I.S. Law covers a wide range of corporate matters that encompass the registration of firms and filing of returns. Our comprehensive corporate services include assisting businesses in the process of registering as legal entities, helping them navigate the necessary paperwork, documentation, and compliance requirements. Additionally, we offer support in filing various types of returns to ensure businesses remain compliant with taxation and regulatory obligations. I.S. Law’s expertise in corporate legal matters ensures that businesses can operate smoothly within the legal framework while focusing on their core operations.
Corporate governance and compliance is an ever-changing area and we help companies minimise operational and regulatory risks and provide them with on-going, up-to-the-minute advice. Across all of our offices we help our clients navigate the maze of legislation and best practice codes relevant to corporate…
To start with, we will discuss the different business structures available for entrepreneurs and businesspersons in Pakistan.
These include:
Non-Corporate Structures
Corporate Structures
Sole proprietorship is registered with the Federal Board of Revenue and the General Partnership is registered with the Registrar of Firms in your respective city/district.
The corporate structures (LLP, SMC, PLC, and Public Limited Company) are registered with the Securities and Exchange Commission of Pakistan (SECP).
Sole proprietorship is the simplest form under which an individual can conduct a business. It is not a separate legal entity and responsibility of liabilities and debt rest with the proprietor.
Sole Proprietor pays the taxes on his personal income.
Partnership or Association of Persons is another simple business structure. It works just like the sole proprietorship but with multiple partners. Partners enter into a simple agreement that lists their respective shares and terms of doing business.
Partnership is not a legal entity and all liability rests with partners. Income of the partnerships is taxed only once and partners are not required to pay tax on salaries or profits drawn by them.
In contrast to a General Partnership or an Association of Persons (AOP), the LLP is a separate legal entity and provides protection to other partners from joint liability created by the misconduct of another partner.
This business structure combines the advantages of Limited Liability Company and the flexibility of a general partnership (regulated under Partnership Act, 1932) at a low compliance cost.
A Single Member Company is set up as a separate business entity from its owner and only has one shareholder. The single member serves as a director and has complete control of the company.
Small business owners who are running their business as a non-corporate entity e.g. sole proprietorship can form an SMC which is a corporate entity with limited liability.
A private limited Company (PLC) is the ideal business structure for SMEs that need to raise capital on a small to medium scale.
A PLC is a separate legal entity from its shareholders. Shareholders elect a board, that, along with the company’s CEO takes the operational decisions.
in contrast to the LLP where only the income of partners is taxed, the company pays corporate tax on its profits and shareholders separately pay the taxes on income (dividends or salaries)
A company may also require a company secretary, legal advisor and auditor depending on its size
Comparison
Suitable For | Tax Liabilities | Compliance Cost | ||
1 | Sole Proprietorship | Small retailers, traders, and other self employed individuals | -Single Taxation: On personal income only-Low Income Tax Rate than PLC for small income brackets but tax rate increased with income | Low |
2 | General Partnership or AOP | Consulting firms | -Single Taxation: On the income of partnership only-Low Income Tax Rate than PLC for small income brackets but tax rate increased with income | Low |
3 | Limited Liability Partnership (LLP) | Small and Medium Enterprises (SMEs) | -Single Taxation: Only LLP’s income will be taxed. Partners’ income (salaries or dividends) will not be taxed. – | Medium |
4 | Single Member Company (SMC) | Small Businesses with Single Owner who want to form a corporate entity and limit their personal liability or raise capital | -Double taxation-Lower tax rate | High |
5 | Private Limited Company (PLC) | SMEs that need to raise capital on small to medium scale | -Double Taxation-High corporate tax rate | High |
6 | Public Limited Company | Medium and Large Enterprises that need to raise capital on large scale | Very High |
When starting a business, entrepreneurs need to have a clear understanding of the requirements of their business and the pros and cons of different company structures.
Every business structure has its unique tax liabilities and different tax rates. Moreover the level of compliance varies for different structures. Corporate entities have more compliance cost than the non-corporate entities. Compliance requires spending time and money on auditors, accountants and tax filing experts. It would not be advisable to register a private limited company without understanding the exact compliance requirements. Even among the corporate entities, tax rates and compliance levels differ for different structures. For example, compliance cost for a private limited company is more than that of a Limited Liability Partnership.
Moreover, investors and credit lenders are generally comfortable putting capital in corporate entities. So the entrepreneurs who plan to raise capital need to consider this upfront.
All these factors need to be taken into account before narrowing down on a business structure.
Let’s have a detailed look on the questions an entrepreneur needs to ask before choosing the right business structure:
If you are a single owner of the company and putting in all the capital, you might want to go with a Single Member Company. In case you are looking for more partners/co-founders, or looking to raise the capital, a Limited Liability Partnership or a Private Limited Company may be a good choice for you.
Business structures like Sole Proprietorship and General Partnership firms have unlimited liability. This means that in case of default of debt or other liabilities, the aggrieved party can legally recover the debt/liabilities from the partners or sole proprietor. This poses a high risk to the personal assets of partners. However, in a private limited company or a limited liability partnership, the liability is limited to the value of shares each member holds in the partnership or company.
If you are looking to raise capital, you should opt for a private limited company or a limited liability partnership as they are created under a sound legal framework and provide more protection to investors and lenders. Non-corporate structures are not recommended for this and SMC won’t serve the purpose either.
