A sole proprietorship also known as a sole trader/sole owner, or simply proprietorship is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the sole owner (proprietor / trader). All assets of the business are owned by the owner (proprietor / Sole trader)and all debts of the business are his/her debts and he/she must pay them from their personal resources. This means that the owner has unlimited liability. It is a “sole” proprietorship in the sense that the owner has no partners (partnership).

This is the most straightforward structure for a business. Basically it means the business decisions are being made by one person. Of course, it doesn’t necessarily mean that the business has only one worker. The sole trader can employ others to do any or all of the work in the business.

A sole proprietor may do business with a trade name other than his or her legal name. This also allows the proprietor to open a business account with banking institutions.


The main advantages of a sole proprietorship (sole ownership) are that:

  • Sole Proprietorships are easy to start up
  • Sole Proprietorship are subject to fewer regulations relative to other types of businesses,
  • the Sole Proprietorship owner has full autonomy with regard to business decisions,
  • Sole Proprietorship are easy to discontinue as well.
  • Another significant advantage is that one takes all the profits of the business. This is the main reason that most businesses are of this type.
  •  A sole proprietor usually has a quick decision process and doesn’t have any opposition when making a decision as he / she has total control of his or her business. All profits and losses accrue to the owner.
  • The owner does not have the tension regarding conflicts among the partners as there are no partners. Also it’s easy to set up, with having little paper work to fill in and little money spent on setting up, this is one of the easiest types of business to start.



  • This type of structure is ideal if the business is not complicated, especially if it does not require a great deal of outside capital.
  • There isn’t much paperwork in establishing this type of structure.
  • You don’t want to use your own name and would like to create a brand name. (See also Trademark registrations under intellectual property).
  • There are less stringent reporting obligations compared with other structures.
  • Sole Owner/Trader is entitled to all the profits and the ownership of assets.


  • Sole proprietorship’s are relatively straightforward to wind up.



There are a number of disadvantages because of which such forms are finally transferred to better structures such as partnerships and limited liability companies which include:

  • Sole Owner/Trader is personally liable for all debts.
  • Personal property may be vulnerable for debts, other business liabilities and/or revenue department payments.
  • Large sums of capital are less likely to be available to a Sole Owner/Trader , and Sole Owner/Trader may have to rely more on overdrafts and personal savings. Thus increasing his or her cost of borrowing and less rate of return.
  • A business may require enormous investments of time without the normal employee recreation leave and other benefits. Sole Owner/Trader being the only beneficiary is also on the other hand the only person standing to bear the losses.
  • There may be issues of continuity of business in the event of death or illness.
  • A business organized as a sole trader will likely have a hard time raising capital since it has to make up for all the business’s funds. The owner of the business has unlimited liability as he/her is responsible for the business’s debts because she/se has control over the business.
  • A disadvantage of a sole proprietorship is that as a business becomes successful, the risks accompanying the business tend to grow. To minimize those risks, a sole proprietor has the option of forming a corporation, or, a partnership to mitigate such risks.
  • Sole Owner/Trader may have only one specialist skill therefore it may hamper diversification of the business.
  • Sole Owner/Trader may have the investment but lack the time and resources  to look completely into the management of the business.


Yes, Talk to our attorneys, lawyers and accountants working at Masood & Masood specializing in business formation about the legal ownership of personal assets or the use of trusts to limit liability and reduce tax burden.

For instance, the family home may not be exposed if it is in the name of your spouse — you must get legal advice before you do this, because there are other consequences, especially if the spouse dies or you divorce. Also, you may not be able to do this if your sole purpose is to avoid a creditor.


A sole trader pays tax in their own right, as part of their personal income tax return at the personal rate of income tax.

A sole proprietorship is not a corporation; it does not pay corporate taxes, but rather the person who organized the business pays self employment taxes on the profits made,  and files his or her tax returns under section 114 of the Income Tax Ordinance, 2001.

A sole proprietorship also does not have to be concerned with double taxation, as a corporate entity would. Better Tax Planning before commencement of business can significantly reduce/manage the tax burden on the business such as you may be able to deduct tax losses from personal income.


Masood & Masood specializing in business formation and better prompt tax planning to help secure you a prosperous business. we may be assist you in the following:

  • Pre feasibilty study
  • Accountancy Support (How to maintain your accounts)
  • Business name registration
  • Legal aspects of succession planning
  • Tax implications as a sole trader

Do let us know and we will be pleased to assist you.




  1. Mohammad Adnan Gangat


    I am interested in openning a software house in Karachi with a minimum investment as i dont have any investors. I was reading about the sole proprietorship business and thought it to be the suitable type for me. I would like to know the process and aproximate cost to set everything up.
    Also, what would be the fee for such setup for your firm.

