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Why we do business:The objective is to maximizeEntrepreneur/Shareholders wealth.

Any activity undertaken with a view to earn profit iscalled a business.

FORMS OF BUSINESSES

Sole Proprietorship- the business done by oneperson.

Partnership Two or more person pool up theirresources to run a business.

Company- An artificial person who has a separate

legal status from its owners.

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A sole-proprietorship is a business with only one owner.It is the simplest and most flexible business structure.

Advantages: Quick & Easy Setup

Easy to Manage (Sole Decision Maker)

Exclusive Use of Profit (No sharing)

Lower rate of taxation

Disadvantages: Bears all Risks and Costs

Unlimited Liabilities- sell off personal assets (e.g. house, car,shares, etc.) to pay off debts and losses

Limited availability of Funds

Limited Borrowing Power

Business may come to a standstill/end when the owner falls sick

or dies.

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Partnership is the relation between persons who have agreed to share

the profits of a business carried on by all or any of them acting for all.Persons who have entered into partnership with one another are calledindividually partners and collectively a firm, and the name under whichtheir business is carried on is called the firm name. There is a limit ofmaximum 20 partners under partnership Act 1932.

Advantages: Easy to Form Better Decision Making

More Availability of Funds Sharing of Risks and Costs

Disadvantages: Unlimited Liabilities- sell off personal assets (e.g. house, car, shares, etc.) to pay off

debts and losses Disagreement amongst partners may lead to dissolution of firm Profit Sharing

No Separate Legal Entity Transfer of Shares- only with prior permission of rest of the partners Higher rate of taxation

http://blog.thecompanywarehouse.co.uk/wp-content/uploads/2009/12/handshake1.jpghttp://blog.thecompanywarehouse.co.uk/wp-content/uploads/2009/12/handshake1.jpg

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What is a company?

A company can be defined as an "artificial

person", invisible, intangible, created by or under

Law (Companies Ordinance 1984), with aseparate legal entity, perpetual succession and

a common seal.

Kinds of Companies: A Single Member Company- Only one member

Private Company- Minimum two, Maximum fifty

Public Company:

Un-Listed

Minimum three , Maximum no limit Listed- Minimum Seven, Maximum no limit

http://en.wikipedia.org/wiki/Legal_personalityhttp://en.wikipedia.org/wiki/Perpetual_successionhttp://en.wikipedia.org/wiki/Company_sealhttp://en.wikipedia.org/wiki/Company_sealhttp://en.wikipedia.org/wiki/Company_sealhttp://en.wikipedia.org/wiki/Company_sealhttp://en.wikipedia.org/wiki/Perpetual_successionhttp://en.wikipedia.org/wiki/Perpetual_successionhttp://en.wikipedia.org/wiki/Perpetual_successionhttp://en.wikipedia.org/wiki/Legal_personalityhttp://en.wikipedia.org/wiki/Legal_personalityhttp://en.wikipedia.org/wiki/Legal_personality

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Advantages: Separate Legal Entity Separate from its members

Perpetual Existence It is not affected by the

death, insanity or insolvency of an individual

member. Limited Liability As per Memorandum & Articles

Transferability of Shares- Easy transfer of shares

Disadvantages:

Higher Rate of Taxation

Owners have little to say in the affairs of the business.

To meet deadlines forStatutory Compliance.

http://en.wikipedia.org/wiki/Insolvencyhttp://en.wikipedia.org/wiki/Insolvency

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Factor Sole

Proprietorship

Firm/Partnershi

p

Company

1. Formation Easy Difficult More Difficult

2. Liability Unlimited Unlimited Limited

3. Risk &Cost

Not Shared Shared Shared

4. Profit Enjoy WholeProfit

Shared Shared

5. Finance Very Limited Limited No Constraint

6. Taxation Low rate Moderate High rate

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Application for availability of

name

Promoters Conceive a Business Idea and

Decide the Type of the Company i.e. Single/

Private /Public Company

Certain Companies are Required

to take prior Approval from

Relevant Ministry /Department

Submission of 4 Copies of

Memorandum and Articles of

Association with CRO duly

signed by each member in the

presence of witness with CNIC

Copies of each

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