As per Lawkidunya, Here’s a comprehensive comparison between Association of Persons (AOP) and Private Limited Company (Pvt Ltd) in Pakistan:
AOP (Association of Persons)
1. Definition: AOP is a type of business entity where two or more persons come together to carry out a business activity.
2. Registration: AOP is registered with the Federal Board of Revenue (FBR) and the Securities and Exchange Commission of Pakistan (SECP) is not required.
3. Liability: Partners have unlimited personal liability, meaning their personal assets can be at risk in case of business debts.
4. Taxation: AOP is taxed as a separate entity, but the tax rate is applied on the individual partners’ shares.
5. Management: AOP is managed by its partners, who share decision-making authority.
6. Capital: No minimum capital requirement.
7. Dissolution: AOP can be dissolved by mutual agreement among partners or by court order.
Private Limited Company (Pvt Ltd)
1. Definition: Pvt Ltd is a separate legal entity from its owners, with limited liability for shareholders.
2. Registration: Pvt Ltd is registered with the SECP.
3. Liability: Shareholders have limited liability, meaning their personal assets are protected in case of business debts.
4. Taxation: Pvt Ltd is taxed as a separate entity, with a corporate tax rate applied on its profits.
5. Management: Pvt Ltd is managed by a board of directors, who are elected by shareholders.
6. Capital: Minimum capital requirement is PKR 100,000.
7. Dissolution: Pvt Ltd can be dissolved by shareholders’ resolution or by court order.
Key differences
1. Liability: AOP has unlimited liability, while Pvt Ltd has limited liability.
2. Registration: AOP is registered with FBR, while Pvt Ltd is registered with SECP.
3. Taxation: AOP is taxed on individual partners’ shares, while Pvt Ltd is taxed as a separate entity.
4. Management: AOP is managed by partners, while Pvt Ltd is managed by a board of directors.
5. Capital: AOP has no minimum capital requirement, while Pvt Ltd has a minimum capital requirement of PKR 100,000.
Choosing between AOP and Pvt Ltd depends on your business needs, risk tolerance, and growth plans. Pvt Ltd offers limited liability protection, separate legal entity status, and more formal management structure, making it a popular choice for businesses. AOP, on the other hand, is simpler and less formal, making it suitable for small businesses or partnerships.