    About myself: I am an oversees Pakistani with a Degree in Computer Engineering. I think it is time for me to invest in Pakistan but would like to start something very small as I am myself is an employee and can not afford large investments. I was reading on the net and came across your website.

    I hope to listen from you soon.


    Engr. Mohammad Adnan Gangat.

    1. Masood

      Dear Mr. Adnan Gangat,

      We are pleased to know that you have chosen M&M to start your IT related business.

      You will only require to be registered with the tax department and you can register your business name with IPO.

      To complete the above two M&M will charge you Rs. 10,000/- excluding out of pocket expenses which will be billed at actual. Out of pocket expenses can range from five to ten thousand pak ruppees.

      Once you give us the go ahead we will generate an invoice in your name and let you know the exact expenses and documents required.

      M&M hopes to be a winning partner in your business endeavours.


  2. Aftab Musa

    Sir plz tell me some names of sole ownership business (famous only), and the business’s web address, i need for my assignment….thanks in advance.

  3. Iqbal Yousaf Khan

    Hello Sir,

    Many name is Iqbal Yousaf Khan and I want to start Export business from Pakistan. The main Items I want to export from Pakistan is “Herbal Medicines”. I want to know flowing mainly:-

    1- What is the procedure to register such a company who wish to start export business of Herbal Medicines
    2- Advice the main Govt. Formalities for the registration of Sole Proprietorship based company.
    3- Govt. Departments / Local bodies certification/ registration
    4- Financial Charges of MasoodNMassood
    5- Fee of each department involved to get register the Herbal Based Medicines Export.

    Your quick answer will be highly appreciated.

    Many Thanks & Regards

    Iqbal Yousaf Khan
    0307 444 11 49

    1. Masood

      Dear Sir,
      Your Questions are too specific to be answered on this public forum.
      You may contact Mr. Hasan Masood, Partner (hasan@masoodandmasood.com) regarding the same.
      We are also intimating this to Mr. Hasan who will be responding to you soon.

  4. Muhammad Usman Afzal

    Hello Sir,

    In pakistan i am started my own website but i want to make it huge like a busniess name i want to register as a busniess so please help me how can me do this

  5. Muhammad Adil Awan

    Assalam o Alaikum!
    I m from Khushab and i want to trade forex online with some international broker like http://www.fxcm.co.uk . I need to open a foreign currency account with my local bank to send my funds abroad(UK). But bank says i should have a business to open such account which i don’t have I m just a student. Then I thought I should register a business of “individual forex trader” in my own name and then apply for foreign currency account with bank. Forex trading is highly risky investment please let me know should I be charged tax even if suffer loss. Please tell me what are your fees for my case and what are expenses for registering my name as an individual online forex trader. Let me clear that I shall not take investment for trading from anyone I want to be registered as an individual trader who trades forex from his own funds with the help of a forex broker.
    Thank you in anticipation.

  6. M. Noman Khan

    Sir my name is M.Noman khan. i have done BBA and now planning to do a business.
    i m planning to open a fitness gym in karachi defense phase 2 EXT area, definitely in sole proprietorship. i would like to know that what are the legal procedures and requirement for it?

  7. Shuaib

    Sir, I want to know that I have started a company and the company with the same name exists in Japan and Korea. I didn’t realize that but after getting my company’s URL on .com domain i found the same named company registered in .jp and .kr domains. If i continue the company would it be alright or will cause difficulty in future.

  8. Deedee Mishaw

    I’m currently blogging for a (poor) living for someone else… but I like it. You’ve inspired me to keep doing it, and look to doing it for myself soon

  9. m muneeb ullah

    i m going to start a small size busniess i want it register can you please tell me in detail the cretaira,time it will take and charges for registration
    M Muneeb Ullah

  10. Hassan Abid

    My name is Hassan Abid.I want to open a sole Proprietorship business, i know this information.please gide me some more abot these procedures & registration of Sole business.
    i. Decide on and select a Business Name;
    ii. Print Letter Heads, envelopes and your business/visiting card;
    iii. Write an Account Opening Request to your Bank, stating that this is your business and you are the sole proprietor of it;
    iv. Open an account at a local bank’s branch close to you;
    v. Next request the bank to issue a letter stating that this is your account and business;
    vi. Submit the bank certificate and your application with the Tax Authority i.e the FBR (Federal Board of Revenue) Federal Board of Revenue (FBR) formerly known as the CBR Central Board of Revenue;
    vii. If you are on a job, you already have a NTN (National Tax Number) – the same NTN will be used for your Sole Proprietorship status.
    viii. Once the status is added, you are a registered legal entity.

