Learn everything related to establishing companies

Establishing companies is a dream that haunts many people, as it is the gateway to the world of finance, businessmen, and achieving profits and ambitions. However, before embarking on this journey, it is necessary to understand the conditions for establishing companies and ensure that the correct legal procedures are followed. In fact, this is only possible by consulting a lawyer specialized in Establishing companies. You can seek help from one of the companies that provides company establishment services. Perhaps Diwan Company, which provides company establishment services, is the most famous in this field. In our following article, we will discuss the most important general conditions for establishing companies and the different types of companies.

The most important general conditions for establishing companies in Egypt

Several conditions must be met to establish companies in a proper manner, and below we will shed light on the most important conditions necessary for establishing companies:

• the age: The company founder must be at least 21 years old.
• EligibilityThe founder of the company must have full legal capacity.
• Not participating in violationsThe founder of the company must not be convicted of a felony or misdemeanor involving dishonor or dishonesty.
• capitalIt is important that the founder of the company has sufficient capital to carry out its activity.
• Availability of required documentsAny company needs some important documents and papers to ensure its legal background, such as:

• •  A copy and original of the national ID card or passport of the company founder.
  • Company incorporation contract.
  • Articles of association of the company.
  • No objection certificate from the competent authorities (in some cases).
  • A recent commercial register.
  • Tax registration certificate.

See also: Learn about ways to establish companies in Egypt

Steps for establishing companies

Any company needs several steps to establish it properly, ensure that no future or legal problems occur, and achieve maximum benefit from it, as follows:

• Choose the company type: Whether it is a limited liability company, a joint stock company, a partnership company, a simple partnership, or even a limited partnership with shares.
• Determine the company nameThe name must be unique and not used by another company, and must not contain offensive words or disrupt public order.
• Preparing the articles of association and articles of associationThe articles of incorporation include basic data about the company, such as its name, capital, and activity. In addition, the articles of association regulate how the company is managed and the rights and duties of the partners.
• Extracting a commercial registerApplication is made at the Commercial Registry Department of the company’s headquarters governorate.
• Obtaining a tax registration certificateSubmission must be made at the relevant tax office.
• Obtaining licenses to practice the profession (in some cases): Some activities may require special licenses from other government agencies.

Types of companies

Companies are considered one of the most important economic entities in the world, and their forms and characteristics vary according to the laws of each country. We will highlight the most important types of companies as follows:

• Limited Liability Company.
•  Joint stock company.
• Solidarity companies.
• Simple recommendation companies.

Firstly Limited Liability Company

 It is a commercial company in which liability is limited to the partners’ subscribed funds only, meaning that the partners do not bear any debts or obligations that exceed their shares in the capital, and in which the number of partners is not less than 2 and not more than 50.

As for the capital, it is divided into negotiable shares between the partners. On the other hand, we find that the management is managed by one or more managers appointed by the partners. In addition, taxes are subject to income tax as a company.

If we discuss the advantages of the limited liability company, we find that it has several advantages as follows:

• Ease of establishment and management.
• Limited liability on partners.
• Flexibility in company structure.

Likewise, we find that there are several disadvantages to the limited liability company, which are as follows: 

• Difficulty obtaining external financing.
• Difficulty selling partners' shares.
• Limitations on the number of partners.

 Secondly, the joint-stock company

It is a commercial company that is divided into tradable shares, and a large number of shareholders participate in it, as there is no minimum number of shareholders, and the capital is divided into tradable shares on the stock exchange.

The company is managed by a board of directors elected by the shareholders, and with regard to taxes, it is subject to income tax as a company tax on dividends to shareholders.

Joint stock companies are characterized by several features, as follows:

• Ease of obtaining external financing. 
• Possibility of selling shares.
• Distribution of profits to shareholders.

If we move to the disadvantages of the joint-stock company, we find that there are several obstacles it faces, for example the following:

• Complexities of establishment and management.
• Unlimited liability for shareholders in some cases.
• It is subject to strict supervision by government agencies.

Third, joint-liability companies

Joint liability companies are considered one of the oldest and most important types of commercial companies. These companies are characterized by the responsibility of the joint partners for all their obligations. The process of establishing a joint liability company is characterized by its simplicity, as it does not require complex procedures or complicated conditions.

 The capital of the joint liability company consists of the contributions of two or more partners, who bear joint responsibility for all of the company’s obligations.

Each partner in a joint-liability company has the status of a merchant, which means his unlimited joint liability for all the company’s debts, even if they exceed his share in the capital.

Joint liability companies are also characterized by flexibility in their management, as all partners can participate in managing its business and making decisions, or delegate this task to one or more partners.

