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[ Ask A Question ] [ Main ] |
 What is a Company; how can I form it? |
| What is a firm; how can I form it? |
| What is a sole proprietorship; how it can be formed? |
| What is the difference between a company and a partnership? |
| Is it necessary to form a company or a partnership firm to start a business? |
| What is sales tax; how am I to pay it? |
| What is an income tax: How am I to pay it? |
| What is a customs duty; how am I to pay it? |
| What is an excise duty; how am I to pay it? |
| What kind of labor laws exist in Pakistan? |
| What are intellectual property rights (IPRs)? |
| What is the benefit of registration of intellectual property rights? |
| What are the legal formalities to obtain finance from a bank/leasing company? |
| What is a mortgage; how is it registered? |
| What is a pledge? |
| What is a hypothecation? |
| What is a letter of credit (L/C); how can I get a letter of credit from a bank? |
| What should I do if I have a complaint against a bank or any of its officials? |
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| What is a Company; how can I form it? |
| A “company” is a legal entity admitted by law to do business, own properties, sue and be sued for the recovery of properties, monies, enter into contracts etc. in its own name and independent to its member (s). To be a “company” in law it must be registered under the Companies Ordinance, 1984. Any one or more persons can form a company by fulfilling the formalities required by law. |
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| What is a firm; how can I form it? |
| A “firm” is a relationship between two or more persons who have agreed to share profits of a business according to their participation. The partners are collectively called a “firm” and the name under which they do business is called the “firm name”. Any two or more persons (up to 20) can form a partnership to do any one or more businesses through an agreement in writing. It is not compulsory in law to register a partnership. However, a registered partnership has more advantages than an un-registered partnership. |
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| What is a sole proprietorship; how it can be formed? |
| A “sole proprietorship” is a form of doing business where one person owns and runs a business under a specific business name. Any person interested in doing a business may start the same at any time by giving a particular name to its business. To start a business as a “sole proprietorship” no prior registration of it is required with any government department or authority. |
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| What is the difference between a company and a partnership? |
| In a company, the members are ordinarily not liable for the acts of the company. Even in the case of winding up of the company; there liability is only to the extent of any amount of money unpaid on the shares held by them. However, in a partnership firm, every partner is liable, jointly with all other partners and also severally, for all acts of the firm done while he is a partner. Another material difference between a company and firm is that in a firm, a new partner can only be introduced with the consent of the existing partners; however, in a company, any person who purchases shares of the company becomes member of it. |
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| Is it necessary to form a company or a partnership firm to start a business? |
| No, it is not necessary to form a company or a partnership firm to start a business. You can start a business as a sole proprietor and then can enter into partnership or make a company according to your wish. |
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| What is sales tax; how am I to pay it? |
| Sales tax is a tax payable under the Sales Tax Act, 1990 by a person registered under the said Act on taxable supplies made by it in the course of or in furtherance of taxable activity carried on by him and on the goods imported by him. The rate of sales tax presently applicable is fifteen (15%) of the value of taxable supplies. |
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| What is an income tax: How am I to pay it? |
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Governed by the Income Tax Ordinance 2001, Income Tax is a federal levy/annual tax on the total income of a person excluding the deduction allowed by the Ordinance for one tax year. Every tax year is independent of all other tax years. The term person is also divided into four categories which include:
a) an individual
b) company
c) small company
d) association of persons
Every person who is liable to pay income tax , must apply for an NTN ( National Tax Number) without which it will not be possible to file income tax returns.
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| What is a customs duty; how am I to pay it? |
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Customs duty is levied in accordance with the First and Second Schedule of the Customs Act, 1969 on:
a) goods imported into Pakistan
b) Goods exported from Pakistan
c) goods brought from any foreign country to a customs station
d) goods brought in bond from one customs station to another.
In case of imports customs duty is paid at the time of release of goods from the customs port or station. For this purpose, a bill of entry is filed stating the complete specification of the goods imported and amount of duties payable according to the value of goods imported calculated on the basis of invoice under the correct Pakistan Customs Tariff (PCT) Heading. On delivery of the bill of entry, the goods or any part thereof is examined without delay for the purposes of assessment of customs duty and other taxes thereon. Upon assessment the importer is directed to deposit the amount of duty assessed, warehouse charges, fines and penalties, if any, placed by the port authorities. Once the payment is made, the shipment is released and can be loaded and transported to its destination.
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| What is an excise duty; how am I to pay it? |
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Excise duty refers to any sum payable under the provision of the Federal Excise Act, 2005 on:
(a) goods produced or manufactured in Pakistan;
(b) goods imported into Pakistan;
(c) such other goods as the federal government may, by notification in the official gazzet, specify, as are produced or manufactured in the non-tarrif areas and are brought to the tarrif areas for sale or consumption therein; and
(d) services, provided or rendered in Pakistan.
If your goods or services become excisable then you are required to be registered with the excise authorities under the Act. If you are a registered person then at the close of every month you are required to deposit the excise duty on a prescribed challan form in a bank located in the jurisdiction of the Collector of Centeral Excise where you are registered.
