How To Start A New Business and Esential of Traits

There are three methods to starting a new business which is sole proprietorship, partnership and limited company.

1) Sole Proprietorship

• Can be registered under Business Registration Act 1956. Biz is owned by a single individual. Most businesses in Malaysia are registered as Sole Proprietorship. From aspect of law there is no differentiation between the owner & his biz.
• Registration: at the Registrar of Business at the office of Commission of Companies Malaysia (CCM) or at any of CCM branches.  
• Fill up “Form A”, pay RM30 if the biz use your own name as in Identification Card (if use other name, pay RM60). If registration is approved you will be given certificate called “Form D”. Renewal fee, RM30 per year.
• Advantages of sole proprietorship are :

1. Cheap, easy to create & easy to close down. Very lenient & does not have to comply with a lot of rules.
2. Freedom in control; absolute power in actions & decision making.
3. Prompt & fast decision making.
4. Confidentiality assured.
5. Profits are for the owner -no need to distribute.
6. Not subjected to corporate tax.

• Disadvantages of sole proprietorship are :

1. Difficult to get capital & loans.
2. Unlimited liability (not limited to biz assets but also the owner’s personal assets)
3. Heavy work load.
4. Business continuity is not guaranteed (if owner die or retire, sole proprietorship is dissolved)
5. Limited skill & capability (managing the biz alone)

2) Partnership

• Membership between 2 - 20 persons. Registered under Business Registration Act 1956. (RM60, Form A).
• Members must make agreement (Partnership Deed) to operate a biz in the form a partnership. Any changes to agreement, must inform CCM by using Form B with a fee of RM30.
• Agreement can be unwritten, but for future reference in case of dispute in the partnership, written agreement is recommend. Details of the agreement as shown below :

1. Date, names & addresses of members
2. Nature of biz, name & address of the biz.
3. Period of deed & members responsibilities 
4.  Contribution of capital for investment & way to appropriate/distribute profit/loss.
5. Accounting procedure, salary & limitation of members spending 
6. Restriction (if any) to any members.
7. Way to dissolve the partnership.

• Partnership is run by a committee consisting of:

1. Manager
2. Assistant Manager
3. Secretary
4. Treasurer

• Members of this committee are responsible for the operation of the business, - be paid salaries in accordance to the biz performance.
• Advantages of Partnership are :

1. Easier & quite cheap to register. 
2. More capital can be derived from members (max 20).
3. Responsibilities can be spread among members.
4. More ideas, capabilities & skills from pool of members.

• Disadvantages of Partnership are :

1. Unlimited business liability.
2. Profit has to be shared among other members.
3. Partnership life is not guaranteed should a partner or member passed-away.
4. Growth potential is limited to capital from 20 members.
5. Conflict always happen between partners.

3) Limited Company

• Under the jurisdiction of Companies Act 1965. min 2 & max 50 people. Can be divided as following types:

1.      Limited Company by Shares – member’s liabilities are limited to unpaid shares owned. Once paid no more liabilities. Can be divided into two categories:-1) Private Limited Company & 2) Public Limited Company.

2.      Limited Company by Guarantee – member’s liabilities are limited to amount guaranteed should there be any loss and dissolution.

3.      Unlimited Company – unlimited liabilities as those of partnership companies, but liabilities will stop after a period of one year from the date he/she leave the company.

• A limited company can be registered with the Registrar of Companies at CCM. If approved, the co. will be given ‘Certificate of Incorporation’ in the form of ‘Form 8’ for Public Limited Co. and ‘Form 9’ for Private Limited Co.

• The characteristics of private limited company as shown below :

1. The law consider that the company & its owners are separate entity.
2. A company has its own; name & address.
3. A company can sue & be sued.
4. A company can own assets under its name.
5. A company will continue its existence even if its owner or founder passed away or leave the company.

• Limited company can divide to private limited company and public limited company.

Private Limited Company

• Must put Sdn Bhd at the end of it’s name.
• Should have at least 2 directors, 1 secretary, the highest authority is Board of Directors led by its Chairman.
• Governs by its constitutions; 1) Memorandum of Association (procedures regarding co’s dealings with outside parties; 2) Article of Association (procedures regarding co’s dealing with parties inside the company)
• Advantages of private limited company are :

1. Business liability is limited to member’s contribution only.
2. Continuity is guaranteed even in the demise of a member.
3. Easier to get loans.
4. Shareholders are protected by laws.
5. Ease of ownership transfers.
6. High potential of growth.
7. Shareholders are not burdened by managerial responsibilities.

• Disadvantages of private limited company are :

1. Difficult to manage and shares cannot be bought through the share market.
2. Lots of taxes example corporate tax, income tax, sales tax.   
3. No information confidentiality.    
4. Founder can loose control of the company.

Public Limited Company

• When a private limited company wants to increase its members to more than 50 persons so that it can raise more capital, it has to change its status to Public Limited Company.
• It has to prepare a ‘Prospectus’ to be advertised to the general public. It has to register with the authority of the share market.
• Under Companies Act 1965; minimum of 7 members. No limitation to how many members
• Advantages of public limited company are :

1. Shares can be bought in share market.
2. Can invite others from the public to buy shares
3. Easier to get capital.

• Disadvantages of public limited company are :

1. Hard to maintain relationship between management and workers, shareholders and management.
2. Too many members, do not know each other.
3. Stringent laws protecting the shareholders (Companies’ Act 1965).
4. Various taxes (corporate tax, income tax, sales tax).

Conclusion

We can said that entrepreneur traits is an important element to enable an entrepreneur to success in their business venture. During the venture there are many severe situation and circumstances that entrepreneur need to face. The traits possess by the entrepreneur will help them to overcome this all trouble and business challenge. Several important or fundamental traits are proactive, networked, open risk taker, observant, visionary, failure is an option, open culture, outcome oriented and team oriented.

There are many way to start a business. We have three way to starting a business here which is starting-up a new business, buy and take over an existing business and buying a franchise business. 3 form of business can be registered in Malaysia which is sole proprietorship, partnership and limited company. This 3 form of business have their own advantage and disadvantage. The entrepreneur should choose the better or appropriate form to ensure future success.