Module 6 - Starting A New Venture

STARTING A NEW VENTURE
Module for
Principles of Entrepreneurship (ENT 530)
BBA, Faculty of Business Management, UiTM
Fauziah Pawan, Sept. 2012 (ENT530) 1

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

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)

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.

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 Companies Act 1965

(Sendirian Berhad)

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 owner-
manager.
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 result in termination of

the business

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.
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

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
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.
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 or withdrawal of any shareholder has no 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 Owner receives all Profits depend on amount of Shareholder receives

profits & profits & bears all losses investment or as specified in share of profits through
losses partnership agreement dividend payouts
Liability of Unlimited liability Unlimited liability unless Shareholder liability
owners extending to personal otherwise specified in a limited to amount of share
assets partnership agreement or capital contribution
Management Owner makes all All partners have equal In the hands of a
control management decisions control unless otherwise management team guided
and acts freely specified in a partnership by a Board of Directors
agreement
Continuity of Death of owner Death of any partner Death or withdrawal of

business dissolves the business dissolves the business unless shareholder has no effect
otherwise specified in a on existence of company
partnership agreement
Section 2:
Business Licenses
& Permits

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
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
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.

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, Wholesale & Retail Trade (WRT) license. License is
import & export business 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

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

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.

Section 3:
Protecting Intellectual Property

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
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
concerned. Fauziah Pawan, Sept. 2012 (ENT530) 25
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.

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
The symbol is universally used to denote a copyright

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 to show a registered
trademark

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
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
References
http://www.malaysia.gov.my
http://ssm.com.my
Hisrich, Robert D., Peters, Michael P. & Shepherd, D.,

(2006). Entrepreneurship, New York: McGraw-Hill /
Irwin, 8th Edition, International Edition, 2010.
UiTM Entrepreneurship Study Group (MEDEC),

(2004). Fundamentals of Entrepreneurship, Petaling
Jaya: Pearson-Prentice Hall Sdn. Bhd. 2004
Fauziah Pawan, Sept. 2012 (ENT530) 31/27

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STARTING A NEW VENTURE

Fauziah Pawan, Sept. 2012 (ENT530) 1

Fauziah Pawan, Sept. 2012 (ENT530) 2

Some of the key initial decisions include the form of

Fauziah Pawan, Sept. 2012 (ENT530) 3

Fauziah Pawan, Sept. 2012 (ENT530) 4

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

Entrepreneurs need to know the implication of choosing

Fauziah Pawan, Sept. 2012 (ENT530) 5

The registration of these forms of businesses are

Table 1 summarizes the legislations governing the

Fauziah Pawan, Sept. 2012 (ENT530) 6

Business Form Governing Legislation

Sole Proprietorship Registration of Businesses Act 1956

Partnership Registration of Businesses Act 1956

Private Limited Company Companies Act 1965

Fauziah Pawan, Sept. 2012 (ENT530) 7

Sole proprietorship allows only one person to be registered as

This single owner is also considered the manager for the

The size and scope of business is often relatively small and as

Fauziah Pawan, Sept. 2012 (ENT530) 8

On the other hand the owner-manager has to also

Death of the sole owner will result in termination of

Fauziah Pawan, Sept. 2012 (ENT530) 9

The maximum number of partners allowed is 20 persons

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

Like the sole proprietorship, a partnership also allows

Partners also bear unlimited liabilities that means their

Partnership Agreements are not required by law but

Death or withdrawal of any of the partner may result in

Fauziah Pawan, Sept. 2012 (ENT530) 11

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

The Memorandum of Association outlines how the money

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

Shareholders can indirectly affect operation decisions through

A BOD consist of representatives from the major shareholders, key

A key role of the BOD is to ensure shareholders business interest

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

This means that the business assets can be seized to settle

The individual shareholder is liable only to the extend of his

Since the life of the company and the shareholder is separate,

Share of Owner receives all Profits depend on amount of Shareholder receives

Continuity of Death of owner Death of any partner Death or withdrawal of

Fauziah Pawan, Sept. 2012 (ENT530) 16

The licenses needed are basically divided into

Fauziah Pawan, Sept. 2012 (ENT530) 17

Both licenses can be applied for from the relevant local

Premise license applications often need to be accompanied

Signboard license application need to be accompanied by

Businesses involved with manufacturing,

Table 3 summarizes examples of categories of

Fauziah Pawan, Sept. 2012 (ENT530) 19

Manufacturing Manufacturing license required for manufacturing

Building & Construction Need a specific license from the Construction

Fauziah Pawan, Sept. 2012 (ENT530) 20

Table 4 summarizes examples of business

Fauziah Pawan, Sept. 2012 (ENT530) 21

Business Activity Example

Retail sale event Allows a retail or wholesale business to

Fauziah Pawan, Sept. 2012 (ENT530) 22

Fauziah Pawan, Sept. 2012 (ENT530) 23