Difference Between Partnership Firm and Private Limited Company
| Description | Partnership | Company |
| Audit Requirement | Not Applicable | A private company is obliged to submit audited accounts with SECP and FBR. |
| Annual Tax Chargeability Rates | Maximum slab rate is 35% above the revenue of 6 million | 29% for companies20% for small companies |
| Tax withheld u/s 153 (Payment of Goods and Services) | An association of person having turnover of 100 million or above in any of the preceding year is required to withhold tax u/s 153. | Every private company is liable to withhold tax u/s 153 without any threshold. |
| Minimum Tax U/S 113 | Chargeable @ 1.25% only if Turnover increases from 100 million | Applicable at the rate of 1.25% |
| Alternate Corporate Tax U/S 113C | Not Applicable | Applicable at the rate of 17% |
| Income Tax Withholding For sale of any other goods | 5.5% of the gross amount11% of the gross amount if the person is not appearing in the active taxpayer list | 5% of the gross amount10% of the gross amount if the person is not appearing in the active taxpayer list |
| Workers Welfare Fund | Applicable at 2% of taxable income on the proportion of normal taxation only. The tax is paid with annual income tax return. | Applicable at 2% of taxable income on the proportion of normal taxation only. The tax is paid with annual income tax return. |
| Workers Profit Participation Fund | Not Applicable | Applicable at 5% of accounting profit. |
| Drawings from business | Business drawings shall not be taxable to the partner | Business Drawings shall be treated as dividend and will be taxed at 15%. |
| Equity investment | Equity investment can only be made by the partners | Equity investment can be made by large public |
| Salaries | Partners cannot take salaries from partnership; however, it can take drawings from the annual profits taxed at 35% of highest slab rate. | Directors can take salaries from company at 20% taxation |
| Dissolution | Easy procedures of dissolution of partnership | Time taking process to dissolve a company |
| Liability | Partners are personally liable to the liabilities of the partnership | Directors liabilities are limited up to the company only. Under section 139 of the Income Tax Ordinance, 2001 any tax payable by the company in respect of any tax year cannot be recovered from the company shall be recovered from the following: a director of the company, other than an employed director; ora shareholder in the company owning not less than ten per cent of the paid-up capital of the company, Any director who pays tax as above shall be entitled to recover the tax paid from the company or a share of the tax from any other director. |
- Any person not holding Pakistan origin card can also be a Partner/Director of the business entity.
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