A sole proprietorship is the simplest and most common form of business in Pakistan. It is ideal for individuals who wish to start their business with full control and minimal compliance. Unlike partnerships or companies, a sole proprietorship does not require incorporation with the Securities and Exchange Commission of Pakistan (SECP). However, it must be registered with the Federal Board of Revenue (FBR) to operate legally and obtain a National Tax Number (NTN).

This guide explains everything you need to know about sole proprietorship registration in Pakistan, including its benefits, legal procedure, required documents, and post-registration obligations.

What is a Sole Proprietorship?

A sole proprietorship is a business that is owned and operated by a single individual. There is no legal distinction between the owner and the business, meaning the owner is personally liable for all debts and obligations.

Advantages of a Sole Proprietorship

• Simple Registration Process

• Complete Control over business decisions

• Low Start-Up Costs

• Less Regulatory Compliance

• Tax Benefits (only individual tax returns required)

• Easy to Manage and Dissolve

Who Should Register as a Sole Proprietor?

• Freelancers

• Consultants

• E-commerce sellers

• Retail and shop owners

• Small service providers (e.g., electricians, designers, digital marketers)

Legal Framework

• Governing Body: Federal Board of Revenue (FBR)

• Applicable Law: Income Tax Ordinance, 2001

• Required Registration: NTN (National Tax Number)

Sole proprietorships are not registered under SECP but must register with FBR for legal and tax purposes.

Step-by-Step Process for Sole Proprietorship Registration

Step 1: Choose a Business Name

• Select a unique and relevant name for your business.

• The name must not infringe on trademarks or existing registered business names.

Step 2: Prepare Required Documents

You will need the following:

1. CNIC of the proprietor (owner)

2. Business Letterhead

3. Business Address Proof (utility bill, tenancy agreement, or ownership document)

4. Mobile Number & Email Address (must be registered with the same CNIC)

5. Office/Shop Photo (with nameplate or signage, if applicable)

6. Nature of Business (clear explanation required on FBR portal)

Step 3: Register on FBR’s IRIS Portal

• Visit FBR’s online IRIS system.

• Create a user account using your CNIC, phone number, and email.

• You will receive a 6-digit code via SMS and email to activate your profile.

Step 4: Submit NTN Registration Application

• After logging in to IRIS, select “Registration of Individual” under Registration tab.

• Fill in personal details, address, business details, and upload documents.

• Select business type as “Sole Proprietor.”

Step 5: Verification and Issuance of NTN

• Once submitted, FBR may conduct a physical verification visit or request further documents.

• Upon approval, your NTN Certificate will be generated and can be downloaded from the IRIS portal.

Post-Registration Requirements

1. Bank Account Opening

You can now open a business bank account in your name using the NTN and business letterhead.

2. Sales Tax Registration (If Applicable)

If your business deals with taxable goods or services, you must register for Sales Tax separately through FBR.

3. Maintain Business Records

Keep proper records of income, invoices, and expenses to file your annual income tax return.

4. File Annual Income Tax Return

As a sole proprietor, your business income is declared in your personal income tax return every year. Failure to file returns may result in penalties or blacklisting.

Optional Registrations

Depending on your business nature, you may also register with:

• Chamber of Commerce

• Trade License from Local Government

• Punjab/Sindh Revenue Authority (for service providers)

• Social Security or EOBI (if hiring employees)

Taxation for Sole Proprietors in Pakistan

• Tax is calculated on individual slabs, not corporate rates.

• You may claim business expenses as deductions (e.g., rent, salaries, utilities).

• Registered sole proprietors enjoy lower withholding taxes on various payments.

Common Mistakes to Avoid

• Using an unregistered business name for invoicing.

• Operating without obtaining NTN.

• Not filing tax returns on time.

• Ignoring sales tax liability when applicable.

• Failing to maintain documentation for income and expenses.

Conclusion

Registering as a sole proprietor in Pakistan is the fastest and most cost-effective way to start a small business. With minimal documentation and low compliance requirements, it provides flexibility and control to entrepreneurs. However, obtaining an NTN and keeping up with tax filing is essential for legal compliance and future business growth.

If you’re unsure how to proceed, consulting with a tax expert or business consultant can ensure you meet all legal obligations without delays.