How to register a sole proprietorship in Pakistan in 2023

How to register a sole proprietorship is the biggest question in 2023. In recent years Pakistan has decided to train its young people and motivate them to start their businesses. For this purpose, Pakistan is supporting entrepreneurial activities on a government level, and they have started a program named “entrepreneurship training startup Pakistan” with the cooperation of an idealist organization.

They have completed one batch, and the government provides financial support to the participant who completed the program successfully. After the completion of the entrepreneurship training, they have to decide on the registration of their business. We will discuss the available type of business registration in Pakistan. Moreover, we will discuss how to register a sole proprietorship and a single-member company in Pakistan in 2023

Types of business registration

First, we need to know the type of business registration available in Pakistan. There are two types of business structures named non. Corporate structure and corporate structure. Furthermore, these structures are divided into different categories. The subdivision of the two types is listed below.

• Corporate structure
• Non-Corporate Structures

Corporate structure

• Single-member Company (SMC)
• Private Limited Company
• Limited liability partnership
• Public Limited Company

Single-member Company

A single-member company refersto a company’s structure owned by one person. It is not a new concept, and many countries allow their citizen to incorporate single-member companies. Pakistan adopted a single-member company structure in 2003 under the SMC Rules 2003. Before 2003. No one was allowed to register one personal company; if he wanted to do business alone, he could register as a sole-proprietor company.

SMC rules define the sole director  in clause h, rule 2, and sub-rule one as “sole director means the director of a single-member company who is for the time being the only director.” The companies ordinance 1984, section 174, discusses a minimum of two directors required to establish a private limited company amended after the SMC Rules 2003. A single-member company has the following features.

• A Single-member Company is an entity that is separate from the owner 
• Have the advantage of limited liability that is declared at the time of the registration
• Owner’s assets are protected due to separate entity
• Defined lawful outline
• Solid company structure
• Low maintenance cost compared to private limited Companies and public limited Companies
• Member of a regulated and documented sector of the economy
• The simplest form of corporate sector registered entity
• Improved responsibility, authority, and accountability
• Credibility is high in the market due to the registered company
• Ownership of shares can be transferred
• An excellent capital market access
• Easy to take a loan from banks or to get funds from investors
• On some payments, you can get tax advantages like lease, insurance rental, or other charges that are tax-deductible

  Non-Corporate Structures

• Sole proprietorship
• General Partnership

This article will discuss the sole proprietorship, single-member company, and registration process.

Sole proprietorship

The simplest structure of the business is the sole proprietorship. Additionally, 90% of the business community of Pakistan follows this type of business. This business type is the oldest method of doing business. In this type of business, a single member handles all the activities like managing and controlling in a sole proprietorship. A single person is responsible for a sole proprietor’s entire business profit, complete business loss, and overall business debt. Moreover, in technical language, the business’s liability is unlimited for a sole proprietorship, and the sole proprietor is responsible for paying taxes from his income.      

To register a sole proprietorship in Pakistan, you must visit the federal board of revenue (FBR) department. After discussing the sole-proprietor company, we will discuss the difference between the single-member company and the sole-proprietor company. Furthermore, at the end of the article, we will discuss registering a sole proprietorship and a single-member company in Pakistan in 2023.

Sole proprietorship VS Single-member Company

Level 1

• For a sole proprietorship, you only need to register NTN from FBR and start the business. Conversely, you must register your company with the Securities and Exchange Commission of Pakistan (SECP) under the act of 1984, SMC Rule 2003. 
• You can register a duplicate name in a sole-proprietor Company, whereas in a single-member Company, you cannot choose a name already registered in SECP. Moreover, in sound or spelling, a name close to any other name cannot be registered in SECP. 
• In a sole-proprietor Company, you are alone responsible for profit and loss. However, in a single-member Company, other people will share your profit and loss.
• In both cases, sole proprietorship and single-member company, You are the company’s owner, and your decision will be the final authority.
• Liability responsibility: You are responsible for every loan payable to your accounts and assets in a sole proprietorship. While in a single-member Company, only company accounts and assets will be used to pay liabilities. For example, someone suits a case against your company. The decision came against your company; for a sole proprietorship, your company assets, company accounts, personal assets, and personal accounts will be used to pay liabilities (like loans and credits). On the other hand, your assets and personal accounts are safe, and only company assets and company accounts will be used to pay liabilities (like loans and credits).

Level 2

• In a sole proprietorship, you will file combined returns for personal income and company income. In a single-member Company, you will submit separate individual and company income returns.
• You do not require Securities and Exchange Commission of Pakistan (SECP) compliance in a sole proprietorship. However, in a single-member Company, you must fulfill compliances like form 29 and others.
• A monthly general sale tax (GST) return is applicable for both setups.
• There is no need to submit audited accounts in sole proprietor companies and single-member companies with less than one million rupees. For a single-member company with a value greater than one million rupees, you have to nominate an auditor and submit an audited account at the end of the fiscal year.
• Suppose you want to convert a sole proprietorship into a single-member company. In that case, you will dissolve your NTN number and need a third-party audit, which will define your assets and convert them into your company shares, which is a little bit complex. 
• If you cannot continue your business for any reason, it is easy to resolve your NTN number in a sole proprietorship. Still, there is a somehow complex procedure available to resolve a single-member Company

We will discuss how to register a sole proprietorship and a single-member company in Pakistan in 2023

How to register a sole proprietorship in Pakistan in 2023

We have enough knowledge to decide whether to register a  sole proprietorship or a single-member company. Here we are enlisting the procedure for registering a sole proprietorship in Pakistan.

