Regulatory Requirements to Establish Enterprises in Pakistan
Introduction: Starting a business in Pakistan requires following certain legal steps. Entrepreneurs need to
choose the right type of business, register it with the relevant authorities, and comply with tax and labor
laws. They must also protect their business name, brand, and other intellectual property rights. In this
document we will explains the main types of businesses and how to protect intellectual property in Pakistan.
1. Types of Businesses in Pakistan
When starting a business, an entrepreneur must decide which type of business structure suits their needs.
The most common types of businesses in Pakistan are:
A. Sole Proprietorship
A sole proprietorship is the simplest form of business. It is owned and managed by one person.
Easy to start with very few legal requirements.
The owner is personally responsible for all debts and risks.
Profits and losses belong to the owner.
Registration is done with the Federal Board of Revenue (FBR) for tax purposes.
Example: A small grocery shop or a freelance writer running their own business.
B. Partnership
A partnership is a business where two or more people share ownership and responsibilities.
Requires a legal agreement called a Partnership Deed.
Partners share profits and losses based on their agreement.
There are two types: general partnerships (where all partners are equally responsible) and limited
liability partnerships (LLP), where partners are only responsible for their investment.
Example: A law firm run by multiple lawyers or a consultancy firm with two partners.
C. Private Limited Company (Pvt. Ltd.)
A private limited company is a separate legal entity from its owners. This means that the owners are not
personally responsible for business debts.
Must be registered with the Securities and Exchange Commission of Pakistan (SECP).
Needs at least two directors.
Owners (shareholders) are only responsible for the money they invest.
Must follow tax laws and file annual reports.
Example: A software company developing mobile apps.
Difference Between Partnership and Private Limited Company
This document highlights the main differences between a Partnership and a Private Limited Company (Pvt.
Ltd.), especially useful for students, entrepreneurs, and small business owners.
Feature Partnership Private Limited Company (Pvt. Ltd.)
Legal Status Not a separate legal entity Separate legal entity
Ownership Owned by two or more partners (up to 20) Owned by 2 to 50 shareholders
Easy and less expensive, formed through Requires registration with SECP under
Formation
partnership deed Companies Act
Liability Unlimited liability of partners Limited liability of shareholders
Continuity Ends with death or retirement of a partner Has perpetual existence
Feature Partnership Private Limited Company (Pvt. Ltd.)
Transfer of Can be transferred with restrictions in
Difficult; needs consent of all partners
Ownership Articles of Association
Managed by directors appointed by
Management Managed by partners
shareholders
Governed by the Companies Act, 2017
Regulations Governed by the Partnership Act, 1932
(Pakistan)
Profits taxed as personal income of
Taxation Taxed as a separate legal entity
partners
Higher due to formal structure and
Public Confidence Lower due to informal structure
regulations
Must use "Private Limited" or "(Pvt.) Ltd."
Use of Name No specific requirement
in the name
Examples Nishat Dairy (Pvt.) Ltd., Packages Real
Local shops, clinics, small law firms
(Pakistan) Estate (Pvt.) Ltd.
Summary: A Partnership is suitable for small businesses that need less regulation and more flexibility. A Private Limited
Company is better for growing businesses that want legal protection, limited liability, and more credibility.
D. Public Limited Company (PLC)
A public limited company can sell its shares to the general public through the stock exchange.
Requires SECP registration and approval from the Pakistan Stock Exchange (PSX).
Must follow strict rules about financial transparency and governance.
Suitable for large businesses seeking public investment.
Example: A multinational manufacturing company or a large retail chain.
Difference Between Private Limited Company and Public Limited Company
Private Limited Company (Pvt.
Feature Public Limited Company (Ltd.)
Ltd.)
Owned by a small group (family,
Ownership Owned by the general public through shares
friends, or private investors)
Minimum 2, Maximum 50
Number of Members Minimum 7, No maximum limit
shareholders
Shares are not traded on the stock
Shares Shares are traded on the stock exchange
exchange
Shares cannot be freely
Transfer of Shares Shares can be freely transferred
transferred
Minimum Capital No fixed minimum capital in Usually requires higher minimum capital (e.g., in
Requirement many countries Pakistan: Rs. 200 million for listed companies)
Disclosure Fewer legal formalities, less Strict regulations, must disclose financials to the
Requirements disclosure public
Private Limited Company (Pvt.
Feature Public Limited Company (Ltd.)
Ltd.)
Must use “Private Limited” or
Use of Name Must use “Limited” or “(Ltd.)”
“(Pvt.) Ltd.”
Public Subscription Cannot invite public to buy shares Can invite public to buy shares (through IPO)
Nishat Dairy (Pvt.) Ltd., Packages Fauji Cement Ltd., Habib Bank Ltd., Engro
Examples (Pakistan)
Real Estate (Pvt.) Ltd. Corporation Ltd.
Summary:
A Private Limited Company is more suitable for small and medium businesses that prefer to maintain internal control. A Public
Limited Company is ideal for large businesses aiming to raise substantial capital from the public through stock markets.
E. Non-Profit Organization (NPO)
A non-profit organization is created to support social causes rather than earn profits.
Registered under the Societies Registration Act, Trust Act, or Companies Act (Section 42).
If approved by the FBR, it may get tax exemptions.
Must follow strict financial reporting and governance rules.
Example: A charity that provides free education to children in rural areas.
Key Points:
Sole proprietorships and partnerships are easier to start but have personal risk.
