Sole proprietorship or one man business is the easiest way to start a business in Pakistan. This post is typically for those who don’t know that how to register sole proprietorship in pakistan. An individual will become the manager, proprietor and responsible for all transaction. Solely accountable for all liabilities and debts. Business duration is entirely depend on the owner and sell the products or services when he or she feels it’s feasible. Owner is the king of his or her business, uses their own intelligence and creative skills in managing affairs of the business. Majority who wants to start a business in Pakistan goes for sole proprietorship. Excellent way of giving corporate look to a small business.
Individual business owner is not answerable for any business tax. But income tax must be paid by the owner. In the beginning there is no such investment required for starting a business. In Pakistan the liability of sole proprietor is not limited to business, creditor can claim the personal asset of the debtor. In short business owner is solely responsible for all kind off risk and results of its business operation.
Following are the main steps to start a sole proprietorship business:
This is quite easy however, instead of doing it yourself, get a tax consultant or lawyer to do it for you, it is not expensive. The following steps need to be taken
- Initially we have to finalize the name of the company.
- Prepared the list of basic stationary company letter head, visiting cards.
- Preparing business stamp
- Bank account opening with account title of sole proprietor business. Sole proprietor signature and stamp will be required on the letterhead by the bank manager.
- Acquire the bank statement of newly bank account.
- After that Apply for National Tax Number (NTN) certificate. For applying NTN Bank account number and bank statement will be required with computerize ID card of sole proprietor. If you are on a job, you already have a NTN (National Tax Number). No need to get a new NTN number if you already have.
How to Register Sole Proprietorship in Pakistan:-
Making Proprietor business legal, owner has to obtained NTN number to fulfill the lawful agreement as per tax laws.
Obtaining National Tax Number – NTN:
Federal board of revenue (FBR) is the organization which provide National tax number (TAX). Two ways of getting NTN number.
- Online Applying at FBR Website by visiting https://e.fbr.gov.pk. Complete procedure is mentioned on the website.
- Select “New e-registration” from the dropdown of “e-Registration menu”
- Tax payer facilitation center provides facility for Applying on Paper.
- Select the taxpayer type (Individual)
- Enter the data in front of following captions appearing on the screen:
- Enter the CNIC/NTN/Reg.Inc, according to the selected taxpayer type
- Enter Name of taxpayer
- Enter “Image character”
- Click “Ok”
After completing all the details save the form with available information and continue at alter stage if it required so. Besides the details some information will also required to complete form.
- For all business concern bank account with business name title must be provided.
- Detail of the owner, premises proof and reference number of utility will be provided.
After completion of the online registration form, verify the form by clicking the “Verify” button.
Finally submit the form by clicking “Submit” button. A token number will be assigned by system. Application status can be checked either online or by calling help line 051-111-772-772.
After registration as taxpayer application will approved and system will send you the email for verification within 3 days.
Visit any Taxpayer Facilitation Centers (TFC) and submit a duly signed copy of the online application along with required documentation. (Copy of CNIC, Last Paid Electricity Bill, and Letter Head).
Note: There is no fee for getting NTN certificate.
Filing Annual Income Tax Return:
It is mandatory for a taxpayer to file Income Tax Returns annually.
- Accounting Period: July 1- June 30
- Filing Period: Annual Income Tax Returns are normally filed in September. However dates can be extended as per Government directives.
- Every proprietor business individual has to file Income Tax Return irrespective of date of starting a business.
- Once the status is added, you are a registered legal entity.
Example of Sole Trader ship in Pakistan
Following business are the general examples of sole proprietorship:
4. Tourist guide
6. Beauty parlor
8. Petrol pumps.
Advances/Merits of Sole Proprietorship
The following are the advantages of sole proprietorship:
As we mentioned earlier it is the easiest way to start a business in Pakistan. There is no legal fees or registration mandatory but if we want to convert it into lawful business we can do it at any time by obtaining a license from concerned department.
- You are a boss.
- It is easy to organize and may be started with small amount of money.
- It permits a high degree of flexibility to the owner since he/she is the boss of the business establishment.
- Due to the owner’s unlimited liability, some creditors are more willing to extend credit.
- The owner receives all the profit of the business.
- No risk of fraud by a partner.
- Quick decision making
The enterprise may be crippled or terminated if the owner becomes ill and in his/her absence no proper mechanism exists to manage and run the business. Since the business has the same legal entity as the proprietor, it may ceases to exist upon the proprietor’s death, and also if no one from the family is available to take over the business legitimately. Because the enterprise rests exclusively on one person, it often has difficulty in raising long-term capital.
- Has limited resources. Banks are reluctant to grant loans to proprietorship considering its small assets and high mortality rate.
- Unlimited liability for business debts. The single owner is responsible for paying all debts and damages of their business.
- If the firm fails, creditors may force the sale of the proprietor’s personal property as well as their business property to satisfy their claim.
- When the owner dies, the continuation of the business is difficult, because a new owner must typically accept all liabilities of the business.
- bear risk and loss alone.
Examples of sole proprietorship in Pakistan:-
Habitt is an extension of International Brands Limited (IBL), owners name are Arshad and Rashid Shahid Abdullah both are the sole proprietor. Operations had been started in 2001. They open the first outlet in Dolmen Mall. Opened second outlet in tipu sultan road. Habitt is a discount store with a wide variety of products at very economical price.
Recently habitat opened new showroom at the IBL Building center at shahra-e-Faisal. It will be the newest display center recently constructed. In furniture industry habitat already established its name. Habitt is a complete home store. It lives up to this claim and offering a massive variation of household products to its customers like furnishing, kitchenware, electronics, decoration pieces, bed sheets and even bathroom accessories. In short, all kinds of furniture and home accessories from lamp, accents to crockery item will be available habitat has competitive edge as an exclusive distributor of Al-Abid Textiles and sole supplier of these export quality textiles
Wished to cater genuine Arabic cuisine to Pakistani people. Mr. Anis Dhanani, introduced an open-air restaurant in Karachi. Most of the food served is Syrian clear depiction of the name of the restaurant “Damascus” which is the capital of Syria. The demand of Arabic food was very high in Karachi which urged the Mr. Dhanani to open a restaurant with excessive amount of Arabian Dishes. Like all starter, the sales of Damascus were quite low. For gaining a reputation in restaurant industry It took them a year. Damascus had started out with a small product line, for example, ‘Shawarma’ and ‘Furroge‘ but now have a great variety of dishes.
Damascus has already gain the fifteen year of worthy appreciation in food market and planning to expand in future in various cities of Pakistan.
When the name of burger and shawarma comes into mind it will impossible to forget the name of Qadir burger which is situated in Lahore moon market. One of the best and tasty sole proprietorship example ever. They founded in 2000 claim themselves as one who introduce Shawarma in Lahore. Still they are expanding and maintaining their menu with delicious shawarma, burger and sandwich categories.