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