Topic 6

Starting a New Venture

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
 Learning Objectives
• Legal Forms of Business (in Malaysia)
• Business Licenses & Permit
• Business Rights & Protection

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 Introduction
• Starting a new venture requires the entrepreneur to
make informed decisions regarding several key issues
that will impact on the entrepreneur ‘s ability and
capacity to extract the best potential from the target
opportunity.

• Some of the key initial decisions include the form of

business to register, the business licenses & permits
required to operate and protecting unique assets or
intellectual property that impact greatly on the
company’s competitive edge and ability to make money.

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 Section 1:
Business Forms
&
Governing Legislations

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
 Registration a Business Entity
• Registering a business entity is a key initial step to creating a
new venture to exploit entrepreneurial opportunities

• To register a business, the entrepreneur(s) need to first

determine the form of business or legal structure that best
suits the entrepreneur’s aspirations

• Entrepreneurs need to know the implication of choosing one

form of business over another form particularly in terms of the
• ownership implication,
• share of profits and liabilities,
• management control and
• continuity of business life (see Table 2 for a summary)

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 Business Forms & Legislations
• Entrepreneurs looking to create their own new venture often
choose one of the following business forms:
• Sole Proprietorship
• Partnership
• Private Limited Company or ‘Sendirian Berhad’

• The registration of these forms of businesses are governed by two

key parliamentary legislations:
• Registration of Businesses Act 1956 (Amendment 1978)
• Companies Act 1965

• Table 1 summarizes the legislations governing the registration of

specific business forms.

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 Table 1
Summary of Business Forms & Governing Legislations

Business Form Governing Legislation

Sole Proprietorship Registration of Businesses Act 1956
(Amendment 1978)

Partnership Registration of Businesses Act 1956

(Amendment 1978)

Private Limited Company Companies Act 1965

(Sendirian Berhad)

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 Sole Proprietorship
• The most basic business entity in terms of ease of registration
and relatively simple business structure and management
requirements

• Sole proprietorship allows only one person to be registered as

the legal owner

• This single owner is also considered the manager for the overall
business and is often referred to as the owner-manager.

• The size and scope of business is often relatively small and as

such the owner-manager may run the business activity by
himself or with the help of not more than 5 full time workers

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 Sole Proprietorship

• The sole ownership entitles the owner-manager to all

profits earned by the business

• On the other hand the owner-manager has to also

bear the entire business risk and unlimited liabilities.
Unlimited liability implies that personal assets can be
seized to settled outstanding business debts.

• Death of the sole owner will result in termination of

the business
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 Partnership
• This business form involves two or more partners in a single
business concern

• The maximum number of partners allowed is 20 persons

• Professional business (e.g. legal firms, architect firms or

accounting firms) are allowed to have up to 50 partners

• Like the sole proprietorship, a partnership also allows the

owners (partners) to manage freely with all profits being
shared by the partners.

• Partners also bear unlimited liabilities that means their

personal assets can be seized to settle business debts.
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 Partnership
• Partnerships are encouraged to have a Partnership
Agreement outlining details of ownership, entitlement
to profits and share of liabilities.

• Partnership Agreements are not required by law but

are very useful in case of disputes between partners.

• Death or withdrawal of any of the partner may result in

termination of the business unless stipulated
otherwise in the Partnership Agreement

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 Private Limited Company
• Registered under the Company Act 1965 and is recognized by the
affix ‘Sdn. Bhd.’ (Sendirian Berhad) behind the registered trade
name
• Registration process is much more complex & costly
• Registration has to be through a registered Company Secretary
• Among the key documents that the Company Secretary must
present for registration is the Memorandum of Association and
the Articles of Association
• The Memorandum of Association outlines how the money
invested in the company is to be utilized while the Articles of
Association focuses on the laws governing the internal
management of the company

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 Private Limited Company
• The Private Limited Company can have up to 50 members or
shareholders
• Control of day-to day operations is in the hands of a management
team that may or may not be major shareholders.
• Shareholders can indirectly affect operation decisions through
representatives in a Board of Directors (BOD)
• A BOD consist of representatives from the major shareholders, key
members of the management team and the Company Secretary.
• A key role of the BOD is to ensure shareholders business interest
and investments are effectively represented in management
direction and decisions.

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 Private Limited Company
• A Private Limited Company registration renders the business as having
its own ‘life’ separate from that of the life of the shareholders.

• As such the company is a legal ‘person’ able to bear its own liability
arising from the business operations

• This means that the business assets can be seized to settle outstanding
debt or other legal claims

• The individual shareholder is liable only to the extend of his investment

in the company but his personal assets cannot be seized to settled
company debts or claims

• Since the life of the company and the shareholder is separate, the
death or withdrawal of any shareholder has no effect on the life of the
business.
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 Table 2: Factors in Business Forms
Factors Sole Proprietorship Partnership Private Limited
Company
Ownership One individual Up to 20 individuals Up to 50 individuals

Share of Owner receives all Profits depend on amount of Shareholder receives

profits & profits & bears all losses investment or as specified in share of profits through
losses partnership agreement dividend payouts
Liability of Unlimited liability Unlimited liability unless Shareholder liability
owners extending to personal otherwise specified in a limited to amount of share
assets partnership agreement or capital contribution
Management Owner makes all All partners have equal In the hands of a
control management decisions control unless otherwise management team guided
and acts freely specified in a partnership by a Board of Directors
agreement

Continuity of Death of owner Death of any partner Death or withdrawal of

business dissolves the business dissolves the business unless shareholder has no effect
otherwise specified in a on existence of company
partnership agreement

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
 Section 2:
Business Licenses
& Permits

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
 Business Licenses & Permits

• While a business registration brings a venture

into existence, the new business needs various
licenses and permit to operate legally or to carry
out certain business related activities

• The licenses needed are basically divided into

two key categories of:
• General business premise license and signboard
license
• Special licenses & permits

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General Business Premise & Signboard Licenses
• A business in Malaysia needs to obtain a business premise
license in order to begin operations in a particular location
and legally erect a signboard for the business premise

• Both licenses can be applied for from the relevant local

authorities (e.g. Majlis Bandaraya Shah Alam; Dewan
Bandaraya Kuala Lumpur)

• Premise license applications often need to be accompanied

by the premise Certificate of Fitness document, Fire
Department support letter and premise rental agreement
or a sales & purchase agreement.

