The business community in Pakistan keeps on running their ventures the conventional way. They do not bother to register a business as it seems to be difficult and complex for them. Their favorite form of business is either sole proprietorship or association of persons. In pursuit of their legal ease, they fail to register a company to gain a tax advantage, limit their liability, and expand beyond a locality. This guide aims to explain how to register a company in Pakistan and what are its benefits.
Why Register a Company in Pakistan?
As soon as your start a business, it is either a sole proprietorship or a partnership. The moment, you grow and aim to target more regions, you need a more strong and reliable business structure. You may need to project the business as a reliable one, raise capital, and limit your liability. For this purpose, you may need company registration in Pakistan. A corporate entity helps you:
Limits your Liability – Once you register a company, it gets its assets and wealth that are completely separate from you. It works as a separate entity where any risk of bankruptcy may never affect your wealth. You lose what you initially invest which is your limited liability.
Access Capital – Raising capital is never easy when you run a business that is not registered with a governing body. Investors are interested to put hard-earned money in companies with legal presence and a track record. Assure your clients and investors by recognizing your business existence the legal way.
Credibility – A corporate entity that is registered with a body such as SECP – Securities and Exchange Commission – in Pakistan is deemed to be more credible than a brick-and-mortar store that shutdown or runaway even a day after collecting investments or scamming the public. A company is required to register with the Federal Board of Revenue, pay and declare taxes, and file required documents every year.
Growth exponentially – Being credible and having access to more capital give wings to a business. It finds the resources to enter into new ventures and avenues, promote products or services to other regions, and maximize growth.
Additional benefits of company registration in Pakistan may include gaining tax rebates in several industries such as exporting goods and services specifically related to IT. The government also supports companies that are true and fair in their operations and contributes to the economic growth of the country. Companies can participate in various national and international exhibitions the government initiates to help them expand beyond the borders.
What type of company I can register in Pakistan?
A great majority of people are not aware of the different legal options available to register a business. They are unable to find and differentiate between them. Before you explore how to register a business in Pakistan, you can get a quick overview of the different company types to choose the one that best describes your business model.
|Sr. no.||Type of company||Required capital (minimum)||Required shareholders (minimum)||Time to incorporate|
|1||Single Member Company||Pkr. 100,000||1||4 weeks|
|2||Private Limited Company||Pkr. 100,000||2||6 weeks|
|3||Public Listed Company||Pkr. 200 million||7||6 weeks|
|4||Public Listed Company (unlisted)||Pkr. 100,000||3||6 weeks|
Single Member Company – SMC
A company that is formed by a single member is called a single-member company. Here, the ownership remains with one member. Company shares or stocks cannot be registered to two or more two members. It is a better alternative for sole proprietors to get their businesses incorporated without involving partners and gaining the benefits of being a corporate entity.
Private Limited Company
Two or more members, who want to document their business into a legal entity, can file for a private limited company. The Companies Act of Pakistan lay down rules for the formation of a private limited company. It allows the company to decide its number of members and restricts the transfer of shares. By law, such a type of company is not allowed to offer shares or other financial instruments to the public.
Public Limited Company
For a business to register as a public limited company, it requires at least three members. It differs from a private limited company as it is formed for the general public. The company can offer shares to the public at large through a stock exchange or IPO – initial public offer using. Bank or financial management companies deal in IPO on behalf of the companies. It requires a higher amount of capital requirement as it may involve public finances.
A public limited company can either be a listed or a non-listed one. A listed company is allowed to take funds and finances from the general public. A non-listed or unlisted public company is not allowed to deal in shares publically.
Can a foreigner register a company in Pakistan?
By following a legal process and paying the nominal company registration fee in Pakistan, individuals from any country of the world, except Israel, can incorporate a business. They can choose to register any type of company based on their foreign credentials.
How to register a company in Pakistan?
