1. BAEB501 : ENTREPRENEURSHIP
CHAPTER 4:
Form of Business Entities
© 2010 Cosmopoint

2. Chapter 4: Form of Business Entities
Topic Outlines
4.1 Business Organization in Malaysia
4.2 Sole Proprietorship
4.3 Advantages of Sole Proprietorship
4.4 Disadvantages of Sole Proprietorship
4.5 Partnership
4.6 Advantages of Partnership
4.7 Disadvantages of Partnership 4.8 Corporation
D
4.9 Advantages of Corporation
4.10 Disadvantages of Corporation
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3. Chapter 4: Form of Business Entities
Learning Outcomes
 After completing this chapter, student should be able to:
 Explain the main types of legal structure a business may operate
under
 Discuss the pros and cons of each type of legal structure
 Describe the various forms of intellectual property
© 2010 Cosmopoint Slide 3 of [11] Topics

4. Chapter 4: Form of Business Entities
4.1 Business Organization in Malaysia
 Business in Malaysia can be registered under any of the following.
 Business Registration Act 1956 (Amendment 1978) and
Procedures of Business Registration 1957:
 There are two types of business that can be performed under this
Act:
Sole Proprietorship Partnership
© 2010 Cosmopoint Slide 4 of [11] Topics

5. Chapter 4: Form of Business Entities
4.1 Business Organization in Malaysia
 Company Act 1965
 There are 3 types of companies that can
be formed under this Act:
 Limited Company by Gurantee
 Limited Companny by Share
 Private Limited Company
(Sendirian Berhad)
 Public Limited Company
 Foreign Owned Company
 Unlimited Company
 Cooperative Act 1948
 Parliamentary Act or State (Government)
Enactment
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6. Chapter 4: Form of Business Entities
4.2 Sole Proprietorship
 Solely owned by one person, where
management rests on that person whose
liability is unlimited.
 The simplest business structure
 Does not mean that the sole proprietorship
has to be small.
 May grow to any level in sales revenue
 E.g: tailor shops, salons, restaurants.
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7. Chapter 4: Form of Business Entities
4.3 Advantages of Sole Proprietorship
 Simple to create
 Least costly form of ownership to establish
 Profit incentive
 Total decision – making authority
 No special legal restrictions
 Easy to discontinue
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8. Chapter 4: Form of Business Entities
4.4 Disadvantages of Sole Proprietorship
 Unlimited personal liability
 Limited access to capital
 Limited skills and abilities
 Feelings of isolation
 Lack of continuity for the
business
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9. Chapter 4: Form of Business Entities
4.5 Partnership
 A partnership is a legal business entity that carried out by more than
one person but not exceeding 20 person.
 However, in professional businesses, such as legal firms, architect
and accounting firms, the members could number up to 50 person.
 Partners carry out the business, share the capital, profits and losses.
 Every partner is considered the company’s representative and acts on
behalf of the company.
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10. Chapter 4: Form of Business Entities
4.6 Advantages of Partnership
 Easy to establish
 Complementary skills
 Division of profits
 Larger pool of capital
 Ability to attract limited
partners
 Little government regulation
 Flexibility
 Income tax is not imposed on
the partnership itself but on
the owners as individuals.
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11. Chapter 4: Form of Business Entities
4.7 Disadvantages of Partnership
 Unlimited liability of at least one partner
 Capital accumulation
 Difficulty in disposing of partnership
interest without dissolving the
partnership
 Potential for personality and authority
conflicts.
 Partners should understand the law and
regulation
© 2010 Cosmopoint Slide 11 of [11] Topics

12. Chapter 4: Form of Business Entities
4.8 Corporation
 Obviously many corporations are big
 Not only limits the liability of owners, it
enables many people to share in the
ownership (and profits) of a business
without working there or having other
commitments to it.
 Corporate character
 Establishment of years
 Stockholders & Board of director
© 2010 Cosmopoint Slide 12 of [11] Topics

13. Chapter 4: Form of Business Entities
4.9 Advantages of Corporation
 Limited liability of stockholders
 Ability to attract capital
 Ability to continue indefinitely
 Transferable ownership
© 2010 Cosmopoint Slide 13 of [11] Topics

14. Chapter 4: Form of Business Entities
4.10 Disadvantages of Corporation
 Cost and time involved in the corporation process
 Double taxation
 Potential for diminished managerial incentives
 Legal requirements and regulatory
 Potential loss of control by the founders.
© 2010 Cosmopoint Slide 14 of [11] Topics

15. Chapter 4: Form of Business Entities
Activity
 Task: Select any three companies in any
industry. Identify the advantages and
disadvantages for 3 form of business
entities.
© 2010 Cosmopoint Slide 15 of [11]