As per Lawkidunya, Here are the financial characteristics of a Single Member Company (SMC) in Pakistan:

Capital Structure

1. No Minimum Capital Requirement: There is no minimum capital requirement for SMCs in Pakistan.
2. Single Member’s Investment: The sole member is required to invest a certain amount of money in the company, which can be in the form of share capital or loan.

Funding Options

1. Limited Fundraising Options: SMCs have limited options for fundraising, as they cannot issue shares to the public.
2. Loan from Sole Member: The sole member can provide loans to the company, which can be interest-free or interest-bearing.
3. Bank Financing: SMCs can obtain bank financing, but the sole member may be required to provide personal guarantees.

Taxation

1. Separate Tax Entity: An SMC is taxed as a separate entity from its sole member.
2. Corporate Tax Rate: SMCs are taxed at the corporate tax rate, which is currently 29% in Pakistan.
3. Withholding Tax: SMCs are required to withhold tax on certain payments, such as salaries and dividends.

Financial Reporting

1. Annual Financial Statements: SMCs are required to prepare annual financial statements, including a balance sheet and profit and loss account.
2. Audit Requirements: SMCs are required to have their financial statements audited by a chartered accountant.
3. Filing with SECP: SMCs are required to file their financial statements with the Securities and Exchange Commission of Pakistan (SECP).

Dividend Distribution

1. Dividend Payment: SMCs can distribute dividends to their sole member, but only out of profits.
2. Dividend Taxation: Dividends are taxed in the hands of the sole member, at the applicable tax rate.

Financial Risks

1. Unlimited Personal Liability: Although SMCs provide limited liability protection, the sole member may still be personally liable for certain debts or obligations.
2. Financial Instability: SMCs may be more vulnerable to financial instability, as they rely on a single member for funding and decision-making.