Starting a Business

Starting a Business Hawker Stall Selling Char KwayTeow

Starting a Business Sole Trader (Sole Proprietor) Eg. Hawker Stall Selling Char KwayTeow. 1. Owner of the firm has full control of it. 2. All profit belongs to the sole trader as well as all liabilities. 3. Unlimited Liabilities (eg. On Bank loans, hire purchase, buying inputs/resources on credit)

4. The sole trader lacks capital to expand his business. • His working capital is derived mostly from his daily revenues. • Relies mostly on own cash or borrowings from friends or relative to start the business. CHECK WITH ACRA

Perfect Competition Market Structure Starting a Business

Partnership 1. Consisting of 2 or more people. 2. Unlimited Liabilities (eg. On Bank loans, hire purchase, buying inputs/resources on credit) 3. Does not contain the wording limited liability (LLP) 4. Only firms that are partnership that have limited liability (LLP) are professional services like law firms. eg. Like Lee and Lee Law Firm LLP, Allen and Gledhill LLP.

Starting a Business • 5. Partnership: Consisting of no more than 10 partners. • - In a partnership, the partners are owners and operators of the firm as well. 6. Easy to set up and partners can bring their skills to benefit the company. Partners can also contribute more working capital to the firm. Banks may or may not advance loans to them depending on their wealth (or net worth) 7. Profit gain or liability accrued will be apportioned based on each ones share of the business or how much each one has contributed to start the business. (only for LLP). In most cases, there is a often a joint and several guarantee (JSDG) by all the partners to make good on all liabilities. 8. Partners may disagree and cause the dissolution of the firm.

Teaser 1 Q1. Explain the difference between a sole proprietorship and a partnership. Presentation: Bangkok Bank Hand Up Joey, Connie, Warupan, Atalya, Joaquim, Brayden, Su Chen

Joint Stock Company 8. Private Limited Company (Pte Ltd): - The shareholders (owners) of the company may not be the same people who run the company. -The shareholders and the firm are different entities (ie. they have different identities unlike the sole proprietor or partnership. -A board of directors run the limited liability company. This consist of no more than 20 people. They shareholders may vote to remove a director. -Profits gained by the company is not the profit of the shareholders until a dividend is given by the company to the shareholders. -Liabilities of the company is not the liability of the shareholders. - A Shareholder who owns more than 50% of the company owns the limited liability company. - Yearly disclosure of financial performance. - Shares are not sold on the stock exchange. They are bought and sold privately.

Go to ACRA

Joint Stock Company How Might A company become large? Externally Mergers , Acquisition Internally Public or Private Sales of Shares Retained earnings Borrowing from Banks

Public Company (Public Listed Company) - Can sell shared publicly - Can advertise the sale of their share and its share prices are publicly available. - Can sell shared publicly - Amount of money to set up (ie. Capitalization) of the public listed company is very high - Required by law to publish and make known its annual performance - Must hold AGMs (Annual General Meetings)

Public Company (Public Listed Company) - Management diseconomies – Company becoming too large to manage. - Vulnerable to take overs. • Owner of the company can lose control by – • a. board of directors make decisionnot shareholders • b. large shareholders can out vote shareholders with minority or small holdings. • c. banks can deny the company any loans causing the company to run losses and under severe circumstance declare bankruptcy.

Teaser 2 A multinational was described as a large company that employs people form different countries and is controlled by a government. (Is this correct description to begin with?) Q2. How might a company become large (4 marks) To hand up: Index number 2,4,6,8,10,24,26,28 Ans: They become large via the following: Internal growth through retained earnings/profits, share issue, borrowing Externally via mergers and acquisition. (please explain each one and not just list them)

Advantage of a large firm over to a small firm Economies of Scale in the area of: Technical EOS Financial EOS Bulk Buying Marketing EOS

Multinational Will have operations in many countries but head quarters is in country of origin.

Teaser 3 Q3. Multinationals car companies are sometimes said to have economies of scale. Analyze what this means for such a company (6 marks) [answer must be relevant to a car company or lose points] To hand up: Index number 3,5,7,9,11,25,27,29 Ans: EOS – the lowering of the average cost of production from being able to produce at a high level of output. This include Technical EOS – in a car plant different skills like lather making and engine building are specialized skills. Financial EOS – With greater size, the firm can borrow more a lower cost of borrowing. Bulk Buying – The company can buy great amounts of steel or tyres for its cars and this would be cheaper than buying small amounts of inputs. Marketing EOS – The marketing manager can manage the sales of different products of the company without having each division eg car division and accessory division have 2 different supervisors.

Teaser 2 A multinational was described as a large company that employs people form different countries and is controlled by a government. Q1. Explain whether the above statement is true. (4 marks) Q2. Multinationals car companies are sometimes said to have economies of scale. Analyse what this means for such a company (6 marks)

Multinational • Advantage In Being An MNC • Can reach many more consumers worldwide. • Avoid trade barriers (owing to protectionism) • Minimize transport cost. • Minimize cost of production by locating to place with cheaper wages. • Because of large amount of sales, they can enjoy Economies of Scale. • Benefits It can Bring to A Country • Bring in foreign direct investment (FDI) that will invest in new businesses, modern equipment and new technology thereby helping the country in economic growth. Local firms can learn and benefit from these new technologies. • Create jobs • Government earns large amounts of tax revenues from MNCs • Increase international trade for the firm.

Multinational • Disadvantage to Country • exploitation of labour • the resources causing environmental degradation. • Have the power to avoid being taxed by transferring their funds to other branches in other countries where the corporate taxation rate is lower.

Cooperative Cooperatives are business organizations that are owned and controlled by a group of people to undertake an economic activity to their mutual benefit. • Advantage • Popular with workers as they themselves are in charge of running the the cooperative. • Also everyone has an equal share. • Members workers are motivated to work harder as they own the cooperative • Workers receive profit in the form of dividend on the basis of equal shares or in proportion of the shares they put in. • Disadvantage • Hard to raise money as workers may lack funds to capitalise the business. • Maybe badly run as workers may lack the entrepreneur skills to run it.

Public Sector Organization • Public sector organisation employ resources to deliver essential public services. These are considered to be services that are in the best interests of pubic welfare or the economy to make widely available, such as street lighting, health care and education. • Some services are provided free of charge. • Some services are provided at low cost to the public. • The aim is not to make profit but to make available certain goods and services essential to the public. Public Corporation - Profit oriented but the profits they make are re-invested in improving their public services or the can be use d by the government to fund other public sector spending. However if there are losses then the losses are being paid off my tax revenues from the public and other forms of government funds. (eg through the issue of government bonds)

Starting a Business The End

Starting a Business