Private and public companies offer legal protection but require more paperwork.
NGOs/NPOs focus on social good and follow special rules.
2. Intellectual Property Rights in Pakistan
Protecting business ideas and brands is important to prevent others from copying them. Intellectual Property
(IP) rights help businesses secure their logos, inventions, creative works, and designs.
A. Trademarks
A trademark protects brand names, logos, and slogans from being used by others.
Registered with the Intellectual Property Organization of Pakistan (IPO-Pakistan).
Registration lasts for 10 years and can be renewed.
Example: The name and logo of a solar system installation company.
https://www.facebook.com/profile.php?id=100093545764943
B. Patents
A patent gives exclusive rights to inventors for new products or processes.
Protects an invention for 20 years.
Encourages innovation and prevents copying.
Example: A pharmaceutical company patenting a new medicine formula.
C. Copyrights
Copyright protects creative works such as books, music, films, and software.
It automatically applies when the work is created but can be registered for extra protection.
Lasts for the creator’s lifetime plus 50 years.
Example: A musician protecting their song from being copied.
D. Industrial Designs
Industrial design rights protect the look of a product.
Covers shapes, patterns, and appearances.
Registered for 10 years, with an option to extend for 5 more years.
Example: A unique bottle shape for a soft drink.
E. Trade Secrets
Trade secrets include formulas, business methods, and other confidential information that gives a company a
competitive advantage.
Not registered publicly but protected through legal agreements.
Example: The secret recipe of a famous restaurant chain.
Key Points:
Trademarks protect brand identity (name, logo, slogan).
Patents protect inventions for 20 years.
Copyrights protect creative works (music, books, films, software).
Industrial designs protect the appearance of products.
Trade secrets protect confidential business strategies.
3. Business Registration and Compliance in Pakistan
To legally operate a business, entrepreneurs must register their business and comply with laws regarding
taxes, labor, and financial reporting.
A. Business Registration Authorities
SECP: Registers private and public companies.
FBR: Issues National Tax Number (NTN) and handles tax compliance.
Registrar of Firms: Registers partnerships.
IPO-Pakistan: Handles intellectual property rights like trademarks and patents.
B. Taxation and Licensing
Sales Tax Registration:
Required for businesses selling goods/services.·
Who needs it: Any business that sells taxable goods or services and reaches a certain threshold
(usually Rs. 10 million annual turnover) is required to register with the Federal Board of Revenue
(FBR) for sales tax.
Purpose: Once registered, the business is allowed to charge sales tax from customers and then deposit it
to the government.
Example: A shop selling mobile phones, or a manufacturing unit producing soap, must register for sales
tax if their sales exceed the limit.
Provincial and Local Licenses:
What it is: Some businesses require specific licenses or approvals from local/provincial government
departments.
Why it's needed: To ensure the business operates legally and follows safety, health, and municipal
regulations.
Who issues them: These are usually issued by district municipal committees, metropolitan
corporations, or provincial departments.
Examples:
A restaurant needs a food license from the local food authority.
A shop needs a trade license from the local Tehsil Municipal Administration (TMA).
A school must get a registration certificate from the provincial education department.
C. Employment and Labor Laws
1. Social Security Registration: EOBI
Explanation: EOBI stands for Employees' Old-Age Benefits Institution, a government institution in
Pakistan.
It provides financial support to workers after retirement, in case of disability, or to family members in
case of a worker's death.
Employer’s Responsibility:
All businesses and factories (especially with 5 or more employees) must register their employees with
EOBI.
The employer must regularly contribute a percentage of the employee’s salary to the EOBI fund
(currently around 5% of minimum wage).
The employee also contributes a smaller portion (1%).
Benefits to Employees:
Pension after retirement (at age 60 for men, 55 for women).
Invalidity pension in case of permanent disability.
Survivors’ pension to the family in case of the worker’s death.
Old-age grant (a lump sum amount) if the worker has worked less than 15 years but is still retiring.
Example:
If a private company in Peshawar hires 10 workers, it must register them with EOBI, and start paying
contributions regularly. At retirement, these employees will receive monthly pensions from EOBI.
2. Minimum Wage Compliance
The minimum wage is the lowest legal salary an employer can pay to a worker.
In Pakistan, the government sets the minimum wage every year (as of 2025, it is around Rs.
37,000/month, depending on province).
Employer’s Responsibility:
The employer must pay at least the minimum wage to all workers.
The wage must be paid on time, and any overtime work must be compensated accordingly.
The employer should also provide benefits like weekly holidays, medical leave, and working hours
compliance (usually 8 hours/day, 48 hours/week).
Legal Consequences of Violation:
If a company fails to comply with minimum wage laws, it can face legal penalties, fines, or even
cancellation of license in serious cases.
Example:
A garment factory in Lahore hires 50 workers. It is legally required to pay each of them at least Rs. 37,000
per month. If it pays less, the labor department can take action against it.
Key Points:
Businesses must register with SECP, FBR, or Registrar of Firms based on their structure.
Sales tax and trade licenses may be required for some businesses.
Employers must follow labor laws, including social security registration and minimum wage rules.
Conclusion
Starting a business in Pakistan requires selecting the right type of enterprise, registering it with the
government, and ensuring compliance with tax and labor laws. Entrepreneurs must also protect their
intellectual property to prevent unauthorized use of their brand, inventions, or creative work. By following
these steps, businesses can operate legally, build credibility, and achieve long-term success in the market.
