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Sole Proprietorship
Partnership
Corporation
SOLE PROPRIETORSHIP
A business is owned and operated by one person To become a sole proprietor, a person need to obtain whatever local and state licenses necessary to begin the operations The most widely used legal form of organisation
Advantages
1. Ease of formation; less formality with fewer restrictions 2. Sole ownership profits 3. Decision making and control vested in one owner 4. Relatively freedom from governmental control 5. Freedom from corporate business taxes
Disadvantages
1. 2. 3. 4. 5. Unlimited liability including own assets Lack of continuity Less capital available Relatively difficult to obtain long term financing Relatively limited viewpoint and experience
PARTNERSHIP
Is an association of two or more persons acting as co owners of a business for profits Agreement clearly outlines the financial and managerial contribution of the partners and carefully delineates the roles in the partnership relationship Partner contributes money, labour, skills, profits or losses
Advantages
1. 2. 3. 4. 5. Ease of formation Direct rewards; direct sharing of profits Growth and performance facilitated Flexibility in carrying the business; quick action Relatively freedom from governmental control and regulation 6. Possible tax advantage (individuals tax only)
Disadvantages
1. Unlimited liability; at least one partner decisions or actions and may involve personal assets 2. Lack of continuity 3. Relatively difficult to obtain large sums of capital 4. Bound by the acts of just one partner 5. Difficulty of disposing of partnership interest
CORPORATION
There are three types of corporation provided by the Company Act 1965;
a1 1. Corporation limited by share 2. Corporation limited by guarantee 3. Corporation unlimited by share
Advantages
1. 2. 3. 4. Limited liability; limited to individuals investment Transfer of ownership; through sale of stock Unlimited life as long as the company exist Relative ease of securing capital in large amounts, through issuance of bonds and shares. 5. Increased ability and expertise from stockholders who invest in the venture
Disadvantages
1. Activities restriction by various laws 2. Lack of representation; majority stockholders outvote minority stockholders 3. Extensive government control and regulations 4. Organising expenses are large in forming corporation 5. Double taxation; taxes are levied both on corporate profits and individual salaries n dividends
TYPES OF VENTURES
An entrepreneur has several ways to start a new venture. 3 forms available;
Buying An Existing Business Franchising
Start Up
START UP
A start up company is a company that recently formed. It is a process where the entrepreneur creates a completely new business starting from scratch Use their own funds from their saving or borrowing from others Needs a lot of experience, knowledge, skills and interest in the field involved
Advantages
1. Freedom of making own decisions 2. Opportunity of using ones idea and developing own image 3. Freedom to select the ideal location, plant, equipment, products/services, employees, suppliers and bankers 4. Ability to make changes to business 5. Will not affect the reputation of the business as it is a new venture
Disadvantages
1. Time consuming and costly 2. At the initial stage (1-2 years), obtain only minimal profits or losses 3. No business record to forecast sales, expenses and profits 4. No ready customers 5. Difficulty of obtaining loans from financial institutions
Advantages
1. 2. 3. 4. 5. 6. 7. Immediate operations Easier financing Existing inventory Existing customer Existing employees Less competition Can resell the business
Disadvantages
1. 2. 3. 4. 5. 6. Costly to buy Outstanding contracts Problem of the business Personal conflicts Obsolete goods Uncollectable receivables
FRANCHISING
Any agreement in which the owner of a trademark, trade name or copyright has licensed others to use and sell its goods or services A franchisee can operate as an independent businessperson but still realise the advantages of regional or national organisations
Advantages
1. 2. 3. 4. Training and guidance provided Brand name appeal Proven track record Financial assistance
Disadvantages
1. Franchise fees 2. Franchisor control 3. Unfulfilled promises
Permit
Letter Of Authority Others
Cont
4. 5. 6. 7. 8. Standard and quality Hire purchase act Workers social needs Infrastructure needs Import and export regulation
6. Research & Development MARDI,SIRIM,UTP,UiTM,UKM,UPM etc 7. Financial assistance Banks, government agencies etc 8. Advisory assistance Government agencies, private consultant etc 9. Extension assistance MEDEC,MITI,SIRIM,MARA,MATRADE etc 10.Information assistance MITI,MATRADE,MARDI,MIDA,FRIM etc
SOURCES OF CAPITAL
Personal funds Family and friends
Retirement account
Government loans
Stock markets
1. Personal funds Savings account, current account, money safe at home or cash in hand
2. Family and friends Parents, sibling, son or daughter, other relatives Friends officemate, school mate,
5. Government loans To assists businesses and industry as a whole MARA, KBS, 1MDF, 1AZAM, TEKUN etc
6. Stock markets Obtain by offering stock in the venture to the public and must comply with federal regulations (issuing prospectus) Bank Rakyat, UEM, POS Malaysia etc
CHAPTER 4
BUSINESS PLAN
THE IMPORTANCE OF A BP
1) 2) 3) 4) 5) 6) Increase opportunity for success Develop mission and vision Identify barriers to business As a performance tool Identify the main competitors Identify the right way of managing the business 7) Increase stakeholders confidence
AUDIENCE OF A BP
Management Team Shareholders
Bankers Or Creditors
Customers
Suppliers
Employees
ELEMENTS OF A GOOD BP
a) b) c) d) e) f) g) h) Executive summary Market analysis Market and sales strategies Services or product line Organisation and management Funding request Financials Appendix
GUIDELINES IN PREPARING BP
1. 2. 3. 4. 5. 6. Keep the BP short Be focused Reveal people involved and their roles Avoid the use of jargon Information should be based on study Be realistic and objective
GROUP ASSIGNMENT
You are required to set up a new business. In the early stage, you need to identify certain items The items discussed should be supported by realistic and relevant data and information Be creative and professional to get the best marks items that you need to cover are;
1. 2. 3. 4. 5. 6. 7. 8. 9.
Name of the company Organisational structure Role/responsibility of each member Nature of business Industry profile Location of the business Date of business commencement Factors in selecting the proposed business Future of the business