LIFE UNIVERSITY Department of Business

1. Introduction
1.1. Executive Summary

1.2. General company description

1.2.1. Business context

Urban center growth is expected to continue as a prominent trend in 2023, according to

Cambodian real estate trends. A significant growth in population, particularly in large cities like
Phnom Penh, Sihanoukville, and Siem Reap, has led to an increase in demand for residential
and commercial buildings. As developers work to accommodate the requirements of the
expanding population, this has resulted in new construction projects. Due to the increase in real
estate values in certain places, investors should anticipate profitable investment prospects.
The economy of Cambodia has benefited from urbanization in a number of ways. Urban
center expansion leads to more employment opportunities and company attraction, which
furthers the economic prosperity of the nation. Additionally, the influx of immigrants improves
the general standard of living in these communities by bringing cultural diversity. Urbanization
can, however, also create certain difficulties. The infrastructure, which includes public services,
utilities, and transportation, may be strained as a result of the population growth. Additionally,
it may result in an increase in living expenses, particularly in urban areas where real estate is
expensive.
In 2023, a number of real estate trends and projections are anticipated to have an impact
on the real estate market in Cambodia.
 Luxury Properties
The demand for luxury residences in the Cambodian real estate market is anticipated to
increase steadily through 2023 and beyond. Greater international investment and high-net-
worth individuals have been drawn to Cambodia by its expanding economy, which has
increased demand for upmarket homes. Urban areas like Phnom Penh, where luxury flats and
condominiums are in high demand, are particularly exhibiting the real estate trend.
Rich investors looking for comfort, distinction, and refinement are catered to by the luxury
properties in Cambodia, which provide first-rate amenities, great sites, and top-notch facilities.
The trend is being further fueled by Cambodia's growing middle- and upper-class population,
which has increasing purchasing power and a propensity to invest in luxury houses. Given that
this trend is anticipated to persist, developers have a substantial potential to increase the supply
of luxury properties in order to meet the rising demand. The price of these houses will thus
probably rise, offering a potentially profitable investment opportunity.
 Rental Properties
The rise in demand for rental homes is a further prediction for the Cambodian real estate
market in 2023 and beyond. This trend is being driven by the large and growing number of
young professionals and foreigners living in the country who choose to rent rather than buy
their homes. Urban locations like Phnom Penh and Sihanoukville, where there are plenty of
work possibilities and lifestyle amenities, have a particularly high demand for rental houses.
Condominiums, homes, and apartments are all available for rent in Cambodia. To meet the
needs of young professionals and expats, these apartments often provide high-quality
characteristics including contemporary design, practical locations, and alluring amenities.
Rental homes also give residents flexibility if they're new to the nation or just want to take their
time choosing a permanent residence. The future will provide good returns for investors that
concentrate on rental properties, according to experts. The demand for rental properties in
Cambodia is most expected to keep increasing as a result of the nation's constant economic
growth, urbanization, and swelling population of young professionals and foreigners.

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Additionally, rental properties give investors a dependable source of passive income, and they
may take advantage of the rising demand to optimize their profits.

City Sihanoukville is throwing open new opportunities for the real estate sectors as its
population will go up to 1 million from the current 300,000 with the implementation of the new
master plan taking part in the ‘Great debate on Cambodia’s real estate and construction sector
2023’ organized by the American Chamber of Commerce (AmCham), at Factory Phnom Penh
on Wednesday, Preah Sihanouk province Deputy governor Long Dimanche said the new
master-plan will transform Sihanoukville as the financial hub of Cambodia. The master plan,
being prepared with the support of China’s Urban Planning Design institute of Shenzhen
(UPDIS), aims to develop Preah Sihanouk province into a multi-purpose modern special
economic zone. “The master plan is developed in such a way that it can generate money for the
development of the province. It is an opportunity for the real estate sector as well, especially
with the expansion of the population,” Dimanche said, indicating the future demand in the
coastal city for house, shopping malls and offices. According to the deputy governor, the new
expressway connecting Phnom Penh with Sihanoukville is proving to be a real game-changer
for the coastal city along with the international airport. “One can even say that Phnom Penh has
a beach now as we can reach Sihanoukville from the capital in 2 hours by using the
expressway,” he pointed out. While admitting that the issue of unfinished building left
abandoned by investors, mostly Chinese national, in Sihanoukville following the ban on online
gambling and the outbreak of the Covid-19 pandemic in 2019 is a tricky one, Dimanche said
the provincial administration and the royal government of Cambodia are trying to solve the
matter.

1.3. Vision, Mission and Goal

1.3.1. Vision
Bring the luxury of nature to people living and build buildings to meet the need of people
“Own nothing and control everything”.

1.3.2. Mission
Provide decorations of the building to the customers with the high standard of
living beyond their expectation and make them feel like they live in the garden.

