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STARTING A NEW VENTURE

Module for
Principles of Entrepreneurship (ENT 530)
BBA, Faculty of Business Management, UiTM

Fauziah Pawan, Sept. 2012 (ENT530)

Module Focus
This
1.

2.
3.

module will focus on:


The main business forms that appeal to
new own-venture entrepreneurs & their key
features
Key licenses & permits to operate a
business
Key forms of intellectual property & its
protection

Fauziah Pawan, Sept. 2012 (ENT530)

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 companys
competitive edge and ability
to make money.
Fauziah Pawan, Sept. 2012 (ENT530)

Section 1:
Business Forms
&
Governing Legislations

Fauziah Pawan, Sept. 2012 (ENT530)

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 entrepreneurs 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 Slide
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15)

Business Forms & Legislations

Entrepreneurs looking to create their own new venture


often choose one of the following business forms:

The registration of these forms of businesses are


governed by two key parliamentary legislations:

Sole Proprietorship
Partnership
Private Limited Company or Sendirian Berhad

Registration of Businesses Act 1956 (Amendment


1978)
Companies Act 1965

Table 1 summarizes the legislations governing the


registration of specific businessFauziah
forms.
Pawan, Sept. 2012 (ENT530)

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 (Sendirian
Berhad)

Companies Act 1965

Fauziah Pawan, Sept. 2012 (ENT530)

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 ownermanager.

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
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time workers

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 Fauziah


result
in termination
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of the business

Partnership

10

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)

11

Partnershipcont.
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
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12

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
of
Fauziah Pawan,
Sept.
2012Articles
(ENT530)
Association focuses on the laws governing the internal
management of the company

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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
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interest and investments are effectively represented in
management direction and decisions.

14

Private Limited Companycont.


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
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Pawan, Sept. 2012 (ENT530)
separate, the death or withdrawal of any shareholder has no
effect on the life of the business.

Table 2: Factors in Business


15
Forms
Factors

Sole
Proprietorship

Partnership

Private Limited
Company

Ownership

One individual

Up to 20 individuals

Up to 50 individuals

Share of
profits &
losses

Owner receives all


profits & bears all
losses

Profits depend on
amount of investment
or as specified in
partnership agreement

Shareholder receives
share of profits
through dividend
payouts

Liability of
owners

Unlimited liability
extending to
personal assets

Unlimited liability
unless otherwise
specified in a
partnership agreement

Shareholder liability
limited to amount of
share or capital
contribution

Manageme Owner makes all


nt control
management
decisions and acts
freely

All partners have equal


control unless
otherwise specified in a
partnership agreement

In the hands of a
management team
guided by a Board of
Directors

Continuity
of
business

Death of any partner


Death or withdrawal
dissolves the business
of shareholder has no
Fauziah Pawan, Sept.
2012on
(ENT530)
unless otherwise
effect
existence of
specified in a
company
partnership agreement

Death of owner
dissolves the
business

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Section 2:
Business Licenses
& Permits

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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
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General Business Premise &


Signboard Licenses
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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
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and samples of the signboard design and colors

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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.
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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, import &
export business

Wholesale & Retail Trade (WRT) license.


License is 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
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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

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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.
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Section 3:
Protecting Intellectual Property

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Intellectual Property as a
Business Right

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 companys intellectual property gives the


Fauziah
Sept. 2012and
(ENT530)
company the exclusive right to use
thePawan,
property
to take
against any unauthorized use of the registered property

Patent

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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
patent
to
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Pawan,the
Sept. 2012
(ENT530)
another party hence severing all rights to the invention
concerned.

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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.
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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.

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


the registered author
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The

symbol is universally used to denote a copyright

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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


unregistered trademark and

indicate an

to show a registered trademark


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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.
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Malaysia is one of the member countries

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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
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31/27

References
http://www.malaysia.gov.my
http://ssm.com.my
Hisrich,

Robert D., Peters, Michael P. & Shepherd,


D., (2006). Entrepreneurship, New York: McGrawHill / 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)