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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 module will focus on:
1. The main business forms that
appeal to new own-venture
entrepreneurs & their key features
2. Key licenses & permits to operate
a business
3. 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.
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Section 1:
Business Forms
&
Governing Legislations

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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)
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Business Forms & Legislations


Entrepreneurs looking to create their own new venture
often choose one of the following business forms:
Sole Proprietorship
Partnership
Private Limited Company or Sendirian Berhad

The registration of these forms of businesses are


governed by two key parliamentary legislations:
Registration of Businesses Act 1956 (Amendment
1978)
Companies Act 1965

Table 1 summarizes the legislations governing the


registration of specific business forms.
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Table 1
Summary of Business Forms &
Governing Legislations
Business Form
Sole Proprietorship

Governing Legislation
Registration of Businesses
Act 1956 (Amendment 1978)

Partnership

Registration of Businesses
Act 1956 (Amendment 1978)

Private Limited
Company (Sendirian
Berhad)

Companies Act 1965

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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
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Sole Proprietorship.cont.
The sole ownership entitles the ownermanager 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 result in
termination of the business
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Partnership
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 to settle business debts.
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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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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 Articles of
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
interest and investments are effectively represented in
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management direction and decisions.
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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
separate, the death orFauziah
withdrawal
of any shareholder has no
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effect on the life of the business.

Table 2: Factors in Business 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

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

Manageme Owner makes all


nt control
management
decisions and acts
freely
Continuity
of
business

Death of owner
dissolves the
business

Death of any partner


dissolves the business
unless otherwise
specified in a
partnership agreement
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Death or withdrawal
of shareholder has no
effect on existence of
company
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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

A 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
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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
A 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
company the exclusive right to use the property and to take
against any unauthorized use of the registered property
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Patent
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 the patent to
another party hence severing all rights to the invention
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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.
A 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 27
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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


indicate an unregistered trademark and
registered trademark
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to show a

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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.
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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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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