Formation of new company

Introduction:

Pakistan, a South Asian country with a population of more than 200 million, is a land of opportunities for business ventures. It has a strategic location between South Asia, Central Asia, and the Middle East, and a large workforce with relatively low labor costs. With its pro-business government policies and a growing economy, Pakistan has become an attractive destination for local and foreign investors to start their businesses.

In this article, we will discuss the process of forming a company in Pakistan, the types of companies available, and the legal and regulatory requirements involved.

Types of Companies:

In Pakistan, there are three main types of companies that can be formed:

Sole Proprietorship:

A sole proprietorship is the simplest and most common form of business organization. It is a business that is owned and operated by a single person. The owner has unlimited liability, which means that they are personally responsible for all the debts and liabilities of the business.

Partnership:

A partnership is a business that is owned and operated by two or more people. Each partner contributes to the business, and the profits and losses are shared according to the partnership agreement. In Pakistan, there are two types of partnerships: general partnership and limited partnership.

Company:

A company is a legal entity that is separate from its owners. It can be owned by one or more persons, and the liability of the owners is limited to their investment in the company. In Pakistan, there are two types of companies: private limited company and public limited company.

Formation of Private Limited Company:

A private limited company is the most popular form of business organization in Pakistan. It is a separate legal entity, and the liability of the shareholders is limited to their investment in the company. The following are the steps involved in forming a private limited company in Pakistan:

Step 1: Name Reservation:

The first step in forming a private limited company is to reserve the company name with the Securities and Exchange Commission of Pakistan (SECP). The name should not be identical or too similar to the name of any existing company.

Step 2: Preparation of Documents:

The next step is to prepare the necessary documents, which include the Memorandum of Association (MOA) and Articles of Association (AOA). The MOA sets out the objectives of the company, while the AOA contains the rules and regulations governing the internal affairs of the company.

Step 3: Registration with SECP:

After the documents are prepared, they are submitted to the SECP for registration. The SECP will review the documents and issue a certificate of incorporation if they are satisfied that all the legal requirements have been met.

Step 4: Registration with Federal Board of Revenue (FBR):

After the company is incorporated, it must be registered with the FBR for tax purposes. The company will be issued a National Tax Number (NTN) and a Sales Tax Registration Number (STRN).

Step 5: Opening of Bank Account:

The next step is to open a bank account in the name of the company. The bank will require the certificate of incorporation and the NTN and STRN numbers.

Step 6: Registration with Employees’ Old-Age Benefits Institution (EOBI):

If the company employs five or more persons, it must be registered with the EOBI for the payment of old-age benefits to its employees.

Step 7: Registration with Social Security Institution (SSI):-

If the company employs 50 or more persons, it must be registered with the SSI for the payment of social security benefits to its employees.