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Principles of Organisation
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CHAPTER 5 – SELECTING A FORM OF BUSINESS OWNERSHIP
i. Sole Proprietorshipii. Partnershipiii.Corporationiv. How Ownership Can Effect Risk and
Returnv. Obtaining Owner of An Existing Business
Business Ownership
Legal right to possess something/businesses.
The state of being an owner.
• 3 main types of ownership :
• Sole Proprietorship
• Partnership
• Corporation
• The biggest difference between all the types od business ownership is LIABILITY (who is responsible for the business’ debts).
Business Ownership
Sole Proprietorship
A business owned and managed by one individual; the business and the owner are one and the same in the
eyes of the law
AdvantagesSimple to createLeast costly formProfit incentiveTotal decision-makingNo special legal restrictionsEasy to discontinue
Sole Proprietorship
DisadvantagesUnlimited personal liabilityLimited skills and abilitiesFeelings of isolationLimited access to capitalLack of continuity of business
Sole Proprietorship
Partnership
An association of two or more people who co-own
a business for the purpose of making a
profit
A partnership agreement or the Uniform Partnership Act
AdvantagesEasy to establishComplementary skillsDivision of profitsLarger pool of capitalAbility to attract limited partnersLittle governmental regulationFlexibilityTaxation
Partnership
DisadvantagesUnlimited liability of at least oneDifficulty in disposing of interestLack of continuityPotential for personality and authority conflictsPartners bound by law of agency
Partnership
Special Partnerships
Limited partnership-composed of at least one general partner and at least one limited partner
Limited liability partnership-a special type of limited partnership, in which all partners are limited partners
Master limited partnership-a partnership whose shares are traded on stock exchanges, just like corporations
Corporations
A separate legal entity apart from its owners which receives the right to exist from the state in which in which it is incorporated
DomesticForeignAlienPublicly heldClosely held
AdvantagesLimited liability of stockholdersAbility to attract capitalAbility to continue indefinitelyTransferable ownership
Corporations
DisadvantagesCost and time in incorporatingDouble taxationPotential for diminished incentivesLegal requirements and red tapePotential loss of control
Corporations
How Ownership Can Effect Risk and Return
?Low risk = Low return
• An individual seeking to go into business for himself can either start a company or buy an existing one.
• Acquiring an existing business means you have immediate cash flow; the company already has customers, assets and a brand name or reputation in the marketplace.
Obtaining Owner of An Existing Business
Step 1
Assess your interest and skills
Step 2
Potential funding cost
Step 3
Legal Framework
Obtaining Owner of An Existing Business
Step 4
Referal network
Step 5
Select the company
Step 6
Post-acquisition plan
In 2005, eBay acquired Skype with US$2.5bil and sold 60% of Skype share in 2009.
Aeon acquired Carrefour with RM990mil in 2012. One of the biggest acquisition made in Malaysia