1.3.3. Goal
Transform from a self-employed business to a small business with a clear company
infrastructure diagram. Clear and correct in accordance with the law.

1.4. Company Entity

I have a sentence that is stuck in my mind so far, and I know it from reading a book that
says, “If you really want to be rich, then you have to understand the co-operation and the legal
structure”, which is an important part of financial literacy. From now on, I will explain the
secrets of the laws and method that the rich use in their business as well as protect their property.
In short, you will understand the benefits of corporations, limited liability companies, limited
partnership that help you save thousand of dollars from taxes and help you from the influence
of creditor (banks). Since this thesis focuses on real estate related businesses, we will conduct
a study of legal entities that protect us from the influence of creditors.
For as important as knowing which entity to use for running your business, protecting
your assets, and limiting your liability is knowing which entity not to use.
 Sole proprietorships
 General partnerships
Sole proprietorships and general partnerships provide no asset protection. These bad entities
are not separate legal things. You haven’t registered without any protection. One lawsuit against

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your business, and your house, saving, and personal assets can all be lost. In running any
business. To protect yourself from such risks you need to limit your liability by establishing a
corporation or other good entity. A good entity is one that shields and protects your personal
assets from business risk. A bad entity is one that provide you no protection whatsoever.
There are several other disadvantage to using a sole proprietorship:
 Owners. There can only be one owner of a sole proprietorship. If you later want to bring
on owners you will have to switch to another business entity.
 Sale. It is hard to sell a sole proprietorship since its value is based on the owner and not
the business.
 Death. When a sole proprietor dies, the sole proprietorship terminates. The sole
proprietor’s successors can only sell assets, not the business as a going concern.
 Audit Risk. Because sole proprietors report their business profits and losses to the IRS
on Schedule, there is a much higher risk of IRS audit. Schedule returns are audited at a
five times greater rate than corporate tax returns.

A general partnership is also a bad entity. In fact it is twice as bad as a sole proprietorship
because you have twice the personal exposure: personal liability for your acts and your partners’
acts. By contrast, limited liability companies, limited partnerships, and corporations offer much
greater protection. All of them offer owners limited personal liability for business debts and the
acts of others. It should be noted that because of these unlimited risks that last thing you want
to do is become a general partner of an enterprise in which you do not have day-to-day
management control. If you do not thoroughly know what is going on in the company you
should not put your future on the line as a general partner.
Other general Partnership Disadvantages
 Termination. A partnership terminates when one partner dies, leaves, or goes
bankrupt. You may be surprised by some unexpected event.
 Sale. Most sophisticated buyers do not want the risk of being in a general partnership.
This will hinder the ability to sell your interest in a general partnership.
 Self-employment taxes. All general partners must pay self-employment taxes on
their share of partnership income.
With a general partnership you have double the exposure of sole proprietorship. Not only you,
but your partner can put your personal assets at risk. All of the risk and double (or triple or more
depending on the number of general partners you have) the exposure is not a good way to do
business.
In conclusion the longer you operate as a sole proprietorship or general partnership the
longer you are going to be personally responsible for every bad thing that can happen in your
business.
To succeed in business, to protect your assets and to limit your liability, you want to
select from one of the good entities, structures that are truly separate legal beings. They are:
 C corporations (Standard corporation)
 S corporations (Special corporation)
 Limited liability companies (LLCs)
 Limited partnerships (LPs)
Each one has its own advantages and specific uses. Each one is utilized by the rich and the
knowledgeable in their business and personal financial affairs.

Before we discuss the relative strengths of corporation, LLCs, and LPs, it is important to know
the language of each. While their basic structure is similar, the terms of each structural facet
are different. Here then is the language for the good entities.

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Table 1.4.1, Comparation between corporation, limited liability, Limited partnership
Term Corporation Limited Liability Limited Partnership
Company
Owner Shareholder Member General and Limited
Partner(s)
Senior Management Chairman of the Manager(s) General Partner(s)
board; Chief
Executive officer
(CEO); President
Organizational Article of Article of Certificate of Limited
document Incorporation Organization Partnership
Operational road Bylaws Operating Agreement Limited Partnership
map Agreement

