Introduction
When you decide to register a company, the first milestone is to make a selection from different types of companies in Pakistan. A company is one of the types of business entities.
The Company law in Pakistan provides various options for you to choose from, keeping in view your business needs and the proposed structure.
But before that, it is important to know what types of companies there may be and how they are categorized.
Overview
- Introduction
- Types of Companies
- Different Types of Companies in Pakistan
- How to Choose a Type of Company for You?
- Company Limited by Shares
- Private Limited Company
- Company Limited by Guarantee
- Guarantee Limited Company (With Share Capital)
- Unlimited Company
- Private Unlimited Company
- Not for profit Companies
- Not for Profit Company
Types of Companies
Since a company is a creation of law, its types or kinds are defined by law. The laws in different countries allow different types of companies. Companies may be differentiated based on the nature of the liability of members, the number of shareholders, and their share capital.
The law in a country may allow the formation of a company based on it nature of liability of members as a company limited by shares, a company limited by guarantee, or an unlimited company. A company may be formed with or without share capital if the law allows. The generally known types of companies are categorized based on the number of shareholders like single-member companies, private limited companies, and public limited companies.
Different Types of Companies in Pakistan
The law provides you with options to register different types of companies in Pakistan, keeping in view your objectives. You can choose to register
- a company limited by shares
- a company limited by guarantee and
- an unlimited company
- Trade Organization
- Not-for-profit association
How to Choose a Type of Company for You?
You can choose a type of company based on different considerations or factors. The most important factor in choosing a suitable type of company is the shareholding structure. You will decide the type of company on the basis of the number of shareholders. If you want to keep the company in your close circle of family or friends, your choice may be different from the case in which you want large public funds.
The second factor that may affect your decision is the liability of the members of the company. You must consider beforehand how and to what extent the members of the company will be responsible in case of winding up.
Another factor while choosing a type of company is the profitability of the business of the company; you are doing business for profit or it’s a non-profit venture.
Keeping in view the above factors you can make a decision to choose your preferred type of company from the different types of companies listed below.
After finalizing the type of company, you can follow the step-by-step guide to know how you can register your company. Next, you can register your company online for which you will have to register on the SECP portal.
Company Limited by Shares
A company limited by shares may be of three categories and you can choose the most suitable category based on a number of partners (promoters). One of the most attractive benefits of a company limited by shares is the concept of limited liability. Since the company is treated as a separate legal entity, the debts of the company remain on the company. If you have paid the full amount of shares of the company, your liability in case of winding up is ZERO.
Single Member Company (SMC)
If you have decided to go solo, you can register an SMC. You will be the sole promoter, shareholder, and director of the company. However, you may appoint another person to act as CEO of your company if you deem it necessary. While registering an SMC you will have to nominate one of your kins to act as trustee in case of death of legal incapacity. The name of the company will include at the end parenthesis and words “(SMC-Private) Limited”.
Private Limited Company
Going solo is not always the choice especially when you need more capital and skilled human resource to run your business. In such a case you can join hands with one or more persons to register a Private Limited Company. At least 2 persons will act as directors to run the company and one of them can be CEO or you can appoint a paid employee as CEO. However, the number can not go beyond 50 in which case you will have to register a public limited company.
A private limited company is the best option from amongst various types of companies for small and family businesses with no public funds’ requirement. The name of the company will include at the end parenthesis and words “(Private) Limited”.
Public Limited Company
You may start your business as a company with small capital but there is no limit to expanding your business to a giant. If you have a big idea and need to invite the public to run or expand your business, a public limited company is most suitable from the beginning. To register a public limited company, you will need a minimum of three persons at the time of incorporation.
However, to invite the public to subscribe to shares of your company, you will have to meet certain legal and regulatory requirements. The name of the company will include at the end the words Limited”. A public limited company is the preferred choice of various types of companies if you think big and want public fund your company.
Company Limited by Guarantee
Unlike a company limited by shares, you can register a company limited by guarantee with or without share capital.
Company Limited by Guarantee having a share capital
If you register limited by guarantee company having a share capital, you will have to subscribe to shares and additionally give a guarantee to contribute a certain amount in case of winding up. Such an undertaking is not required in the case of a company limited by shares. Both amount of subscription and guarantee will be part of the memorandum of the company.
Company Limited by Guarantee not having a share capital
If you register limited by guarantee company NOT having a share capital, you will only have to give a guarantee to contribute a certain amount in case of winding up. The only difference is the subscription of shares as the company will not have share capital. Only the amount of guarantee will be part of the memorandum of the company.
Unlimited Company
Unlike a limited liability company, there is no limit on members’ liability in an unlimited company. In case of winding up, the member shall be liable to pay all the debts of the company.
Private Unlimited Company
The law allows incorporating an unlimited private company, which requires a minimum of 2 members. If you register a private unlimited company, your liability along with other members will be unlimited. The name of your company will include the word “Unlimited” as the last words of its name. In case of winding up, all of you will be liable to pay all the debts of the company.
Public Unlimited Company
Like a private unlimited company, the law allows you to incorporate a public unlimited company, which requires a minimum of 3 members. If you register a public unlimited company, your liability along with other members will be unlimited. The name of your company will include the word “Unlimited” as the last words of its name. In case of winding up, all of you will be liable to pay all the debts of the company.
Not for profit Companies
Not for profit Companies
If you are intending to undertake public welfare activities, for better recognition and credibility you can incorporate a Not for Profit Company. Under the law, you can incorporate a Not for Profit company as a public company only. You will have to under to contribute a specified sum to the company. You will also undertake to contribute to paying the debts of the company to a certain limit in case of winding up. The company can have a name without words “Limited” or “Guarantee Limited”.
You have got a fair idea of what types of companies in Pakistan can be registered. Are you ready to register your compnay ? Let’s do it right now and start your dream business. If you want to learn more about the steps for company registration in Pakistan.
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