CHAPTER 5 SELECTING A FORM OF

BUSINESS OWNERSHIP
i. Sole Proprietorship
ii. Partnership
iii.Corporation
iv. How Ownership Can Effect Risk and
Return
v. Obtaining Owner of An Existing Business

Business Ownership
Legal right to possess
something/businesses.
The state of being an owner.

Business Ownership
3 main types of ownership :

Sole Proprietorship

Partnership

Corporation

The biggest difference between all

the types od business ownership is
LIABILITY (who is responsible for
the business debts).

Sole Proprietorship

A business owned and managed by

one individual; the business and the
owner are one and the same in the
eyes of the law

Sole Proprietorship
Advantages
Simple to create
Least costly form
Profit incentive
Total decision-making
No special legal restrictions
Easy to discontinue

Sole Proprietorship
Disadvantages
Unlimited personal liability
Limited skills and abilities
Feelings of isolation
Limited access to capital
Lack of continuity of business

Partnership
An association of two or
more people who co-own
a business for the
purpose of making a
profit
A partnership agreement or the Uniform Partnership Act

Partnership
Advantages
Easy to establish
Complementary skills
Division of profits
Larger pool of capital
Ability to attract limited partners
Little governmental regulation
Flexibility
Taxation

Partnership
Disadvantages
Unlimited liability of at least
one
Difficulty in disposing of
interest
Lack of continuity
Potential for personality and
authority conflicts
Partners bound by law of
agency

Special Partnerships
Limited partnership-composed of at least
one general partner and at least one limited
partner
Limited liability partnership-a special type
of limited partnership, in which all partners
are limited partners
Master limited partnership-a partnership
whose shares are traded on stock
exchanges, just like corporations

Corporations
A separate legal entity apart from its
owners which receives the right to
exist from the state in which in which it
is incorporated
Domestic
Foreign
Alien
Publicly held
Closely held

Corporations
Advantages
Limited liability of
stockholders
Ability to attract capital
Ability to continue
indefinitely
Transferable ownership

Corporations
Disadvantages
Cost and time in
incorporating
Double taxation
Potential for diminished
incentives
Legal requirements and
red tape
Potential loss of control

How Ownership Can Effect

Risk and Return

?
Low risk = Low return

Obtaining Owner of An
Existing Business
An individual seeking to go into
business for himself can either start a
company or buy an existing one.
Acquiring an existing business means
you have immediate cash flow; the
company already has customers,
assets and a brand name or reputation
in the marketplace.

Obtaining Owner of An
Existing Business
Step 1
Assess your
interest and skills
Step 2
Potential funding
cost
Step 3
Legal Framework

Step 4
Referal network
Step 5
Select the company
Step 6
Post-acquisition
plan

In 2005, eBay acquired

Skype with US$2.5bil
and sold 60% of Skype
share in 2009.

Aeon acquired Carrefour

with RM990mil in 2012.
One of the biggest
acquisition made in
Malaysia