What are the types of business in Pakistan? Sole Proprietorship & Partnership

Everything that is done to make a profit is called business. There are many types of businesses, someone running a shop, someone running a factory, another one running a private school and even running a hospital, but legally there are certain types of businesses.

Friends..! Life is nothing without business. With the exception of government

employees, almost everyone runs a private business or works in someone

else's business. Everything we use in our lives is due to some kind of business.

If the business is to be described in one line, then everything that is done to

make a profit is called business. There are many types of businesses,

someone running a shop, someone running a factory, another one running a

private school and even running a hospital, but legally there are certain types of

businesses, Today we will talk about these types.

There are three types of business not only in Pakistan but all over the world

1- Sole proprietorship
2- Partnership
3- Private Limited Company

Friends, we take turns looking at these three types. What they mean, what is

their legal status, what are their benefits and what kind of problems they have.


1- Sole proprietorship

Means:-

 Its name alone makes sense. Sole proprietorship means a business owned by

only one person. Most people in Pakistan do this kind of business.

Legal Status: -

The legal status of this business depends entirely on its owner. That is, the

business itself has no legal status. In this business, all kinds of transactions are

considered as personal transactions of the owner.



Benefits: -

This type of business can be started with very little capital.
The biggest advantage of this business is that one person, who is also the owner,

has full control over it. He can make all kinds of decisions.
Profits and growth in this business also go to the owner. That's why people love

this way of doing business.

Registration: -

This business is registered in FBR through NTN. In addition, the owner can

register his business with the Chamber of Commerce if he so desires.

Registration is required in FBR while registration of Chamber of Commerce is not

required but is at the discretion of the owner, however this registration gives a lot

of appreciation to the business.

Problems:-

The most important issue in this type of business is that the business has no

personal status. This business cannot move forward. Whenever the owner sells

the business, the new owner will start it with a new registration.

Because business itself has no legal status. If the owner changes, the business

will also change. Large companies are reluctant to deal with such businesses

because the business has no legal status. And all kinds of responsibility is on the

owner. Owner's personal assets are called business assets. Similarly, banks and

other institutions give less priority to this type of business than other types of

business. Government tax laws have many exemptions and benefits for

registered businesses that sole proprietorship does not receive.

One solution to these problems is for a sole proprietorship to be registered as a

single person company. Doing so makes one person a shareholder in the

business but the business becomes legal and these problems are greatly

reduced.

2- Partnership

Means:-

When two or more people become partners in a business under an agreement

on the terms agreed upon, this type of business or business is called partnership.

All stakeholders may share in the profits, losses and liabilities equally or

unequally. In the same way, the investment to start a business can be in the same

proportion and in different proportions. It may be that a partner is a partner in

exchange for their services rather than an investment. 

Similarly, some partners only invest and do not participate in the business at all.

The purpose of this agreement between the partners can be any condition but on

the basis of mutual consent. This agreement is called a partnership deed or

partnership agreement.

Legal Status: -

Partnership because there is a business agreement between a few people.

This agreement has no legal status if it is not registered. In such a case, neither

the partners can take any legal action against each other in case of any problem

nor any outsider can take any legal action against these partners. It is therefore

important that the partnership be registered. It is registered in the

Registrar's Office under Section 58 of the Partnership Act, which requires the

following details.

1- The name of the business
2- Office address place of the principal office
3- Date of partnership agreement.
  date of joining
4- Partners data (name, address)
  names and addresses of partners
5- Term of partnership agreement
  how to dissolve the partnership

However, it must be understood that like sole proprietorship, partnership is not a

legal person but its partners are the real legal persons. And business transactions

will be a personal transaction of its partners.
 
Benefits: -

There are advantages to partnership over sole proprietorship
1- Because two or more people are involved in a partnership, the initial capital can

be quite high.

2- The more people involved, the better the experience and the better skills to

run a business.

3- The burden of business responsibilities is also distributed.

4- You get to learn teamwork which makes many things better.

5. Establishing a partnership agreement is much easier and quicker than a

company.

6- Where partners share profits with each other, even in case of loss, all partners

bear the burden, so the whole burden does not fall on one person.

problems:-

Compared to sole proprietorship where there are advantages in a partnership due

to more than one person, there are also some problems due to the same number

of people.

1- According to human nature, it is very possible that there will be a contradiction

in the thinking of those who do business together, which may lead to a conflict.

2. Transferring a partnership agreement is also a difficult legal process.

3- Partnership also has unlimited liability like sole proprietorship

4- Partnership also does not have legal status as compared to a company like

sole proprietorship, so banks and other institutions do not give the concessions

that a company gets.

Friends ..! Today we learned a lot about sole proprietorship and partnership.

In the next article we will talk in full detail about the third type of business, the

company.

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