The profits of the joint-liability company are also divided between the partners in pre-agreed proportions, while they also bear responsibility for any losses that the company may suffer in the same proportions. Likewise, joint-liability companies enjoy some advantages as follows:

• Raise more capitalPartnership companies provide the opportunity to raise greater capital through partner subscriptions, which enhances the company’s ability to invest and expand.
• Diversity in experiencesThe participation of partners with diverse experiences and skills provides the possibility of making more effective management decisions, which contributes to achieving the company’s goals faster.
• Ease of management: Joint liability companies are easy to manage, as they do not require a complex administrative structure or additional costs.
• Trust and credibilityThe joint liability of joint partners gives joint liability companies a quality of trust and credibility, which encourages customers to deal with them.

As for the disadvantages of joint liability companies, they are as follows:

• Unlimited liabilityThe unlimited liability of partners for all of the company’s obligations is considered one of the most important disadvantages of joint liability companies, as it may expose their personal property to danger if the company suffers major losses.
• Lack of continuity of the company: The continuity of the joint liability company is linked to the presence of partners, as the partnership may disintegrate in the event of the death, bankruptcy, or withdrawal of one of the partners.

Read also: The most important tips when establishing a company in Egypt

Fourth: a simple partnership company

 It is a simple commercial company and is considered one of the most common forms of companies in the Arab world, especially in small and medium enterprises. It consists of two types of partners:

• Joint partnersThey are the ones who bear unlimited liability towards the company’s debts, meaning that they may be held accountable for these debts with their personal funds even if they exceed their share in the capital.
• Silent partnersTheir liability is limited to the extent of their share in the capital, and they are not responsible for the company’s debts with their personal funds.
  • In fact, the limited partnership company is distinguished by its lack of advantages that made it the first choice for those wishing to enter the world of finance and business without complications, as follows: 
• Ease of establishmentIt does not require complicated procedures, and it is sufficient to conclude a written contract between the partners and register it in the commercial registry.
• Low costs: It does not charge exorbitant fees for setting up and managing it.
• Management flexibility: Partners have complete freedom to manage the company and determine its business strategies.
• FinanceThe company can be financed through contributions from partners or obtaining loans from banks.
• Speed of making decisions: As decision-making does not require the approval of all partners, which speeds up the workflow.

Like other types of companies, while there are advantages, there are also disadvantages, as follows:

• Unlimited liability: General partners have a significant liability that may affect their personal finances.
• Difficulty exiting the company: A general partner cannot easily exit the company easily.
• Management instability: Disagreements between partners may lead to difficulties in managing the company.

Conditions for establishing a limited partnership company

We will review with you as follows the most important conditions for establishing a limited partnership:

• Number of partnersThere is no minimum or maximum number of partners, but there must be at least one joint partner and at least one limited partner.
• capitalThere is no minimum capital, but it must be agreed upon between the partners and specified in the company contract.
• ContractA written contract must be drawn up specifying the names of the partners, their shares, responsibilities, management system and distribution of profits.
• RegisterThe company must be registered in the commercial registry and obtain the commercial registry and tax card before starting to practice the company’s activity.

Important instructions before starting to establish companies

 In principle, you must understand the differences between the different types of companies before you start establishing a company. Below are the most important instructions that will help you establish companies properly:   

• Consultation with a legal and financial expert: It is important to consult a legal and financial expert before establishing any company to know the best type of company that suits your needs. You can use Diwan Company to provide company establishment and post-incorporation services.
  • It has an elite group of experienced legal advisors and experts who can provide you with all legal advice when establishing your company.  
• Study and planning: A comprehensive feasibility study and careful planning must be conducted before establishing any company. You can communicate with several accountants within the Diwan company’s staff and learn about all the feasibility studies that are appropriate for your capital and your capabilities to reach the highest percentage of profits and avoid any potential losses. 
• Compliance with laws and regulations: It is important to adhere to the laws and regulations in force in the country when establishing and managing any company, as Diwan Company has a long history in the field of establishing companies that exceeds 13 years of experience, which has made it gain the trust of more than 1,453 clients.
  • For more information and details about establishing companies, and the most important types of companies, you can contact Diwan Company provides company establishment services Providing post-incorporation services through its official website. 

In conclusion, at the end of our article in which we shed light on establishing companies, we can say that by establishing your company, you will have taken an important step towards achieving your dreams and leaving your mark in the world of business. This is done by conducting a feasibility study to evaluate the feasibility of the project in which your company will enter, in addition to developing a plan. Clear work for the company, as well as learning about the laws and regulations regulating the work of companies in Egypt.