Company Name
Avoid These 5 Mistakes While Registering a Company in Pakistan: The name of the business should be unique, appropriate and consistent with the nature of the business.
It is important that the name reflects the nature of your business; otherwise, the business may be of some other nature and the name may reflect something else.
Logo, name and slogan are very important. All big brands have a story behind their names which is usually mentioned on their website, catalogue or brochure.
Compatibility with Brand and Trademark
While naming a business, also research whether there is any registered brand or trademark in the market with this name or a similar name. If the trademark is registered, you may face problems in the future.
It is a common desire to have the same name for your company and brand. However, it is also important to know that they are be registered with other departments.
Company registration are managed by SECP (Securities and Exchange Commission of Pakistan) whereas trademark or brand registration is deal by the IPO (Intellectual Property Organization) and both departments have their own laws and rules.
What is the best Legal Structure for a Company?
Legal structure refers to deciding which structure is suitable for your business, whether it is a Single Member Company (SMC), Private Limited, or Limited Liability Partnership (LLP). It depends on the nature of your business.
For example:
If the business is being run by a single owner, it is best to register an SMC.
The advantage of an SMC is that it requires less legal compliance, annual meetings, and other formalities.
Disadvantages of a Private Limited Company (If family members are involved)
Disadvantages of a Private Limited Company (If family members are involved)If for some reason a single director or signatory is not available, then the entire paperwork comes to a halt because signatures are required for most of the administrative or legal purposes.
For example, if a check is to be signed, the presence of a director is mandatory. In reality, the real work of the company is done by only one owner, but the rest of the directors are involved only as a formality. However, their signatures and other formalities must be completed as per the legal requirements.
If differences arise in a family business, then it becomes very difficult to run any organisation and it is not easy to remove a director from the company.
Why is SMC a better choice for family businesses?
In a private limited company, a director cannot be removed unless he resigns himself or the corporation is dissolved. In this case, if the business has a well-known name in the market, then the business is affected due to differences. Therefore, it is better for a family business to register a Single Member Company so that it is easy to run the management.
Think to Consider When Deciding a Capital Structure of the Company
Capital structure refers to how much the company’s authorized and paid-up capital will be and what each shareholder’s share will be.
Avoid These 5 Mistakes While Registering a Company in Pakistan: Minimum Paid Up Capital
When forming a company, keep the share capital as much as required. Generally, a minimum capital of Rs 100,000 is mandatory.
If you have to increase the capital later, then the fee will be charged again, because in this case you will have to change both the Memorandum and the Articles of Association.
Additional fees (which is currently around Rs 8,000) have to be paid for these changes. While the basic fee for new registration is less. So, decide well the first time.
Mistake to avoid about paid-up capital
Another common mistake is that the paid-up capital is kept low at the time of company registration so that the fees and legal requirements are kept low. This seems correct at first, but later problems arise.
When differences arise between the directors later, the distribution of the entity assets (Shares) becomes very difficult because this distribution is according to the capital kept at the time of registration.
What is the Correct Way to Decide the Capital Structure of the Company?
The actual amount of investment made by all of the directors should be their share in the paid-up capital.
For example, if the paid-up capital of the company is kept only Rs. 1 lakh, while in reality four directors have invested Rs. 50 lakh then when the assets are distributed, they will be distributed only according to the paid-up capital. Thus, a difference of Rs. 49 lakh will arise which will lead to disputes.
What are the Disadvantages in case of excessive capital?
If you hold more capital than required:
Registration fees will increase.
Annual compliance costs will increase.
Example: If your share capital is more than Rs 1 million, you will have to appoint an auditor and also get an audit done. If it is less than one million, it will not be required.
Therefore, it is better to keep the paid-up capital of the company according to the actual investment made. If the investment increases later, the capital can be increased, but it is better to keep the amount close to the reality in the beginning so that later filing of Share Capital Increase and additional expenses can be avoided.
Company Address
- Keep the organization address in mind when registering for the first time.
- First find an office or place where you want to do business, and then register the business at that address.
- All correspondence from SECP will be sent to the address you provided at the time of registration.
- An incorrect address or home address will cause problems.
- Changing the address later, especially from one province to another, is a difficult, time-consuming and expensive process. It requires paying additional fees and changing both the Articles of Association and Memorandum of Association.
Including family members as directors can be detrimental to business
Earlier, family businesses were run, but now they have become difficult to run. For example, initially, two brothers start a business together, but later, due to differences the businesses has to be separated, which causes problems.
Therefore, best way is to register an SMC which is easily to manage always consult a expert to take such decision and If you also want to Avoid These 5 Mistakes While Registering a Company in Pakistan please get in touch with us through our website by filling out the Contact Us form, or reach out via our social media accounts.