Company registration in Pakistan is a simple process. You need to understand and choose a legal form of corporate entity for your business. As we have discussed different legal options above in this post. You can decide to choose according to its minimum requirements in terms of shareholders, capital, and liability. Once you are familiar with it, you can go on to register a company with the following steps:
Step 1: Choose a Business Structure
Based on your business model, founding members, and available funds; you can decide on a company-type as we have discussed above in this article. A small business owner who intends to remain the sole owner of the company for the foreseeable future can go with a single-member company or find a sleeping partner to register a private limited company. Every business can start small and grow bigger as there is always an option to convert a SMC into Pvt. Ltd. one or grow and list a company as a public one.
Step2: Approve a Company Name
SECP, the premium corporate governing body, provides ease of online company registration in Pakistan. It allows the business community to apply for a company name separately or in combination with the registration process. However, to make sure the proposed company name is available and fulfills the legal criteria. It needs to be unique and relevant to the business and not come in conflict with other brands and companies.
Use the SECP’s eServices Portal, register yourself, choose a name, and submit it after paying a fee of Rs.200
For offline company name approval, you may need to fill out INC-Form-1 with a fee of Rs.500.
Step 3: Prepare Required Documents
The company registration process in Pakistan may require you to prepare all the required documents to verify your business ownership. According to the Companies Act, you need to provide:
- Copies of the Computerized National Identity Card (CNIC) of all the founding members.
- Evidence of the registered office address.
- Memorandum of Association to declare company type and members.
- Articles of Association to define the company’s purpose and operations.
- Bank statement to testify the required capital is paid up.
- Directors’ detail and nationality in case of registering a foreign company
- Registration fee slip
For registering a private limited or single-member company, the company registration fee in Pakistan is Pkr. 1800 if you apply online and Pkr. 3500 if applying the conventional way.
Step 4: Get Digital Signature Certificates (DSC)
Collect all the documents and apply for digital signature certificates for the members, directors, or shareholders. It can speed up the process by allowing members to sign company registration documents electronically. They will not be required to visit the registrar’s office for the sake of signature only.
Step 5: Obtain a Certificate of Incorporation
After collecting the required documents and getting them signed by the members, you are ready to submit them to the SECP office. As you will have already approved the company name, the process may be smooth and easier. The Commission will review your application along with the documents and details to issue a Certificate of Incorporation. That is your license to start operating the business the legal way.
Step 6: Open a Corporate Bank Account
A personal account is not reliable and authentic to use for company operations. Therefore, you need to create a corporate bank account to make the transactions legal. Banks usually need certification of incorporation, NTN, and a bit more detail to open a company’s account.
Step 7: Deposit Shares
All the members or shareholders will need to deposit the amount of capital of their share to the company’s bank account.
Step 8: Apply for National Tax Number (NTN)
To regulate your business and income taxes, you need to register with the Federal Board of Revenue and they will issue you a National Tax Number. Showing NTN is often mandatory in most business agreements and transactions. It is followed by annual tax returns to ensure your company pays the due taxes and abides by the tax law.
Step 9: Seek Sales Tax Registration (if applicable)
Your business is subject to charge sales tax if it deals in products that are locally produced or imported. According to Sales Tax Act 1990, a business is exempt if it deals in medicines, computer software; poultry feed, and unprocessed agricultural produce. If your business is exempt, you can skip this step, else you have to register for the sale tax. You will get a Sale Tax Registration Number (STRN), charge it on every receipt, and submit the tax collected by the 15th of the following month.
Companies may need to register with social security and EOBI (Employees’ Old-age Benefit Institute) to ensure the welfare of their workforce. Initially, you may not need it, but as your workforce grows, you have to consider it. There are a number of profitable businesses in Pakistan you can start, grow, and get them incorporated.
SECP has refined the process and created ease for the business community to register companies without any hassle. Online company registration in Pakistan facilitates people further in getting all the details from the comfort of home and office. They get to know the required documents and company name approval and save multiple visits to the registrar’s office. This article also outlines the key steps as how to register a company in Pakistan. Follow each step and you will be able to do it yourself, else there are firms to hire for secretarial services.
It is a general guide for you to understand what it takes to register a firm or business in Pakistan. The registration fee and requirements may differ over time. For accurate and updated information, you are requested to consult a legal advisor or log on to the official website of SECP.