As we know that sole proprietorship is a business that automatically begins when a single person decides to go into business of their own choice. For sole proprietor itâ€™s not compulsory to be register with a government agency as a condition of operating the business. Sole proprietors and the business which they are running have no separate identity from one another as they both are considered to be the same which exposes the sole proprietorâ€™s personal assets to business obligations and debts. A sole proprietorship is also known as a sole trader or sole owner, or simply we can say that proprietorship is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business as we said before. All profits and all losses are held upon the sole owner or the proprietor / trader. All assets of the business are owned by the owner and all debts of the business are the debts of the owner and he himself must pay them from their personal resources. So, the owner has unlimited liability in such kind of business. It is a “sole” proprietorship in the sense that the owner has no partners like in partnership.
This is the most straightforward structure and the easiest form of business. Basically it means the business decisions are being made by one person which is only the owner. Of course, it doesnâ€™t necessarily mean that the business has only one worker because we are talking about the principal the owner of that firm. The sole trader can employ others to do any or all of the work in the business by his/her own choice. So, establishing this type of entity is easy as compare to others, getting financing for such a concern can be a bit difficult, and the owner himself is personally liable for the business as we already discussed. On the other hand if see through the perspective of customers than in case of a legal claim by a customer, or if there is a financial problem with the business occurred, the creditors can sue the proprietor/owner.
Steps to Register a Sole Proprietorship
This is quite simple registration process in sole proprietor than other firms, however instead of doing it by yourself, gets a tax consultant or may be a lawyer to do it for you at a small cost, it is not expensive. The following steps need to be taken are as follows:
Firstly you have to decide on and select a Business Name, Ensure that the sole proprietorship’s selected business name is available by conducting a search with the secretary or either by the department of state website where the sole business operates. This will ensures you that either the another company registered with the sole proprietors home state does not have a business name that is too similar with yours business name;
Then you have to Print the Letter Heads for your business, envelopes and visiting cards too;
After the confirmation of the business name, you will Write an Account Opening Request to your Bank, which states that this is your business and you are the sole proprietor of it rather than any other person;
Then Open an account at a local bank’s branch close to you for your further procedures;
After opening an account the, next request from you is to the bank to issue a letter stating that this is your account and business;
When you get the letter than you submit the bank certificate and your application with the Tax Authority i.e. the Federal Board of Revenue (FBR) which was previously known as the CBR Central Board of Revenue;
Now suppose if you are on a job, you already have a NTN (National Tax Number), so the same NTN will be used for your Sole Proprietorship status as well.
So once the status is added, you are a registered legal entity.
Registration Process of a Partnership
Now if we talk about the registration process of partnership than this firm is not required by law and there is no penaltyÂ forÂ non registration. But however there are some disadvantages for not registering are also there. For example, if any dispute occurs among the partners or with the previous partners, than in this case no suit in any court of law can be filed by such partners or ex-partners against the firm which is not registered or against themselves to enforce any right arising from any contract/agreement or conferred by the Partnership Act, 1932.Â So, an unregistered firm has this disadvantage that it cannot institute a suit against a third party to enforce any right arising from a contract which the made, e.g. for the recovery of the price or cost of goods supplied. It must be rememberedÂ that a third party may file suit against an unregistered partnership. And even in this case, the partnership can not mention anyÂ amount that may be outstanding to them in the court. There is no protection to the partnersâ€™ liability in an un-registered partnership. As there is no formal documentation or evidence stated that they are in partnership, suppose if one decides to deny the existence of the partnership than there is not much that can be done about it legally. So, prior registration is therefore considered to be necessary.
