The difference between a limited liability company and a one person company

Entrepreneurs, especially beginners, are always searching for the difference between a limited liability company and a one-person company, as commercial activity is now considered the most important component of the modern era, due to the diversity of commercial activities in it, so we will review the most important differences that you look for in each company and the most important features that it has. Every company is unique.

The difference between a limited liability company and a one person company

through Diwan Firm You can learn about the difference between a limited liability company and a one-person company, as there is a big difference between the two companies, which we mention as follows:

1. capital: In a limited liability company, the company's capital mentioned in the commercial registry is not deposited in the bank, but in a one-person company, the entire capital mentioned in the commercial registry is deposited in the bank until the commercial registry is extracted.
2. Taxes: In limited liability companies and one-person companies, both companies are subject to the same tax treatment, which is 22.5%.
3. powersIn limited liability companies, a manager must be appointed who has the right to manage, sign, and deal in the name of the company. As for a one-person company, all powers belong to the owner of the company only. In limited liability companies, the right to manage and sign is given to at least 2 partners. There must be one of them who has the right to manage and sign, and it is possible that both partners have the right to manage and sign, whether they are only jointly or jointly and individually.
4. Number of partnersIn limited liability companies, the minimum number of partners is two people, and the largest number of people is 50 partners. As for a one-person company, it is for one person without any partners.
5. Legal form conversionLimited liability companies can be converted to a single person company or a joint stock company, and a single person company can also be converted to a limited liability company, but the difference is in the conversion procedures.
6. Company adjustmentsIn limited liability companies, the amendment is made through an extraordinary general assembly, while in a one-person company, the amendment is made by an administrative decision from the company owner approved by the Investment Authority.
7. NotebooksIn limited liability companies, there are daily books and inventory books, but in a one-person company, a share book is added to these books, and there is a cycle of recording the transfer of shares between partners, redistributing capital, and recording this in the share book.

What is a limited liability company?

The limited liability company and the one-person company are considered common types of establishing companies, and the basic difference between them lies in the legal structure and responsibility, as in the limited liability company, the shareholders are only responsible for the amount of capital they put into the company, and it is also the most common because it It provides greater protection for shareholders, as it is a commercial company in which the ownership of the company is divided into shares that represent the company’s assets. The liability of shareholders in this type of company is limited in terms of the value of the capital they provided as an investment in the company. In other words, shareholders do not bear responsibility above Their investments in the company.

The limited liability company is considered a common form of establishing a business, and the company is known by this abbreviation “LLC” in many countries. Moreover, this corporate structure may provide protection for shareholders from personal liability for debts and obligations that may arise. To be incurred by the company if it is exposed to financial crises, taking into account that limited liability companies are required to comply with a set of laws and regulations that govern this type of company, and the limited liability company is supposed to be managed well to ensure compliance with legislation and protect the rights of shareholders and other relevant parties. .

What is a one person company?

lies The difference between a limited liability company and a one person company A one-person company is a type of company managed by only one person, and this person is responsible for managing the business and the financial and legal responsibilities of the company. The one-person company is one of the simplest forms of commercial companies, and the owner of the company is often the CEO and the only employee in the company.

It is worth noting that the definition and legal requirements for establishing a one-person company vary from one country to another, and these companies are usually characterized by simplicity in administrative and financial procedures compared to other types of companies, so if you want to establish a one-person company, it is preferable to speak to a lawyer or legal advisor to obtain Get accurate information about the necessary steps and legal requirements in your country.

Differences between the number of partners in a limited liability company and a one-person company

The differences between the number of partners in a limited liability company and a one-person company differ in several important aspects, as in a limited liability company there can be a number of partners who participate in managing the company and bear financial responsibility in a specific and specified percentage.

While in the case of a one-person company, there is only one person who is responsible for all aspects of the work, responsibilities and decisions, and these differences are considered to affect the legal and financial nature of the two companies and the rights and obligations that they entail. Below we review in detail the aspects of the differences between the number of partners in both. The two companies:

1. Number of partnersThis is what we mentioned previously, which is that a one-person company is managed and owned by only one person, while a limited liability company contains more than one person’s partners, and their number can be limited or unlimited.

2. the responsibilityIn a one-person company, the owner is one and is responsible for all the company’s debts from his personal property, while in a limited liability company, liability is limited to the size of each partner’s contribution to the company’s capital, and the property of the company’s partners is not used to pay its debts.

3. Administration: A one-person company. The owner is responsible for managing the company. As for a limited liability company, management may be distributed among the partners according to their agreement.

4. Finance: A one-person company in which the financing of the company depends entirely on the owner of the company, and in a limited liability company the company can attract capital from several partners, which reduces the pressure on one partner in financing. Therefore, it can be said that the difference between a limited liability company and a company One person depends on the number of partners, the authority to act, and the financial responsibility for debts.

See also: Company Formation Services

Advantages and disadvantages of a limited liability company

A limited liability company differs from a one-person company in several aspects, as a limited liability company is considered a separate entity from its owners and shareholders, as the company’s capital is independent from the capital of its owners, while in a one-person company, the owner of the company is solely responsible for the debts and obligations of the company. This means that he bears the responsibility individually without carrying the financial responsibility shared with other partners as is the case in a limited liability company.

These differences may be considered to affect the quality and size of the financial risks that each type of company bears, and also determine the ease of establishing the company and the method of distributing profits and making decisions. Among the most important advantages of a limited liability company are:

• Legal protection for ownersOwners enjoy legal protection that protects them from personal liability for the company’s debts.
• Ease of attracting investment: A company can attract more capital by selling shares or stakes in the company.
• Business continuityFor employees and customers, this structure protects the company from business interruption due to the owner's personal problems.

Disadvantages of a limited liability company

• Complex administrative proceduresManagement of a limited liability company requires adherence to certain procedures and periodic financial reports.
• Limited business knowledge: Due to the large organizational structure, it can be difficult for owners to keep track of all aspects of the business.
• Risks of exceeding authority: Managers and board members may face problems regarding abuse of authority or oversight.

Advantages and disadvantages of a one-person company

A one-person company comes with many advantages, the most important of which are:

• Complete controlThe sole owner of the company is the one who controls all aspects of the business and does not need to refer to the opinions or recommendations of others.
• Speed of decisions: A single owner can make decisions quickly without the need for the approval of other partners.
• Ease of establishment and operation: There are not a lot of complicated administrative procedures or periodic reports required.

Disadvantages of a one-person company

• Unlimited personal liability: A sole proprietor is personally liable for the debts and obligations of the business with his or her personal property.
• Difficulty attracting financingAn individual company may face difficulty in attracting financing due to a lack of confidence in the continuity and stability of the company.
• The possibility of isolationism: Individual work may be isolated from other opinions and ideas that contribute to business development.

See also: The difference between people and money companies

Benefits and risks of a limited liability company and a one-person company

The limited liability company and the one-person company represent two different models in the business world. The limited liability company is distinguished by being an independent entity from its owners and that their responsibility is limited to a certain extent and does not extend to their personal funds, while in the one-person company, the business owner is solely responsible for All the company’s obligations, including his personal financial responsibility. Hence, the difference between a limited liability company and a one-person company becomes clear, which is the degree of separation between the financial and legal responsibilities between the limited liability company and the one-person company.

We mentioned the difference between a limited liability company and a one-person company and explained the most important advantages and disadvantages of each company, mentioning the risks that the person responsible for the company may be exposed to. In the end, you must make sure to consult a lawyer or financial expert before making any decision. Towards the type of company you want to create.