Sole Proprietorship Business Registration

The simplest way to open a business in Pakistan is as a sole proprietorship or one-person business. Usually, people who don’t know how to register a sole proprietorship should read all the information. An individual will take on the roles of manager, proprietor, and transaction controller. The owner decides how long the business will last and when to start selling items or services. Owners are the rulers of their businesses. They manage them with their intelligence and inventiveness. Most people who want to launch a business choose a single proprietorship. It is an excellent method to give a small firm a corporate look.

The proprietor of a business is not accountable for business tax. However, the owner has to pay income tax. Starting a business does not initially require such an investment. A sole proprietor’s obligation extends beyond his firm; creditors may even seize his personal property. In summary, the business owner is completely accountable for all risks and outcomes associated with the operation of the business. Sole proprietorship business registration is very easy. You can totally rely on CMA Law Associate for this purpose.

Documents Needed for Sole Proprietorship Registration

You need following documents to register your sole proprietorship business:

CNIC and NTN

The applicant's CNIC and NTN for sole proprietor registration.

Company Name

The person needs to have the name of his company.

Business Address and Electricity Bill

Business address and electricity bill for address confirmation (also require property documents or rental agreement in case property is on rent).

Round stamp and letterhead

He needs to have the business's round stamp and letterhead.

Billing Address

He need to have the address's electricity bill.

Bank Account Information

Bank Account Number, Bank Name and Branch, and a certificate of account maintenance.

The primary steps to beginning a sole proprietorship business are as follows:

Although relatively simple, it would be less expensive to hire a tax advisor or lawyer to handle it for you. You must take the actions listed below:

  1. To begin with, we must decide on the company’s name.
  2. Make a list of the necessary business letterhead and business cards.
  3. Making a business stamp.
  4. Opening a bank account under the name of a sole proprietorship. The bank manager will demand a letterhead signature and stamp from the sole proprietor.
  5. Obtain the freshly opened bank account’s bank statement.
  6. Next, apply for a national tax ID number (NTN).

How To Apply For NTN:

To apply for NTN, you require the sole proprietor’s computerized ID card along with a bank account number and bank statement. If you are a worker, you already have an NTN (National Tax Number). If you already have an NTN number, there’s no need to get another one.

How to Create a Sole-Proprietorship:

To fulfill the legal agreement required by tax regulations and make the proprietor’s business legal, the owner must obtain an NTN number.

Step 01:

The entity that issues National Tax Identification Numbers is called the Federal Board of Revenue (FBR) (TAX). NTN numbers are obtained in two methods.

  1. Applying online at the FBR website by going to e.fbr.gov.pk. The website describes the entire process.
  2. From the “e-Registration menu” dropdown, choose “New e-registration.”
  3. The Taxpayer Facilitation Center offers a facility for paper applications.

Step 02:

Choose the taxpayer category (Individual).

1: Enter the information before the following captions that display on the screen.

2: Now, enter the CNIC/NTN/Reg according to the chosen taxpayer type. Inc.

3: Then, enter the taxpayer’s name.(after that, type “Image character” into the box.)

4: Lastly, click “Ok” to continue.

Step 03:

Once you have entered all the information, save the form with the current date and go to the next stage if necessary. In addition to the specifics, you need more information to complete the form.

  1. A bank account with the business name and title must be given for all business concerns.
  2. The owner’s information, premises documentation, and the utility reference number will be given.

Step 04:

After completing the online registration form, click the “Verify” option to check your work.

Step 05:

By clicking the “Submit” button, you’ll finally submit the form. The system will assign a token number. You can check the status of an application online.

Step 06:

The system will send you an email for verification three days after your application for taxpayer registration is authorized.

Step 07:

Visit any Taxpayer Facilitation Center (TFC) and turn in a copy of the online application that has been duly signed together with the necessary paperwork (a copy of your CNIC, your most recent electricity bill, and letterhead).

Note: Obtaining an NTN certificate is free.

Annual Income Tax Return Filing:

A taxpayer must submit an income tax return every year by law. Annual income tax returns are typically filed in September. However, filing period dates may be extended per government guidelines.

Regardless of when you started the firm, every sole proprietor must file an income tax return.

You become a registered legal entity as soon as the status is added.

The typical Pakistani examples of a sole proprietorship include the following businesses:

  1. Shopkeeper
  2. Artists
  3. Restaurant
  4. A travel guide
  5. Barber
  6. Beauty parlor
  7. Physician
  8. Gas stations.

Benefits/Advantages of Sole Proprietorship

The benefits of operating as a sole owner include the following:

Advantages:

As we have mentioned, it is the simplest approach to launching a business in Pakistan. There are no legal fees or registration requirements, but we may always turn it into a legitimate business by getting a license from the relevant government.

  1. You are the boss here.
  2. It is simple to set up and maybe initiated with little investment.
  3. Because the owner is in charge of the company, it gives them much flexibility.
  4. Some creditors are more receptive to extending credit because of the owner’s unrestricted liability.
  5. The business’s whole profit is given to the owner.
  6. There is no chance a partner will commit fraud.
  7. Quick decisions

Disadvantages of Sole Proprietorship

If the business owner becomes ill and there is no adequate plan to manage and run the company in their absence, the business may become crippled or shut down. The business may cease to exist with the proprietor’s death because it shares the same legal entity as the proprietor, as well as if no family member is present to take over the business legally. The company frequently finds it challenging to raise long-term finance because it depends solely on one person.

  1. Only a few resources. Banks are hesitant to lend to proprietorships due to their low asset value and high mortality rate.
  2. Unlimited responsibility for commercial debts. The sole proprietor is liable for any obligations and losses incurred by the company.
  3. If the business fails, creditors may demand that the owner’s personal and commercial property be sold to pay off their debt.
  4. When one owner passes away, it can be challenging for the company to continue because the new owner will often have to take over all of its obligations.
  5. Bear all losses and risks by yourself.

We can safely say that registration of sole proprietorship is not a difficult process. It may be long but definitely easy.