Lawyer Prospects for Startups in Pakistan: A regulatory & legal perspective
BUSINESS STRUCTURES IN PAKISTAN
There are different incorporation structures available for entrepreneurs and business persons in Pakistan. These are divided into 2 major heads:
1. Non-Corporate Structures: Sole Proprietorship, Partnership or Association of Persons (AOP)
2. Corporate Structures: Limited Liability Partnership (LLP), Single Member Company (SMC Private Limited), Private Limited Company (PLC), Public Limited Company .
Startups can go for;
i. Sole proprietorship: It 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 rests with the proprietor. Sole proprietorship is registered with the Federal Board of Revenue. It’s registration is not compulsory.
ii. Partnership/ AOP: It 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 registered with the Registrar of Firms in your respective city/district.
iii. Limited Liability Partnership (LLP): is a relatively new business structure in Pakistan. It was introduced by the Securities and Exchange Commission of Pakistan (SECP) in 2017. It is a business structure that provides some liability protection for its owners, along with some potential tax breaks and other advantages. It is registered with the Securities and Exchange Commission of Pakistan (SECP).
iv. Single Member Company Pvt Ltd: It 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. It is registered with the Securities and Exchange Commission of Pakistan (SECP).
v. Private Company Ltd: It is the ideal business structure for Small and medium-sized enterprises (SMEs) that need to raise capital on a small to medium scale. It is a separate legal entity from its shareholders. Shareholders elect a board that, along with the company’s CEO, takes the operational decisions. For startups that are planning to raise investment or capital, and wish to limit liability, it is advised to set up as a private limited company.
For startups, public limited companies and non profit organizations are not recommended.
i. Public Limited Company: To register as a public limited company, your size should be very large and you should be registered in the stock exchange. So public limited is needed when we have a billion rupees project and we want huge investment for it so we public limited.
ii. Non-Profit Organization: A type of business that uses its profits for charitable purposes. Tax-exempt, but must follow special rules. This is not relevant for startups but just for the sake of understanding, when an organization works for a non-profit cause, this registration is required.
Difference Between Proprietorship, Partnership, Limited Liability Partnership & Private Limited Company
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- Quote paper
- Fatima Tariq (Author), 2021, Prospects for Startups in Pakistan: A regulatory & legal perspective, Munich, GRIN Verlag, https://www.grin.com/document/1193148