Nevertheless registration can give many advantages to the firm. So, first of all Form -I needs to be filled by you which act as a partners and then it is attached in appendix B. After above the Partnership Deed is prepared on the Stamp Paper which is worth Rs.500. A sample for the statement of Partnership Deed is also must be there in appendix B. After this registration you will have to pay fee ofÂ Rs.Â 500Â which also needsÂ to beÂ depositedÂ in National Bank of Pakistan through Chelan Form. It is mandatory for the partnership firm to beÂ located inÂ commercial area. With all above there is also needs of Copy of Lease Agreement or Ownership proof needs to be there as well. AÂ templateÂ ofÂ LeaseÂ AgreementÂ is also attached in appendix B.Â The nextÂ requirementÂ after above isÂ theÂ attachment of computerized National Identity Cards of all Partners and Witnesses, and then itÂ is mandatory thatÂ all papers should be attested from Notary Public. And the partners must be contact the office after three days of submission ofÂ papers. And in the last an affidavit regarding accuracy of papers and existence of office needs to be submitted on stamp paper of worth Rs. 5.
Registration process of a Corporation
For the registration process of a corporation theÂ name must be officially approved by the Registrar of Companies. When you apply to the Registrar for the approval of a name, it is recommended by the registrar that two or three possible names ending with the word “limited” be submitted as this should avoid the unnecessary delays in name.Â So, applicants should keep in mind that a name is not likely to be approved if it is comes under following conditions:
If your suggested name is similar to the name of an existing company
The name which you suggests is considered misleading or confusing
If this name implies links with royalty
Or if this name includes the word “Imperial”, “National”, and “Corporation, or Co-operative.
But in case of a subsidiary company proposes to adopt the name of its parent company, the very first it must furnish its written consent for the use of its name of the parent company under which it is going to work. Then after this if once the approval of the Central Bank has been obtained by that person, then the next step is the registration of the company.Â
So for a company to be registered, the below given documents and information must be filed with the Registrar of Companies as early as possible:
The Memorandum and Articles of Association.Â The Memorandum must state the following things;
The name of the company must having a word with “Limited” as the last word
The registered office of the company, that where is the location of that office.
The objects of the company which you are going to start , which it is advisable by the registrar that they should be as wide as possible so as to enable the company to engage in any kind of business or activity easily.
Then here you have to write a statement that the liability of the members is limited by shares or by guarantee.
After that the amount of the share capital and details of the shares authorized to be issued, and all the subscribers to the memorandum together with the number of shares for which they have subscribed must be mentioned.
The next step for the process is the Articles of Association which basically govern the company’s internal procedures and functions. The articles contain all the rules governing the internal management of the company and its members and regulating the rights of its members. The articles of association deal with matters such as:
General meetings of the company which held
Members voting rights
Transfer of shares in the company
Appointment and powers of directors regarding the company which you selects
Dividends of the company
Companies AccountsÂ & Audit
MOA & AOA, which have been made after careful study by lawyers and Focus Business Services which performs in your company, must be made available but care should be taken that the first few main objects are tailored to the specific circumstances and the main business objects of the company which you are operating.
Your company list of the directors and the secretary’s name and details must be present there. A minimum of one director is required, but there is no maximum amount mentioned in it.Â And there is no necessity to have local directors of a company; this will be advisable especially where the provisions of a double tax treaty are going to be utilized. Company directors can also be worked as Secretaries, but in case of a sole Director, he cannot act as a Company Secretary at all, except only in the case of a “one shareholder – one director – one secretary company” when one person can indeed act in all three mentioned capacities.Â
After above the address of the company’s registered office, which will be the place where all official notices will be served of the company.
Then at the last the final step is the declaration or affidavit from a lawyer confirming that all formalities provided by The Companiesâ€™ Law have been properly applied and complied with in relation to the incorporation.
Once all the required documents have been stiff with the Registrar of Companies and he has satisfied himself that they are in order then he will issue a Certificate of Incorporation to the companyâ€™s partners. The company formation and registration procedures, includes the printing of all official stationery, documents and opening the necessary bank accounts which are required, can usually be completed withinÂ a period of two weeks not more than these days, after this all the company can start operating immediately.