Tax rates vary for different business structures. So you need to take this factor into account while deciding on a structure.
We have done a detailed article here to explain the tax liabilities that apply to different business structures in Pakistan.
It is important to consider how much compliance costs you are ready to bear.
Under this section we will explain the process of registering a private limited and a single member company in Pakistan.
Incorporation of a Company involves four main steps:
The following documents are required by the SECP for purposes of company incorporation. It should be noted however, that depending on each individual case, additional documents may be sought by the SECP before a company is successfully incorporated.
Companies are registered with the Securities and Exchange Commission of Pakistan. The SECP has Company Registration Offices (CROs) located in Lahore, Islamabad, Peshawar, Karachi and Quetta which facilitate persons desirous of incorporating a new Company.
With an application for incorporation of a Company three (3) proposed names, in order of preference, are submitted. This is to ensure that if one name is unavailable or rejected by the SECP, the Company can still be incorporated under a name chosen by its members.
A foreign national can be director of a company subject to security clearance by the Ministry of Interior, Government of Pakistan.
The primary benefits of incorporating an SMC are easier and fewer compliance requirements and more streamlined management as the single member is empowered to take all decisions as opposed to a Private Limited Company where the Board of Directors ( or the shareholders, as the case may be have to agree before the Company makes a decision.
Usually, if all documentary requirements are complete, the SECP registers a Company within a period of seven (7) days.
Companies may be incorporated either through a physical filing or through the SECP ‘e services’ portal. In case of physical filing, there must be an authorized person who files the requisite documentation on behalf of the Company. In case of e filing, any one of the directors/members may file incorporation documents with the SECP.
Yes, a company director may be granted a salary and other benefits through contract.
A company is referred to as a separate legal entity as an incorporated company can hold assets and liabilities under its own name. A company can also be sued and can sue independently of its members/directors and has its own legal rights and obligations, seperate from those of its management/owners.
1. Employees’ Old-Age Benefits Institution (EOBI):
At I.S. Law, we provide expert legal assistance in matters related to the Employees’ Old-Age Benefits Institution (EOBI). EOBI is a crucial component of ensuring financial security for employees post-retirement. Our team is well-versed in navigating the complexities of EOBI regulations, including contributions, benefits, and retirement planning. We are here to guide both employers and employees, ensuring they have a comprehensive understanding of their rights and obligations under EOBI.
2. Social Security Matters:
Welcome to I.S. Law, where we specialize in offering comprehensive legal guidance on social security matters. Our experienced team understands the significance of social security programs in providing a safety net during challenging times. Whether it’s unemployment insurance, disability benefits, or healthcare coverage, we are committed to assisting our clients in understanding and accessing the benefits they are entitled to under the social security framework.
3. Labor-Related Issues:
At I.S. Law, we are your trusted partners in navigating a wide range of labor-related issues. Our team of dedicated attorneys is well-equipped to provide expert legal advice and representation in matters involving employment contracts, workplace safety, discrimination, wage disputes, and more. With a deep understanding of labor laws, we work tirelessly to protect the rights and interests of both employees and employers, ensuring a fair and just working environment.
Are you ready to embark on your entrepreneurial journey or expand your business horizons to international markets? Look no further! Our specialized online company registration services make the process seamless and stress-free.
Don’t let the complexities of international business registration hold you back. Trust our experienced team to guide you through the process, allowing you to focus on what you do best – running and growing your business.
Ready to take the first step towards international success? Contact us today to learn more about our company registration services and how we can help you achieve your business goals in the USA, UK, and Canada.”
Additional Services:
Tax Planning: We offer comprehensive tax planning strategies tailored to your business structure. Our experts will help you optimize your tax obligations and minimize tax liabilities.
Registered Agent Services: Ensure compliance with local regulations by appointing us as your registered agent. We’ll handle all legal notifications and document deliveries on your behalf.
Business Bank Account Setup: Access our network of trusted financial institutions to streamline the process of opening a business bank account, a critical step for your company’s financial operations.
Trademark and Intellectual Property Protection: Protect your brand identity with our trademark and intellectual property registration services. Safeguard your unique ideas, logos, and products from infringement.
Comprehensive Compliance Check: We conduct a thorough compliance check to ensure that your business adheres to all federal, state, or provincial regulations. This proactive approach helps prevent legal issues in the future.
Market Research and Expansion Strategy:
Market Research: Gain insights into your target market and industry trends. We provide market research services to help you make informed decisions and identify opportunities for growth.
Expansion Strategy: If you’re looking to expand your business beyond borders, our experts can assist you in crafting a strategic plan for international expansion, including market entry strategies and risk assessment.
Post-Registration Support:
Annual Filings and Renewals: We offer ongoing support for annual filings, renewals, and compliance updates, ensuring that your business remains in good standing with the relevant authorities.
Business Advisory Services: Our advisory services go beyond registration. We provide guidance on scaling your business, managing risks, and maximizing profitability.
Transparent Communication:
Dedicated Account Manager: You’ll have a dedicated account manager who will be your point of contact throughout the entire process. They will keep you informed and answer any questions you may have.
Real-time Updates: We provide real-time updates on the progress of your registration, ensuring that you’re always in the know about the status of your business setup.
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