DIP – Business Ownership Lim Sei Kee @ cK

Main Business Ownership Sole Proprietorship Partnership Company / Corporation Cooperatives Franchise

Sole Proprietorship A sole proprietorship is a business entity owned by one person who is legally responsible for the debts and taxes of the business.

Sole Proprietorship 1 owner Is unable to carry on, Dies, or Ownership: 1 owner Life: Ends when owner: Is unable to carry on, Dies, or Closes the firm Responsibility for business debts if firm is unable to pay: Owner

Sole Proprietorship - PRO Total control of the business by the owner Cheap and easy to start up Keep all the profit Business affairs are private

Sole Proprietorship - CON Unlimited liability Can be difficult to raise finance Can be difficult to enjoy economies of scale, i.e. lower costs per unit due to higher levels of production There is a problem of continuity if the sole trader retires or dies

Partnership 2 or more withdraws, Dies, or Closes the firm Ownership: 2 or more Life: Ends when partner(s): withdraws, Dies, or Closes the firm Responsibility for business debts if firm is unable to pay: Partners individually and jointly

Partners must agree upon: Amount each partner will contribute Percentage of ownership of each partner Share of profits of each partner Duties each partner will perform Debts- the responsibility each partner has for the partnership’s debts

Partnership - PRO Spreads the risk across more people Partner may bring money and resources to the business (e.g. better premises to work from) Partner may bring other skills and ideas to the business Increased credibility with potential customers and suppliers

Partnership - CON Have to share the profits. Less control of the business for the individual. Disputes over workload. Problems if partners disagree over of direction of business.

Company / Corporation A company / corporation is a publicly or privately owned business entity that is separate from its owners; has a legal right to own property; do business in its own name; stockholders are not responsible for the debts or taxes of the business

Limited Companies A limited company is a business that is owned by its shareholders, run by directors and most importantly whose liability is limited. Limited liability means that the investors can only lose the money they have invested and no more. This encourages people to finance the company, and/or set up such a business, knowing that they can only lose what they put in, if the company fails.

Company / Corporation Ownership: Can be thousands Life: Continues indefinitely; ends when: -business goes bankrupt -stockholders vote to liquidate Responsibility for business debts if firm is unable to pay: Stockholders can lose only the amount invested

Company / Corporation - PRO For people or businesses who have a claim against the company, “limited liability” means that they can only recover money from the existing assets of the business. It is easier to raise money through other sources of finance e.g. from banks

Company / Corporation - CON Costly and complicated to set up Certain financial information must be made available for everyone, competitors and customers included Shareholders in public companies expect a steady stream of income from dividends Directors’ legal duties (set out by Companies Act)

Cooperatives A co-operative business is that they are owned and run by the members - the people who benefit from the co-operative's services. The governance structure of cooperatives is significantly more open, democratic, transparent and inclusive than that of for-profit businesses. Profit may not be the primary objective.

Cooperatives - PRO Achieve a common purpose. More power to buy or bargain Lower debt risk Share the load

Cooperatives - CON A long, drawn out decision-making process Co-operatives may find it difficult to raise finance Idealistic and ethical aims may not be agreeable with all members Difficulty attracting members

Franchise A franchise is where a business sells a sole proprietor the right to set up a business using their name. The franchisor is the business whose sells the right to another business to operate a franchise A franchise is bought by the franchisee – once they have purchased the franchise they have to pay a proportion of their profits to the franchiser on a regular basis.

Franchise - PRO The franchisee is given support by the franchiser Less investment is required at the start-up stage since the franchise business idea has already been developed The chance of failure among new franchises is lower as their product is a proven success and has a secure place in the market

Franchise - CON Cost to buy franchise – can be very expensive Have to pay a percentage of your revenue to the business you have bought the franchiser from Have to follow the franchise model, so less flexible

Start a business in Brunei All businesses in Brunei Darussalam must be registered with the Registrar of Companies and Business Names at the Attorney General’s Office. The proposed names of business or company must be submitted to the Registry of Companies and Business Names for approval and a fee of B$5.00 is imposed for each proposed name. [Source: http://www.mofat.gov.bn/index.php/investing- in-brunei-darussalam/setting-up-businesses]

Reasons to start a business in BRUNEI BUSINESS AND INVESTMENT INCENTIVES His Majesty’s government has announced the reduction of the corporate income tax rate from 30% to 22% for the financial period 1 January 2010 onwards Corporate tax relief of up to 5 years for companies that invest B$500,000 to B$2.5 million in approved ventures

Reasons to start a business in BRUNEI 8-years tax relief for investing more than B$2.5 million An 11-year tax break if the venture is located in a high-tech industrial park Exemption from import duties on machinery, equipment, component parts, accessories, building structures and raw materials

Activity 1. Which of the business organizations is the best? 2. How can a sole trader raise capital for the business? 3. How can a limited company raise capital for a business? DISCUSS!

To be discussed next week Read on : Onebiz, online biz licensing system.