The best place to start the discussion of good entities is with corporations. The
shareholders, the investors in the corporation, were liable only to the extent of their contribution
to the business. This was a significant development in world economic history. Forming a
corporation is simple. Essentially, you file a document that creates an independent legal entity
with a life of its own. It has its own name, business purpose, and tax identity with the IRS. As
such it-the corporation is responsible for the activities of the business. In this way, the owners,
or shareholders, are protected. The owners’ liability is limited to the monies they used to start
the corporation, not all of their other personal assets. If an entity is to be sued it is the
corporation, not the individuals behind this legal entity.
A corporation is organized by one or more shareholders. A corporation’s first filing, the
articles of incorporation, is signed by the incorporator. The incorporator may be any individual
involved in the company, including, frequently, the company’s attorney. The articles of
incorporation set out the company’s name, the initial board of directors, the authorized number
of shares, and other major items. Because it is a matter of public record, specific, detailed, or
confidential information about the corporation should not be included in the articles of
incorporation. The corporation is governed by rules found in its bylaws. Its decisions are
recorded in meeting minutes, which are kept in the corporation minute book. When the
corporation is formed, the shareholders take over the company from the incorporator. The
shareholders take over the company from the incorporator. The shareholders elect the directors
to oversee the company. The directors in turn appoint the office to carry out day-to-day
management.
One disadvantage of utilizing a regular (or C) corporation to do business is that that its
earning may be taxed twice. This generally happens at the end of the corporation’s fiscal year.
If the corporation earns a profit it pays a tax on the gain. If it then decides to pay a dividend to
tis shareholders, the shareholders are taxed once again. To avoid the double tax of a C
corporation, most C corporation owners make sure there are no profits at the end of the year.
Instead, they use all the write-offs allowed to reduce their net income.
The potential for double taxation does not occur with the other good entities, a limited
liability company or a limited partnership. In those entities profits and losses flow through the
entity directly to the owner. Thus, there is no entity tax but instead there is a tax obligation on
your individual return. Depending on your situation, and LLC or LP with flow-through taxation
may be to your advantage or disadvantage. Again, one size does not fit all.
The limited liability company is a good entity to use in certain situation. Because it
provides the limited liability protection or a corporation and the flow-through taxation of a
partnership, some have referred to the LLC as an incorporated partnership.
There are two feature that make the LLC unique:
 Flexible management structure
 Flexible allocation of profit and loss.

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The management structure of an LLC was different, and much more flexible, than that of
a corporation. A corporation had directors elected by shareholders, officers elected by directors,
and employees hired by officers. By contrast, an LLC could be managed by all its members,
which we are akin to shareholders in a corporation, or be managed by just some of its member
or by a nonmember. The first was called a member-managed LLC, the second a manager-
managed LLC.
The LLC was designed to overcome the problems corporations faced in attempting to
avoid double taxation. In the process, as we have seen, some unique and useful features were
created as additional benefits to the entity. The main features are as follows:
 Limited Liability protection
o In an LLC, like a corporation, the owners do not face personal liability
for business debts or for legal claims made against the company. In this
day and age when litigation can unexpectedly wipe out a lifetime of
savings, limited liability protection is of paramount importance.

It is important to note that an LLC, as with a corporation, you may

become personal liable for certain debts of the company if you sign a
personal guarantee. As an example, most landlords will require the
owners or officers of a new business to personally guarantee that the
lease payments will be made. If the business goes under, the landlord has
the right to premise are leased to a new tenant.

The important point to remember is that you are not going to sign
a personal guarantee for each and every vendor agreement and customer
transaction you enter. And in these matters, you will be protected through
the proper use of an LLC. To obtain such protection it is important to
sign any agreement as an officer of the LLC. By signing an agreement
“Joe Doe” without adding “Manager, XYZ, LLC” you can become
personally liable. The world must be put on notice that you are operating
as an independent entity. To that end, it is important to include LLC—or
Inc. if you use a corporation, or LP for a limited partnership—on all your
stationery, checks, invoices, promotional literature, and especially
written agreements.
LLCs offer two very flexible and workable means of management. First, they can be
managed by all of their members, which is known as member-managed. Or they can be
managed by just one or some of their members or by an outside nonmember, which is called
manager-managed. It is very easy to designate whether the LLC is to be member or manager-
managed. If the members of an LLC want to change from manager-managed to member-
managed, or vice versa, it can be accomplished by a vote of the members. In a small, growing
company, each owner will want to have an active say in how the business is operated. Member
management is a direct and simple way to accomplish this.
One of the remarkable features of an LLC is that partnership rules provide that members
may divide the profits and losses in a flexible manner. This is a significant departure from the
corporate regime whereby dividends are allocated according to percentage ownership. For
example, an LLC an provide 40 percent of the profits to a member who only contributed 20%
of the initial capital. This is achieved by making what is called a special allocation.

As has been mentioned throughout, one of the most significant benefits of the LLC, and
da key reason for its existence, is the fact that IRS recognizes it as a pass-through the LLC
without tax. They flow through to the business owner’s tax return and are dealt with at the
individual level.

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Again a C corporation doesn’t offer such a feature. In a C corporation, the profits are taxed at
the shareholder. Thus, the issue of double taxation. Still, with proper planning, the specter of C
corporation double taxation can be minimized.
In an S corporation, profits and losses flow through the corporation, thereby avoiding double
taxation, but may only be allocated to the shareholder according to their percentage ownership
interest. As described above, LLC profits and losses flow through the entity and may be freely
allocated without regard to ownership percentages. As such, the LLC offers the combination of
two significant financial benefits that other entities do not.

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