Different structures of businesses in Pakistan are explained below
Sole Proprietorship
A sole proprietorship is a business that is owned and operated by a single individual. There is no distinct legal entity. The firm’s profits and losses are entirely the responsibility of the owner. The business taxes are paid on the owner’s income tax return. The obvious disadvantage of this corporate form is that the owner’s liability is limitless, and he or she is personally liable for any litigation or obligations.
Procedures to set up a sole proprietorship
Follow these steps to form a sole proprietorship:
- Come up with a unique business name.
- Create a letterhead containing your company’s name, logo, phone number, and physical address. Make a company stamp as well.
- Go to www.fbr.gov.pk and register your business for free with IRIS. Please remember that you will need your office’s rent agreement and the most recent paid electricity bill. (Not after three months)
- Once your NTN is issued, take your CNIC, letterhead, copy of your NTN’s online verification, business stamp, and other documents to any bank of your choice to open a bank account in your company’s name and receive an account maintenance letter.
Partnership
A partnership is a group of two or more people who have decided to share earnings and losses to carry out economic activity together. It is possible to enter into a written or verbal partnership agreement.
“Partners,” a “Partnership Firm,” and the name under which their business is conducted are all terms used to describe people who have formed a commercial partnership with one another. In any partnership, mutual trust and cooperation are essential. Partnership necessitates cooperation.
A short-term business agreement is referred to as a partnership. The partnership is dissolved if one of the partners leaves, dies, or declares bankruptcy.
There is no such thing as a partnership that does not have a legal body.
In a partnership, all partners can participate or take part in business management operations. Occasionally, only a few persons are authorized to manage the company’s business.
According to the agreement, each partner contributes his or her share of the capital. Some partners just provide skills and the potential to profit as a business partner.
No partner can transfer his or her interests or rights to another without the consent of all partners.
In a partnership, each partner’s liability is unlimited. The personal property of the partners is also utilized to settle business debts in the case of a loss.
Limited Liability Partnership (LLP)
A limited liability partnership (LLP) is a type of business structure that provides liability protection as well as tax breaks and other advantages to its owners.
LLP is a relatively new corporate structure in Pakistan. It was first launched in 2017 by Pakistan’s Securities and Exchange Commission (SECP). Because there was a tremendous demand for versatile, creative, and effective alternatives to the standard partnership structure (AOP) and private limited company incorporation, SECP started this.
Unlike an AOP, an LLP is a separate legal entity. This means that each partner’s liability is limited to the number of shares in the LLP that he or she holds.
It’s a common arrangement among professionals, such as doctors, attorneys, and accountants, who start a practice together.
A Private Limited Company (PLC)
A Private Limited Company (PLC) offers limited liability and legal protection to its shareholders. A private limited company in Pakistan is a cross between a partnership and a publicly traded corporation. A minimum of two people are required to register. A person can be both a director and a shareholder in a Private Limited Company.
Members of a Private Restricted Company (PLC) are only liable for the number of shares they own. A Private Limited Company in Pakistan can begin operations after acquiring the Certificate of Incorporation. A PLC can be set up in 15 working days.
