DIP – Business Ownership

1. DIP – Business Ownership Lim SeiKee @ cK

2. 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.

3. Sole proprietorship • 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

4. 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

5. 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

6. Partnership • 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

7. 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

8. 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

9. 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.

10. 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

11. 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.

12. 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

13. 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

14. 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)

15. 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 maynot be the primary objective.

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

17. 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

18. 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.

19. 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

20. 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

21. 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]

22. 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

23. 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

24. 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!

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