The type of entity you establish for your business can either give you costly consequences or countless benefits. Filing requirements, potential liability, and tax issues are just a few of the many necessary considerations you must consider while choosing an entity type. Our advisers at Finperial will guide you through these crucial early stages of business. We will help you in making the best decisions for your business setup. Whether you intend to set up a sole proprietorship, a company or a partnership firm, we focus on all the legal requirements your business needs.
The following types of companies investors may setup in Pakistan:
- Sole Proprietorship
This is the simplest and easiest way to start a business in Pakistan. One person can solely begin a business and be the owner and responsible for all types of financial transactions. The business is started and registered under one director and is answerable to income tax only. No business tax applies to such company. Examples of some companies that come under this category are Beauty parlours, Event management, Travelling and Tourist guide, Restaurants and Petrol pumps, etc.
- Company Registration
- Private Limited
A Private Limited company is a small business entity which can be initiated by a minimum number of 2 directors. This type of company limits the trade of shares publicly and also restricts the number of shareholders to 50. The liability of the owner is limited and that the shares cannot be sold openly in the stock market other than the shareholders.
- Public Limited
A Public Limited company is a limited liability company whose shares can be openly sold and traded in public. Such companies must reveal the real financial strength so that the buyers and sellers know the exact worth of the company.
- Limited by Guarantee
A Company Limited by Guarantee is a special form of Public Limited company which is used by non-profit organizations. The profit of such companies is not distributed among the members instead used for the purpose for which the company is formed. The directors of such companies act as guarantors and guarantee to contribute an amount in case the company needs to wind up.
- Limited by Shares
A Company Limited by shares can be a Private or a Public Limited company. The ownership of the members of this company is limited to the amount of price paid for the shares they hold. The rights and duties of individuals are in direct proportion to an individual’s investment. The company exists as an independent entity, and the owners are not held responsible in case the company faces any financial problems.
- An Unlimited Company
An Unlimited Company is like a Private Company Limited by Shares only that the liability of the member is not limited. If the company is unable to pay its debt, the directors and shareholders will lose their personal assets to pay that. So no matter how many shares you hold you still risk a lot. Such type of companies are not very common and have fewer advantages.
- Private Limited
- Partnership and Joint Venture
A Joint venture joins two or more companies for a mutual business under a contractual agreement. The companies agree to share all profit and loss. A Partnership, on the other hand, joins two or more companies giving each a share in the ownership of the company. They share the company and aim in getting profit. Partnerships are a long-term agreement until one or more partner may have a difference. In joint ventures, the contract is a short term for as long as the purpose is met. In a joint venture, the individual entity of the person is maintained while in a partnership the person cannot have a separate entity and is known by the company name. A joint venture is limited in scope and duration and usually for a specific project as agreed on the contract. In partnership, the scope of work defined by the company is the target and not just one project.
An Agency is a company that provides services to other people or companies. It may also be a government department that is obliged to deliver certain targets and activities. Specific duties come under the scope of work of these agencies. These are decided by and oral or written agreement or a basic principal. In general, the relationship between two parties, a principal and an agent who represents the principal in transactions with a third party is called an Agency. Agency relationships occur when the principals hire the agent to perform a service on the principals behalf.
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