To register a sole proprietorship, you have two choices; first, visit the FBR office, follow the below procedure, or make an online login on IRIS and follow the below procedure. For online registration, Open the following link to create new signup for login (iris.fbr.gov.pk)

• Choose a name for your business, or if you are already doing a business, then you can register your current business name on your NTN
• After selection of the name, prepare the following documents
• Letterhead having the address of the office, Email, Landline number, and other details, if any
• stamp of the registered business name
• Business visiting card
• Use the above documents to open a bank account with your business name
• Register for general sale tax (GST), if you want

Information required to register NTN

Step- 1

• Computerized identity card number (CNIC)
• Prefix (for male Mr, For married women Mrs, For unmarried women Ms, for doctor Dr.)
• First Name (Given name by family)
• Middle Name (Not necessary)
• Last Name (Father name or husband name)
• Cell Number (Registered on your CNIC)
• Confirmation of cell Number (Registered on your CNIC)
• Email (Any email ID  like @gmail.com, @yahoo.com, @hotmail.com)
• Verification of email ID (Same Id as entered in Email)
• Type ( type of the land declared by the government on which your office or shop is situated like, Agricultural land, residential property, commercial property, or other).
• Form (a sub-category of the land, for example, you selected the agriculture in type, and now you have to enter from the sub-category like a farm, irrigated, uncultivable, unirrigated, or nursery)
• Measurement unit ( square meter, acre, or other)
• Area (Calculate the size by multiplying the width and length of the land)
• Unit No (union council )

Step- 2

• Street (Street, block, sector)
• Area/ locality ( Area, locality, village, Chak or road)
• City (that will search according to your entered information above)
• District
• Capacity ( owner, lease, franchise rental, or other)
• % Share (100 in case of the owner of the property and 1 in case of rented)
• Land area ( total area of the land whose address is provided)
• Covered area (Area which is constructed)
• Acquisition date ( Date on which you owned or leased the property)
• Utility connection (Electricity or Natural gas connection information)
• Business information ( this field is valid for those already running a business. They will provide the knowledge of their existing business according to the required information like business name, type, acquisition date, the principal activity, capacity, and share)
• Bank account information
• Link (Link with other person registered in FBR for NTN)

After completing the above documents, you are now registered as a Pakistan-based sole proprietorship. The name of the organization written on your NTN is the name of your registered sole proprietorship. 

We will discuss how to register a sole proprietorship and a single-member company in Pakistan in 2023

Single-member company registration

To register a single-member company, you can visit the securities and exchange commission of the Pakistan (SECP) office or register your company online. For offline, you can take your documents as mentioned below and meet with the registrar, which will help you make your file for your company’s registration. For online registration, you need to make your login to access the further process of the company registration. Open the link to access the e-portal of Pakistan’s securities and exchange commission (SECP)  (eservices.secp.gov.pk/eServices)

You will see the login menu at the top right side of the page. A person with Pakistan nationality will click on the link written as signup for national. A person having a nationality other than Pakistan will click on the link written as signup foreign. After filling out the form, you will get a login that will be your CNIC for Pakistani nationals and passport no for foreign nationals.

For step by step guide of single member company online registration, click on the below link.

https://businessdream.pk/best-guide-on-single-member-company-registration-in-secp-in-pakistan-in-2023/

Company registration Log In

After making the login, Please enter your login and password in the link mentioned above, and you will see the following options.

• Company name reservation
• Name reservation and incorporation (LLP)
• Name reservation and incorporation (Combined)
• LLP name reservation

The first step to registering your single-member company is to reserve your company name. Moreover, You can proceed with reserving your company name by two methods. Firstly, you can go for the link named company name registration. Secondly, you can reserve your organization name and proceed for the incorporation of company combine by clicking on the link, Name “reservation, and incorporation (Combined).” We will suggest the second method.

You need to think of 3 options for your company’s name, but these names should not be the same as the other registered company or are not similar to the already registered company. Some familiar names, such as Rehman, can not be selected as company names. Furthermore, some names are prohibited due to their sensitivity, and these names are available on the following link of the securities and exchange commission of Pakistan (SECP). (https://www.secp.gov.pk/company-name-search/)

Information required to register a Single-member company

• Copy of  your CNIC and a nominee CNIC copy which can be your blood relation (Son, Sister, brother, mother, or father) or wife
• Three options for your company
• Company Kind (Single-member)
• Principle line of business (Food, Textile, Beverage, security, or any other from the list)
• Mode of payment ( Bank challan, Debit card, or credit card)
• Proposed subscriber information ( Information of the person who will be the owner of the company)
• Authorized intermediary ( Director of the company)
• The registered address of the office of your company
• Company information ( Industrial property, Residential property, agricultural property, or any other from the list)
• Business share (Blank from the single-member company)
• Unique business information (in case of a company need particular information from any Government department, like for a security company, you need NOC from the home department of the specific province to register from SECP)
• Principle activity (Food, Agriculture, Textile, Leather or any other)
• Capacity (Owner, Director, or SEO)
• Accounting period (1^st, 2^nd, 3^rd, or 4^th.)
• Authorized capital ( No. of shares, Face value or per-share value; for example, if you want to register a company with a total value of 500,000, then you can split it out on the following formula, No of share=50,000, face value=10, total=500,000 )
• Detail of Authorized capital (Minimum 100000 )
• Signatory information ( As per the information provided in the section of director of the company)

We discussed in this article how to register a sole proprietorship and a single-member company in Pakistan in 2023.