Business Entity Comparison: Sole vs AOP vs Company

The business entity comparison calculator compares the three common ways to do business in Pakistan - sole proprietorship, partnership/AOP and a single-member company - side by side on the income tax and levies applied to a given annual profit. Enter your projected profit and the tool shows the tax bill under each structure.

Choosing a legal wrapper for your business is a mix of taxes, liability and paperwork. A sole trader is simple but puts your personal assets at risk; a company gives limited liability but a 20%-34% corporate tax and annual audits; an AOP shares the tax burden among partners but still carries unlimited liability. This calculator quantifies the tax dimension so you can debate the rest with your advisor.

Enter your expected annual profit and review the three numbers. The calculator takes the same profit into the non-salaried slab schedule for a sole proprietorship, into the AOP schedule for a partnership (at the profits do file), and the applicable company rate for a private limited company.

• Enter annual profit.
• Read the tax for all three structures side by side.
• Toggle to include super-tax or company minimum tax.

The taxation of the three forms is fundamentally different. A sole proprietor pays the non-salaried slabs - 15% to 45% - at individual level. An AOP pays exactly the same slab schedule at entity level, and partners receive the remaining profit without further tax in their own returns. A company pays a flat 29% (or 20% for a small company) with a super-surcharge only above Rs 500,000,000, and shareholders are not taxed again on the taxed profits they later draw as dividends. For large, genuine profits the corporate route is usually the lowest-tax wrapper.

The calculator only compares the profit-layer tax; it does not include later filing costs, audits, WHT advantages or the liability consequences. For a real decision, pair the numbers with a professional opinion.

A wholesaler earns Rs 8,000,000 a year. Sole proprietorship faces the AOP schedule: Rs 1,480,000 fixed plus 45% of Rs 2,000,000 - a total of about Rs 2,380,000 (29.75% effective). A small company pays 20% x 8,000,000 = Rs 1,600,000, nearly 800,000 less, but once audit, compliance and later dividend tax are included, the gap narrows. That is the trade the calculator illustrates.

• Forgetting that the company pays super-tax above Rs 500,000,000 - completely irrelevant even for most mid-sized firms.
• Ignoring the AOP partners taxes on distribution - the AOP bottom picture is not just the full slabs of the initial 8 million.
• Choosing the legal one because of tax - the company structure is driven by liability, funding and scale.