• Signboard license application need to be accompanied by

photographs of the proposed location of the signboard and
samples of the signboard design and colors
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 Special Business Licenses

• Some categories of businesses require special

licenses to enable them to carry out a specific
business operation

• Businesses involved with manufacturing,

construction and wholesale are among the
businesses requiring special licenses

• Table 3 summarizes examples of categories of

businesses and the special licenses needed to
operate.
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 Table 3: Examples of Special Business Licenses

Business Category Example

Manufacturing Manufacturing license required for manufacturing

business with at least 75 full-time employees. Apply
for license from Malaysian Investment Development
Authority (MIDA).

Wholesale, retail, trading, Wholesale & Retail Trade (WRT) license. License is
import & export business applied for from the Ministry of Domestic Trade &
Consumer Affairs

Building & Construction Need a specific license from the Construction Industry
Development Board (CIDB) to undertake any building
and construction activities

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 Business Permits

• Business permits allows business to undertake

certain business related activities that are
regulated by governing authorities at either
the federal, state or local level

• Table 4 summarizes examples of business

permits

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 Table 4: Examples of Business Permits

Business Activity Example

Foreign worker entry permit Allows a business to bring into the country
workers from other countries to work in
their business operations

Retail sale event Allows a retail or wholesale business to

advertise and conduct a sale of goods at
prices below normal retail prices for a
specific time frame.

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 Section 3:
Protecting Intellectual Property

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 
 Intellectual Property as a Business Right

• A business that has invested time, money and intellectual capital to

produce something unique or different has the right to protect the
outcome.

• The outcomes are considered as company assets that are able to keep
the company ahead of its competitors and lead to greater money
making capacities

• These assets are often categorized as intellectual property and can be

legally protected as patents, copyrights and trademarks or brands.

• Registering the company’s intellectual property gives the company

the exclusive right to use the property and to take against any
unauthorized use of the registered property
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 Patent
• Patents are used primarily to protect inventions that represent
a new way of doing things

• Inventions normally involve some level of technology and can

be in the form of a product or process

• A registered patent gives exclusive right to the patent owner to

make, use and sell the patented product or process for up to
20 years

• A patent owner can still retain all rights to the invention but
license another party to use the patent within certain agreed
upon conditions and stipulations

• The patent owner can also choose to sell the patent to

another party hence severing all rights to the invention
concerned. Fauziah Pawan, Sept. 2012 25
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 Patent… cont.
• Patent rights are noted by the words “Patent”
followed by the patent registration number.

• Because patents take time to register, companies

can deter infringements by displaying the words
“Patent Pending” or “ Patent in Progress”.

• Even so these deterrents have no legal impact

until the patent is fully registered and given a
patent number.

Fauziah Pawan, Sept. 2012 26

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 Copyright
• Copyrights are used to protect a wide range of original creative,
intellectual or artistic works or authorship

• This can include original works of art and literature, music

composition, audio recordings, drawings, sculptures, broadcasts films
and computer programs.

• The idea behind the creative work is itself not protected and as such
some else can use the same idea but it must be in a significantly
different form or composition so as to not infringe on an existing
copyright.

• A copyright can exist for up to 50 years after the death of the

registered author

• The symbol © is universally used to denote a copyright

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 Trademark or Brand

• Trademarks are any distinctive name, mark, symbols,

words, shapes and colors

• A trademark is sometimes also referred to as a brand to

indicate a distinctive representation of a company

• In Malaysia it is not compulsory to register a trademark but

a company can still rely on common law to protect against
infringement or imitation.
•
Symbols used in to indicate trademarks include ® indicate
an unregistered trademark and ™ to show a registered
trademark
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Where to Register an Intellectual Property
• In Malaysia, a patent, copyright or trademark must be
registered with Intellectual Property Cooperation of
Malaysia (MyIPO).

• For international protection, an intellectual property

may need to be registered in multiple countries or with
the World Intellectual Property Organization (WiPO)

• The WIPO is a United Nations agency based in Geneva

that represents mainly patent protection agreements
valid in over 100 member nations. Malaysia is one of
the member countries
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 Summary

• In starting a new venture, an entrepreneur must

make decisions regarding fundamental issues such
as the form of business registration,
understanding business licenses and permits
needed to operate legally as well as protecting
intellectual properties

• Making these decisions in an informed manner

are important to ensure a business structure that
can operate legally to optimize its entrepreneurial
opportunities
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 References

• http://www.malaysia.gov.my

• http://ssm.com.my

• Hisrich, Robert D., Peters, Michael P. & Shepherd, D.,

(2006). Entrepreneurship, New York: McGraw-Hill /
Irwin, 8th Edition, International Edition, 2010.

• UiTM Entrepreneurship Study Group (MEDEC),

(2004). Fundamentals of Entrepreneurship, Petaling
Jaya: Pearson-Prentice Hall Sdn. Bhd. 2004
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