Sole Proprietorship/Sole Tradership Firm Registration Guide
Update on 06th January, 2022
Sole Proprietorship/Sole Tradership Firm Registration Guide
Meaning of Sole Proprietorship
Sole Proprietorship meaning is a single person-owned small business, which is not a company but a proprietary firm. A simple form of business carried on by individuals who are personally liable for the debts they incur. It is important to note that a sole proprietorship is not a legal entity such as a partnership or a private limited company. As a sole proprietor, an individual can open a business under their own name or under a fictitious name. It is a relatively low-cost business to start, however, the disadvantage is the risk of financial failure if this kind of company fails. There is a possibility of creditors filing a lawsuit against the sole proprietors of the business if it fails to earn a profit. His personal assets could be used to discharge the company’s liability. It can only survive if the owner lives, but if the owner dies, there will be few chances for survival. Expansion of the business becomes more difficult after a certain point. An advantage of such entrepreneurs is that they do not need to attend board meetings and annual meetings. Consequently, tax returns are filed in their personal names. However, another advantage of the proprietorship firm is that these entrepreneurs work at their own pace.
A sole proprietorship and a single-member corporation look almost similar. However, they are very different. The law and operations of an SMC differ from those of a sole proprietorship. A sole proprietor can register his business if he has a shop as a place of business.
Step-by-Step Process For Registration of A Sole Proprietorships Firm in Pakistan
Generally, a sole proprietorship (also known as a sole business) involves just one person running the business. The owner does not have a separate legal entity and is responsible for all profits and losses. Additionally, the owner has complete control and is responsible for all liabilities and debts incurred by the business. No one can interfere with the owner’s decisions. The owner has to file his personal income tax return and pay the business taxes. The tax rate for sole proprietors is lower. Due to the unlimited liability of the owner, in case of lawsuits and other debts, the owner is personally liable. This is the disadvantage of this business structure. Sole proprietorships are different from partnerships and limited liability companies. There is also a difference between a standard sole proprietorship and a single-member company (SMC), which is a limited liability company with one owner. If you have difficulty deciding on a business structure? Please consult our senior lawyers who are near you.
The following are the steps you need to take to create a simple sole proprietorship:
(1) Consider and choose a unique name for your proprietorship firm/business
(2) Create a letterhead, stamp, and business card with the business name, logo, telephone number, and business address.
(3) You need to create a free account on IRIS by visiting FBR website, where you will receive a National Tax Number (NTN). It is important to note that a lease agreement for your office or house will be required. You will additionally require a paid electricity bill, not older than three months.
(4) Take your CNIC, letterhead, business card, NTN copy, and your stamp with your new business name to any bank of your choice.
(5) Thereafter, they will open a bank account in your business name.
(6) You will be considered a registered sole proprietor, now.
(7) You are now eligible to apply for GST Numbers, Chamber of Commerce, PEC, PSEB, and WEBOC or PSW.
A sole proprietorship does not have an official certificate issued by any authority. Your name and contact information will only be on the NTN certificate.
Our Law Firm Can Help You Through Our Senior Business Law Attorney For Registration of a Sole Proprietorship Firm
If you need assistance from a professional business attorney of our corporate law firm, in this regard, you are welcome to contact us. Registration of sole proprietorships is possible for as low as a fee of Rs. 5,000 only. To find out more, please call +92-333-231-6871 or send us an email. By ensuring that we always provide our customers with professional and effective service, we make sure our customers do not have to worry about paying a fortune to other legal professionals or agents.
Please bring the following documents with you or send us through email or WhatsApp +92-333-231-6871:
- Copy of the CNIC of sole proprietor
- Paid electricity bill of the business office/store/shop/workshop (not older than 3 months)
- Tenancy agreement of office or business premises or residence
- Mobile number of the proprietor (not already registered before with FBR)
- Email address of the proprietor (not already registered before with FBR)
Difference of a Proprietorship Firm and a Single Member Company
If When you are planning to start a business and you find it hard to choose the right type of business for your business, here are the differences between a Single Member Company and a Sole Proprietorship:
As far as law and workings are concerned, SMCs are different from sole proprietorships. A single-member company and a sole proprietorship sound alike, but they are very different in working and structure. A Single Member Company is a company consisting of only one member and having a separate legal entity and limited liability. They operate similarly to private limited companies. As opposed to a partnership or corporation, a sole proprietorship is not a legal entity. Entrepreneurs who own their own business do not have to attend board meetings and annual meetings. They sign and file their own tax returns. They can work whenever they want. Individuals file personal income tax returns to report their profits and losses. The owner of the business is personally liable for its debts if the proprietorship business fails.
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