    With thanks & Regards.
    0333-4183227 ( Hassan Abid )

  11. Ali Haider

    Hey, i am interested to open a small software house as a Sole Proprietor in Lahore. Please guide me what should i do? which offices i would have to visit to finally get my software house register. thank you!

  12. Vaqas Ahmed

    I am planning for organizing a n international event on my own which definitely needs a legal identity. is this possible for a sole trader? and what other legal requirements i will have to fulfill in order to start my business? initially i will be having less capital and approximately what cost i will have to bear for starting up the procedure?
    please give me response as soon as possible and if possible so mail it on my personal id.
    thank you

  13. Faisal Awan

    Dear Sirs,

    I intend to offer interpretation services simply over-the-phone or internet. Apparently, I can work as a sole proprietor for this purpose.

    However, I have a legal concern. What if a client contacting me for my services has committed a crime, and from his phone records it is shown that he has been contacting me. How can I prove, as a sole proprietor, that I am simply offering a over-the-phone service and got nothing to do with him personally?

    In such a scenario, what legal measures (i.e. form a single member company) should I adopt to protect myself?

    It will be very kind of you to give it a thought!

    Warm Regards,

    Faisal Awan

  14. Wajid Ali

    Respected Sir,
    I want to register as a Sole Proprietor in Rawalpindi, i am running a website development business, its a one man show and i am doing it in my house which is a rented place. i have following questions.

    Q1. If i register with FBR, will the Gas and Electricity bill of the house become commercial.?

    Q2. Do i need an NOC from the owner of the house.?

    Q3. Will i be able to change my address in FBR forms, if i shift the business to any-other place/shop.

    Q4. Will i be able to change the nature of business to Pvt.Ltd afterwards?

    Q5. Do i need to register for Income Tax only OR also for Sales Tax also,?; as i make banners for local companies.?

    Q6. How can you assist me in all this, and what will be your fee for registration NTN and GST.

    Q7. You are in Karachi, how can you help me in Pindi.?

    Q8. What are the chagres of FBR/CBR etc. for this process.?

    Best Regards!
    Wajid Ali

  15. Hasan Mohsin Qureshi

    DEAR M & M,

    First of all, great work & thank you for being available online.

    Please mention a “step by step procedure” to get a sole proprietor firm registered in one’s name for all cases possible.

    Thanks & Regards,
    Hasan M. A. Q.

  16. Naveed Akhtar

    Is Sole proprietor is responsible to deduct income tax on taxable salaries of his employees or employees are responsible to pay tax directly to fbr?

  17. Saad


    I am based out of Islamabad and I need your services in registering a sole proprietorship for my IT/web consulting business. We make websites and provide consulting services to generate business on social media to our clients.

    I have the following questions similar to what Mr. Wajid Ali asked in the comments on your blog.

    1. Will i be able to change the nature of business to Pvt. Ltd afterwards?
    2. How can you assist me in all this, and what will be your fee for registration NTN and GST.
    3. You are in Karachi, how can you help me in Islamabad?
    4. What are the charges of FBR/CBR etc. for this process?
    5. Is there anything else I should know before proceeding with this?

    Please help with the questions.

  18. Kamran Paul


    I need to start an export business as sole proprietorship. I already own NTN and till now my only taxable income is from salary which is duly deposited against this NTN. My questions are

    1- Can I use same NTN for starting sole proprietorship business?
    2- Whether it is necessary to trademark a business name for sole proprietorship?
    3- What kind of documents are required to registration with SECP?
    4- What further documentations are required for starting such business?
    5- Guidelines for formation of books of accounts (tax purpose)
    6- And lastly fee for your services?

    These are specific questions that may not be be answered on this portal. Therefore, below you can find my contact details.


    Kamran P. P.

  19. Danish

    I was searching for some help for my new start up and came across your website. I have been working as Freelance developer and now want to work under a registered company and have NTN. I have no invester no capital. I have few queries.
    1. Can I use my personal NTN for my company too?
    2. Should I go to sole proprietership or Pvt limited is better choice at start of the business.
    3. One some later stage can a sole proprietership be coverted to Pvt limited.


  20. jhunkarSalman


    I am a salaried individual and pay tax over that using my CNIC #. Now, i want to get NTN for me. What is your fees for NTN registration and NTN certificate.
    And what documents should i need to submit. And i have 3-4 bank accounts but there is no material transaction in 3 bank accounts. Only 01 bank account has transactions due to salary credit each month from employer.

    Thank You!

  21. Kashif

    My uncle having a sole proprietorship business died in Aug-2014. Wanted to know the formal procedure for closure of business and whether a tax return is required to be submitted. He has no children. Thanks.

Leave a Reply