Industries
Types of business entities operating in Pakistan.
Types of Businesses
There are several types of business entities operating in Pakistan. Understand the criteria, liability and documents required for each, to decide which type of entity is best suited for your needs. If you are setting up business in Pakistan, you will need to establish a presence as either a Sole Proprietorship, a Partnership or a Company. The table below summarizes the key aspects of each type of business:
| Business Type | Sole-Proprietorship | Partnership | Company |
|---|---|---|---|
| Definition | A business owned by one person | A business firm/ organization of two or more business partners | A business form which is a legal entity separate and distinct from its shareholders and directors |
| Owned by | One person | Generally between 2 to 20 partners. A partnership of more than 20 partners must incorporate | Private Company Private Company has at least 2 shareholders and a maximum of 50 shareholders. Public Company Public Company has at least 7 shareholders/members. |
| Legal Status | Not a separate legal entity Owner has unlimited liability Can sue or be sued in individual's own name Can also be sued in business names Owner personally liable for debts and losses of business | Not a separate legal entity Partners have unlimited liability Can sue or be sued in firm's name Cannot own property in firm's name Partner's personally liable for partnership's debts and losses incurred by other partners | A separate legal entity from its members and directors. Members have limited liability Can sue or be sued in company's name Can own property in company's name Members not personally liable for debts and losses of company |
| Registration requirement | Age 18 years or above. Pakistani Citizens and Permanent Residents only Undischarged bankrupt cannot manage business without court or Official Receivers' Approval | Age 18 years or above. Pakistani Citizens and Permanent Residents only Undischarged bankrupt cannot manage business without court or Official Receivers' Approval | Age 18 years or above Minimum of 2 directors (if 2, At least one of the directors shall be Ordinarily Resident in Pakistan) Undischarged bankrupt cannot manage business without court or Official Receivers' Approval At least two shareholders |
| Formalities and expenses | Quick and easy to set up Easy to administer and manage Registration cost is minimal Less administrative duties to adhere to | Quick and easy to set up Easy to administer and manage Registration cost is minimal Less administrative duties to adhere to | More costly to set up and maintain More formalities to comply with Annual Returns must be filed as Statutory Requirement of General Meetings, directors, share allotments, etc |
| Set-up fee | Nominal | Moderate | Varies |
| Continuity of the business entity | Exists as long as the owner is alive and desires to continue the business | Exists subject to Partnership Agreement | A company has perpetual succession until wound up or struck off |
| Closing of the business | By owner – Cessation of business | By partners – Cessation of business or dissolution of partnership | Winding up – Voluntarily by members, compulsorily by the High Court Striking Off |