Setting up a Business Entity

Week-12
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Types of Business Entities in Pakistan
Sole proprietorship

Partnership

Limited Company
Private Limited Company
Public Limited Company

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Sole Proprietorship

Sole Proprietorship
Single owner of business
May employ other people
Sole proprietors wealth is liable

3

Partnership

Partnership
More than one partners
Legal agreement/deed to run a business
Each partner is responsible for an agreement/decision
made by any one of the partners
Partners individual wealth is liable
Registration with SECP is required

4

Limited Company

Limited Company
A legal entity separate from its owners (shareholders)
2 to 50 persons can form the company
Minimum two members in board of directors
Board responsible for day to day running of the business
Registration with SECP is required

Shareholders liability is their capital and not personal wealth!

5

Private Limited company

Private Limited Company
Monthly Statements/Tax Returns are required
Shares/stocks can be offered but not in a public exchange
Profits are distributed with respect to equity (share
holding) in the company

6

Public Limited Company

Public Limited Company
Minimum 7 members are required to form a public limited
company
Shares traded on public stock exchange
Shareholders are provided with dividends (profits) on a
periodic pre-determined basis

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Board of Directors
Provides advice and oversight
Composed of experienced professionals
Members may overlap with the top management team
Should not micromanage the venture

8
Why businesses fail
Why 9 out of 10 small businesses fail?

Lack of experience
Insufficient capital (money)
Poor location
Poor inventory management
Over-investment in fixed assets
Poor credit arrangement management
Personal use of business funds!
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