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Introduction to Business Entities
- 1. INTRODUCTION TO LEGAL BASICS Incorporation of Business Entities INTRODUCTION TO LEGAL BASICS F O R S T A R T U P S B Y HAMID JALAL h a m i d j a l a l @ h o t m a i l . c o m
- 2. Introduction to Business Entities — Types of Businesses — Individual / Sole Proprietor Association of Persons— Association of Persons — Partnership Firm — Limited Liability Company
- 3. Introduction to Business Entities — Individual / Sole Proprietorship — Business in Personal Name Registration— Registration ¡ NTN in individual’s Name with Business Reference ¡ Bank Account – Local / Foreign Currency ¡ Sole Proprietorship Certificate from Bank
- 4. Introduction to Business Entities — Merits of Sole Proprietorship — Negligible Cost of Registration — No Specific Business Address Required No Audit Costs … … … (unless substantial cash flows)— No Audit Costs … … … (unless substantial cash flows) — Simple Accounting / Profit & Loss Accounting — Simple Tax Regime & Low Tax Rates — No Partner – No Dispute — No Trade Laws and Policies applicable — Easy Closure
- 5. Introduction to Business Entities — Merits of Sole Proprietorship — Independence and Autonomy — Flexible Working Hours — You keep all the profits— You keep all the profits — Policies are Optional ¡ HR Policy ¡ Employee Retirement Schemes ¡ Compulsory Employee Insurances ¡ Compulsory Third Party Insurances ¡ Provident and other Funds
- 6. Introduction to Business Entities — Demerits of Sole Proprietorship — Single Owner - Personally Liable for all matters — Entire Burden of Investment on one person Inability to raise Financing— Inability to raise Financing — Slow Expansion — Licencing & Trade Bodies Registration Problems — Software Export Licences Problems — Property Purchased in Personal Name
- 7. Introduction to Business Entities — Association of Persons (AOP) — Group of two or more Individuals — Registration: ¡ Agreement /Partnership Deed of all Associates ¡ Registration in NTN as an AOP ¡ Banking through Business Account
- 8. Introduction to Business Entities — Merits of AOP — Negligible Cost of Registration — Collective Poole of Investment No Audit Costs (unless substantial cash flows)— No Audit Costs (unless substantial cash flows) — Business’s Profit & Loss Accounting — Profit Sharing by Partners — Simple Tax Regime & Low Tax Rates — No Trade Laws and Policies applicable — Policies are Optional (as in Sole Proprietorship)
- 9. Introduction to Business Entities — Demerits of AOP — All Owners Liable for Business Transactions / Debts — No Paperwork - Chances of Financial Disputes Difficulties Decision Making— Difficulties Decision Making — Inability to raise Financing — Licencing & Trade Bodies Registration Problems — Software Export Licences Problems — Inability to Purchase property for Business
- 10. Introduction to Business Entities — Registered Firms (Partnerships) — Two or more Individuals locked in a contract for sharing profits Registration— Registration ¡ Partnership Deed on Stamp Paper ¡ Registration of Partnership Deed under Partnership Act 1932 ¡ Certificate of Registration by Registrar of Firms ¡ NTN and GST Registration
- 11. Introduction to Business Entities — Main Clauses of a Partnership Deed — Nature of Business — Duration of Partnership Partnership Property / Capital Investment— Partnership Property / Capital Investment — Partnership Shares — Percentage of Profits and Losses — Nature of Partnership — Role & Responsibility of Each Partner
- 12. Introduction to Business Entities — Main Clauses of a Partnership Deed — Loans and Drawings — Good Faith Restrictions on Partners— Restrictions on Partners — Termination and Succession — Dispute Resolution Mechanism
- 13. Introduction to Business Entities — Merits of Registered Firms — Reasonable Cost of Registration — Pooling of Profits Profit Sharing by Partners— Profit Sharing by Partners — Single Taxation of Firms — Easy Licencing — Recognition in Trade Bodies / Chambers of Commerce
- 14. Introduction to Business Entities — Demerits of Registered Firms — Commercial Place of Business — Each Partner can bind all others (Joint Debt Liability) — Creditors can create lien on partners’ personal assets— Creditors can create lien on partners’ personal assets — Difficulty in Decision Making — Higher Tax Rates — Audit preferably by a Chartered Accountant — Automatic dissolution upon death/resignation of one Partner — Applicability of Labour Laws — Problems in Dissolution
- 15. Introduction to Business Entities — Limited Liability Company — A separate Legal Entity — Two or more Individuals or Entities Shareholders and Directors— Shareholders and Directors — Decision Making by the Board of Directors — Liability of Directors is Limited — Private and Public Limited Company
- 16. Introduction to Business Entities — Registration of a Company — Registration under the Companies Ordinance 1984 ¡ Name Availability from Securities & Exchange Commission of PakistanName Availability from Securities & Exchange Commission of Pakistan ¡ Memorandum of Association ¡ Articles of Association ¡ Form 1 and Form 21 (Declaration and Place of Business) ¡ Form 29 (Directors and Officers) along with CNICs and details etc ¡ Submission of All Documents to SECP ¡ Filing Fee ¡ Registration Certificate Issued by Companies Registrar, SECP ¡ Bank Account, NTN and GST etc.
- 17. Introduction to Business Entities — Corporate Structure of a Company — Independent Legal Entity — Liability of Directors in Limited Decisions / Authority by the Board of Directors— Decisions / Authority by the Board of Directors — Directors Represent Shareholders and No. of Shares — Private and Public Limited Status — Listed and Non Listed
- 18. Introduction to Business Entities — Merits of a Company — Pooling of Investment — Easy Decision Making Process by Majority Vote All expenditure charged to Company— All expenditure charged to Company — Purchase of Real Property / Assets — Taxation of Company on Profit and Loss Basis — Easy Financing on basis of Balance Sheet / Assets etc — Easy Licencing and Worldwide Business Recognition — Full Recognition in Trade Bodies / Chambers of Commerce
- 19. Introduction to Business Entities — Demerits of Company — High Cost of Registration ¡ Filing Fee, Stamp Duty, Consultant’s Fee, Printing, liaison with SECP etc — Too much paperwork— Too much paperwork — Compulsory Appointments ¡ Auditor and Legal Advisor ¡ Chief Executive Officer ¡ Qualified Chief Financial Officer ¡ Qualified Company Secretary ¡ Chairman of the Board
- 20. Introduction to Business Entities — Demerits of Company — Minimum Investment / Capital Thresholds — Highest Tax Rates — Separate Taxation for Company and Directors— Separate Taxation for Company and Directors — Annual and Periodical Filings — Board Meetings (AGM / EGMs etc) — Tax on Dividends paid to shareholders — Employment and other Policies — Industrial and Labour Laws — Winding up Issues
- 21. Introduction to Business Entities Thank YouThank You
- 22. Introduction to Business Entities HAMID JALAL Attorney at Law R E H M A N & A S S O C I A T E S ATTORNEYS AT LAW & CORPORATE COUNSEL 12, 13 (Mezzanine) Razia Sharif Plaza, Fazal-e-Haq Road, 92 Blue Area, Islamabad Ph: +92 (51) 2802457/2344653 | Fax: +92 (51) 2344652 mail@ralegal.com.pk | www.ralegal.com.pk