DIP – Business Ownership
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Transcript of DIP – Business Ownership
DIP – Business OwnershipLim Sei Kee @ cK
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
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
Total control of the business by the owner
Cheap and easy to start up
Keep all the profit
Business affairs are private
Sole Proprietorship - PRO
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
Sole Proprietorship - CON
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
Partnership
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
Partners must agree upon:
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 - PRO
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.
Partnership - CON
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
Company / Corporation
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.
Limited Companies
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
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 - PRO
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)
Company / Corporation - CON
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
Achieve a common purpose.
More power to buy or bargain
Lower debt risk
Share the load
Cooperatives - PRO
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
Cooperatives - CON
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
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 - PRO
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
Franchise - CON
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]
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
Reasons to start a business in BRUNEI
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!
Activity
Read on : Onebiz, online biz licensing system.
To be discussed next week