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There are three major legal forms of business:
- Sole Proprietorship
- Partnership
- Company Incorporated
In Sole Proprietorship, an individual on his / her own
account carries out the business or profession. No formality
for setting up a sole proprietary concern.
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A partnership is a business relationship entered into by
a formal agreement between two or more persons or
corporations carrying on a business in common. The capital
for a partnership is provided by the partners who are liable
for the total debts of the firm and who share the profits
and losses of the business concern according to the terms of
the partnership agreement.
Partnership (other than banking companies) is generally
limited in size to twenty partners. The interest of a
partner is transferable only with the prior consent of the
other partner (s). However, a partner's right t a share of
the for taxation purposes, partnerships are classified into:
- Registered firms
- Unregistered firms
The income of the registered firm is subject to super
tax before distribution to the partners. Also the
individual income of the partners is subject to income
tax at the usual rates.
For unregistered firms, income tax is levied on the
firm's income and the partners are not liable to pay tax
on the shares of profit received from the unregistered firm(s).
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A company is a legal entity formed under the Companies
Ordinance, 1984. It can have share capital or can be
formed without share capital.
A company heaving share capital may be formed as:
- A company limited by share
- A company limited by guarantee and
- An unlimited company
The liabilities of its members are limited to the extent
of their shares in the paid-up capital of the company.
These companies may further be classified as public
limited and private limited companies. Public limited
Companies can be formed by at least seven persons by
subscribing their names to the 'Memorandum and Articles
of Association' f the company. The word 'Limited' is
used as the last word of its name.
Private Limited Companies may be formed by one
person or more by subscribing their names to the
'Memorandum and Articles of Association' of the company.
A private limited company, by its Articles of
Association:
- Restricts the right to transfer its share;
- Limits the number of its members to fifty; and
- Prohibits any incitation to the public to subscribe
for shares or debentures of the company.
A private limited company is required to use the words
"(Private) Limited" as the last word of its name
Means a company having the liability of its members
limited by memorandum to such amounts as the members may
respectively undertake to contribute to the capital of
the company in the event of its closure. A company
limited by guarantee is usually formed on a 'non profit
basis'. Companies limited by guarantee use the words
"(Guarantee) Limited" as the last words of their names.
Means a company having unlimited liability of its
members.
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A Public Company or a Private company may be formed by a
group of persons, associated for any lawful purpose, by
subscribing their names to the Memorandum of Association
and complying with the requirements of the Companies
Ordinance, in respect of the registration. The minimum
requirement for the number of persons for
private company is one or more persons while for Public
Company three or more person.
Prior Approval of the respective Ministries is required
for incorporation of companies. A list of such companies
with concerned organizations noted against each is as
under:
| Banking Company |
Ministry of Finance,
State Bank of Pakistan |
| Insurance Company |
Ministry of Commerce |
Investment Finance Company
(Investment Bank) |
Ministry of Finance,
State Bank of Pakistan |
| Leasing Company |
Securities and Exchange Commission of
Pakistan |
| Venture Capital |
Securities and Exchange Commission of
Pakistan |
| Assets Management Company |
Securities and Exchange Commission of
Pakistan |
| Arms and Ammunition |
Ministry of Industries
Board of Investment |
| Securities Printing, Currency and Mint |
Ministry of Industries
Board of Investment |
| High Explosives |
Ministry of Industries
Board of Investment |
| Radioactive Substances |
Ministry of Industries
Board of Investment |
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The first step with regard to incorporation of a company
is to confirm the availability of the name of the
proposed company from the concerned Registrar on payment
of a nominal fee. The name should not be inappropriate,
deceptive or designed to offend the religious
sensibilities of the people, and it should neither be
identical nor have a close resemblance to the name of
any existing company.
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- Four copies of the Memorandum and Articles of
Association signed by the promoter and one copy duly
stamped
- Declaration regarding compliance with the
requirements of the companies Ordinance, 1984 signed by
one of proposed Directors or an Advocate or Chartered
Accountant or Cost and Management Accountant (on Form 1)
- Address of the registered office of the company (on
Form 21)
- Particulars of the Chief Executive, Directors and
other officers/executives (on Form 29)
In addition to the documents required for registration
of a private limited company, the following documents
must be filed with the concerned Registrar:
- List of persons consenting to act as Chief
Executive/Directors (on Form 27)
- Consent of the Chief Executive and Directors (on
Form 28)
All the document meant for registration of a public
company.
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Association being formed for the promotion of commerce,
art, science, sports, social services, charity or other
such socially useful objectives are required to obtain a
license form the Securities and Exchange Commission of
Pakistan. The application for obtaining the requisite
license should be accompanied by the draft Memorandum
and Articles of Association, the list of promoters, the
declaration, the names of associated companies and
estimates of annual income and expenditure (Section 42).
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A foreign company, i.e. a company incorporated outside
Pakistan, is required to deliver following documents to
the concerned Registrar within 30 days of the
establishment of its place of business in Pakistan:
- A certified copy of charter, statute or Memorandum
and Articles of Association of the company in the
English or Urdu language accompanied by prescribed Form
38
- Address of the registered or principal office of the
company (on Form 39)
- A list of Directors, the Chief Executive and
Secretaries (if any) the company (on Form 40)
- Particulars of the principal officer of the company
in Pakistan (on Form 41)
- Particulars of person (s) resident in Pakistan
authorized to accept services on behalf of the foreign
company (on Form 42)
- Address of the principal place of business in
Pakistan of the foreign company on Form 43 (Section 451).
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- Foreign companies that intend to undertake export
activities in Pakistan will be registered immediately on
production of valid documents
- Permission to companies engaged in contractual
obligations of contracts with public sector entities
will be granted on production of valid document without
circulation to government departments. Visit the Board
of Investment (BOI) web site (http://www.pakboi.gov.pk)
for the application corm and the required documents.
- Permission for opening a liaison office by a
foreign company to promote products and services will be
granted by the BOI in consultation with the concerned
agencies
- Companies that wish to open their branch/liaison or
representative offices in Pakistan may apply to BOI for
permission on prescribed form. The BOI process and
decide such cases within a period of 6 to 8 weeks.
- Details on the required documentation, etc. are
available at all offices of the BOI. A specimen of the
application for permission to establish branch/liaison
offices by foreign companies can be obtained form the
BOI website (http://www.pakboi.gov.pk)
- Permission for opening of branch/liaison offices may
be granted by the BOI for a period of 3 to 5 years.
Further extensions will be granted after reviewing the
past performance of the foreign companies. Request for
renewal will be processed by the BOI within two weeks.
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