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| What kind of labor laws exist in Pakistan? |
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There are three categories of Labor Laws prevalent in Pakistan, which are as follows:
a) Laws that regulate the relations between an employer and an employee. These are governed by the Industrial Relations Ordinance, 2003.
b) Laws that require contributions to be paid by the employers; they are:
• Employees Old Age Benefits Act,1976
• Provincial Employees Social Security Ordinance,1965
• Workers Welfare Funds Ordinance, 1971
• West Pakistan Maternity Benefits Ordinance, 1972
• Workers Children (Education) Ordinance ,1972
• Companies Profit (Workers Participation) Act, 1972
• Workers Compensation Act, 1923
c) Labor Laws that fix standards for wages:
• The payment of wages act, 1936
• The minimum wages ordinance, 1961
• Pakistan minimum wages for unskilled workers Ordinance, 1969
d) Labor Laws setting standards for workplace:
• The Shops and Establishment Ordinance, 1965
• West Pakistan Industrials and Commercial Employment(Standing Order) Ordinance,1968
• The Factories Act,1934
• The Employment (Record of Services) Act, 1951
• The Employment of Children Act,1991
• The Apprenticeship Ordnance, 1962
• What is the procedure for registration under labor laws?
The procedure for registration under various labor laws is different. In case of federal government laws such as EOBI the federal labor department while in case of provincial government laws, the provincial labor departments regulate the procedure for registration of under the labor laws.
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| What are intellectual property rights (IPRs)? |
Intellectual property rights are those rights which arise from the work created by human intellect such as a literary or artistic work, a process of inventing a particular product etc. These rights give exclusive right to the creators of such work to use, perform, transfer or sell these rights. The owners of these rights also have the right to initiate court proceedings against the persons using these rights without their permission and or authority. The rights basically extend to three categories that include trademark, patent and copyright which are all governed by following laws;
a) The Trade Marks Ordinance, 2001.
b) The Patent Ordinance, 2001
c) The Copyright Ordinance, 1962 |
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| What is the benefit of registration of intellectual property rights? |
| Registration of intellectual property rights with the concerned authorities creates valid evidence / proof of ownership of such intellectual property rights. It entitles the registered owner to claim legal protection under the prevalent intellectual property laws and hence exclude unauthorized users from making copies of his product or undertaking any acts in relation to his product for commercial purposes. |
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| What are the legal formalities to obtain finance from a bank/leasing company? |
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The essential procedure to be followed to obtain finance is similar whether from a Bank or a leasing company. Depending on the type of finance/facility (running finance, cash finance) required from the Bank, the individual concerned must submit the following initial documents to the Bank.
a) Borrower’s Fact Sheet b) Credit information bureau (CIB) report
In case of a new business;
a) A projection report b) Search report from the SECP.
Incase of an existing business;
a) Audited financial statements b) Inspection reports c) Evaluation Reports.
Once the Bank decides to extend finance to the borrower, certain necessary legal documents need to be executed by the borrower in favor of the bank. They are as follows;
a) Property Documents b) Promissory Note c) Loan contract between the bank and the customer d) Personal guarantees given by the directors/ partners / sole proprietors of the business. e) Contract between the Bank and the Customer with regard to the facility availed.
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| What is a mortgage; how is it registered? |
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A mortgage involves the transfer of a title to an immovable property as security for the repayment of a debt or the performance of an obligation. The person in whose favor property is mortgaged acquires certain rights in the property such as right to sell the mortgaged property in case the debt is not repaid. The mortgage becomes void upon the payment of debt or the performance of the obligation upon the terms stipulated.
A mortgage is registered with a government official called the Registrar against payment of the prescribed registration fee. Upon registration of mortgage title documents of property mortgaged are deposited with the registrar who also notifies the area Patwari about the mortgage. The Patwari also mentiones about the mortgage in the register of rights maintained by it regarding such property.
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| What is a pledge? |
| A pledge is the act of providing some thing as security for a debt or obligation. In a pledge the debtor borrows money by physically transferring to the person giving loan, the possession of the property to be used as a security. The property so pledged is returned if the debt is repaid. |
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| What is a hypothecation? |
| Hypothecation is a kind of security / collateral in which movable property is pledged against issuance of a finance facility. In hypothecation title or possession of the property pledged remains with the owner of such property. Assets that can be hypothecated include plant and machinery, stocks, house hold items, office equipment. Also a hypothecated asset can be re-hypothecated in relation to another business deal. |
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| What is a letter of credit (L/C); how can I get a letter of credit from a bank? |
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A letter of credit is a document under which a bank, at the request of a customer, agrees to make payment to a third party called the beneficiary, subject that the demand made by such third party complies with certain specified conditions. Once these conditions are met, the bank will make payment to the beneficiary despite the fact that there is any underlying agreement existing between the customer and the third party which is satisfied or not.
Since it is also a facility extended by a Bank, the procedure for getting an L/C from a Bank is the same as getting finance/facility from the Bank.
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| What should I do if I have a complaint against a bank or any of its officials? |
| Incase of a complaint against a bank or its official, the first thing you may do is to give a written application to the senior personnel of the bank against such complaint. However, there is another option available to you for redressal of you complaint; you can now make a written complaint to the Banking Ombudsman at the State Bank of Pakistan. |
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