06 - Starting A New Venture - Sms

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
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.
Section 1:
Business Forms
&
Governing Legislations
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
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
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
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
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
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
13
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
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
Fauziah
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
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
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
Death of owner
dissolves the
business
16
Section 2:
Business Licenses
& Permits
17
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
General Business Premise &

Signboard Licenses
18
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
and samples of the signboard design and colors
19
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.
20
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
21
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
22
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.
23
Section 3:
Protecting Intellectual Property
24
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
25
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
Fauziah
Pawan,the
Sept. 2012
(ENT530)
another party hence severing all rights to the invention
concerned.
26
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.
27
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
The
symbol is universally used to denote a copyright
28
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

29
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.
Malaysia is one of the member countries
30
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
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

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STARTING A NEW VENTURE

Fauziah Pawan, Sept. 2012 (ENT530)

module will focus on:

Fauziah Pawan, Sept. 2012 (ENT530)

a new venture requires the

of the key initial decisions include the

Fauziah Pawan, Sept. 2012 (ENT530)

Registration a Business Entity

Registering a business entity is a key initial step to creating

To register a business, the entrepreneur(s) need to first

Entrepreneurs need to know the implication of choosing

Business Forms & Legislations

Entrepreneurs looking to create their own new venture

The registration of these forms of businesses are

Registration of Businesses Act 1956 (Amendment

Table 1 summarizes the legislations governing the

Companies Act 1965

Fauziah Pawan, Sept. 2012 (ENT530)

most basic business entity in terms of ease of

proprietorship allows only one person to be

single owner is also considered the manager for the

size and scope of business is often relatively small

sole ownership entitles the owner-manager

the other hand the owner-manager has to

of the sole owner will Fauziah

business form involves two or more partners in a

maximum number of partners allowed is 20 persons

business (e.g. legal firms, architect firms or

the sole proprietorship, a partnership also allows

also bear unlimited liabilities that means their

are encouraged to have a Partnership

Agreements are not required by law but

or withdrawal of any of the partner may

Private Limited Company

Registered under the Company Act 1965 and is recognized by

Registration process is much more complex & costly

Registration has to be through a registered Company

Among the key documents that the Company Secretary must

The Memorandum of Association outlines how the money

Private Limited Company.cont.

The Private Limited Company can have up to 50 members or

Control of day-to day operations is in the hands of a

Shareholders can indirectly affect operation decisions through

A BOD consist of representatives from the major shareholders,

A key role of the BOD is to ensure shareholders

Private Limited Companycont.

Private Limited Company registration renders the business

such the company is a legal person able to bear its own

means that the business assets can be seized to settle

individual shareholder is liable only to the extend of his

the life of the company and the

Table 2: Factors in Business

Owner receives all

Manageme Owner makes all

All partners have equal

Death of any partner

Fauziah Pawan, Sept. 2012 (ENT530)

Business Licenses & Permits

a business registration brings a venture

licenses needed are basically divided into

General business premise license and signboard

General Business Premise &

business in Malaysia needs to obtain a business premise