
Order all necessary equipment to conduct your day-to-day business and furnish your franchise venue. 
Interview, hire and train employees.
Order your inventory.
Advertise the opening of your franchise.
Open your franchise.

26. In Group Activity 1
Rosli and Haris have an interest in forming a business selling stationary and sport equipment. However they still not sure either to form a partnership or private limited company. Help them to start their business.
Explain about advantages and disadvantages of being an entrepreneur
Help them to choose the most suitable type of business by giving strong reasons and suggest the best type of a business
Give an example of suitable business name that you would suggest to them based on the type of business chosen.

27. In Group Activity 2 There are three ways to start a business:-
Establishing a new business
Buying an existing business
Running a franchise
If you are planning to start a business, what is the way that you would choose?
Explain about the advantages and disadvantages to support your reason.