Steps to establish a one-person company

Establishing a one-person company in Egypt requires some conditions and procedures that must be followed in order for the company to have legal status and begin practicing its commercial activities, and all of these things help you. Diwan Firm It can be completed with ease, and this type is considered one of the types of companies that has increased in popularity recently, and it is the opposite of the usual companies that are made up of a minimum of two people or more, while they are satisfied with only one person, and this type has some characteristics and advantages of its own. .

Definition of a one-person company in Egypt

Before updating the steps for establishing a one-person company, we must define this type of commercial company, which is permitted to be established under Egyptian law for only one person. This company is considered one of the most prominent modern types of companies that have been activated to meet the requirements of the modern and rapidly changing market. 

A one-person company has several key features that we will explain below:

Sole Proprietorship

The company is wholly owned by one person, and this person may be a natural person or a legal entity (another company).

Limited Liability

The liability of the company owner is limited to the capital invested in it, in other words, his financial and personal responsibilities do not extend to his own assets outside the scope of the company.

Administrative structure

There is one management of the company, designated by the owner, who can appoint the managers or employees necessary to run the business effectively.

Establishment and registration

The process of establishing a one-person company is carried out through the legal steps and procedures in the General Authority for Investment and Free Zones (GAFI), and this requires submitting all necessary documents, which include the incorporation contract and articles of association.

Purposes and objectives

A one-person company can be established for various business purposes and objectives, whether it is to provide services, produce products, or engage in other business activities.

Reports and Commitments

The company must comply with all financial laws and regulations, in terms of submitting annual reports and periodic payment of taxes.

See also: How to establish a one-person company

Why do investors prefer to establish a one-person company?

 

There are some reasons why investors prefer to establish a one-person company over other types of companies, as follows:

• Simplifying procedures: This type of company helps simplify the establishment and management procedures as it deals with only one owner.
• Reduced economic risk: Since liability is limited to the capital, the owner's personal financial risk is lower.
• Encouraging entrepreneurship: The one-person company encourages individuals to start their own projects without the need for additional partners or investors, which contributes to promoting entrepreneurship in Egypt. 

However, investors may face some challenges and points that should be noted, such as the following:

• The responsibilities of sole management, as the owner must manage all operational and administrative aspects of the company, which requires a great deal of time and effort.
• Getting external financing is a bit difficult since the company relies solely on the owner's resources.

The importance of hiring a corporate lawyer in establishing a one-person company

Hiring a corporate lawyer to establish a one-person company is important and necessary to ensure the success of the company, especially with all the challenges faced by entrepreneurs, for the following reasons:

Deep legal knowledge

A corporate lawyer has in-depth knowledge of the laws and regulations governing the formation and operation of companies, and is therefore able to guide you through the procedures required to ensure compliance with all regulations.

The lawyer handles the procedures for establishing the company, whether they are related to preparing the necessary documents such as the articles of association or registering the company with the competent authorities. These procedures can be complicated, and the corporate lawyer makes them significantly easier for you.

Protection of legal rights and interests

A corporate lawyer can prepare contracts and agreements in a way that ensures your legal rights and interests are protected. These documents reflect the founder's business intent and limit potential legal risks.

Providing ongoing legal advice

A corporate lawyer is not just an advisor at the start of the company, but a legal supporter who can be referred to at any time to face any new legal challenges that arise during the operation of the company.

An attorney helps you determine the best legal options to achieve your business goals with the least possible risk, and can also help you with tax planning and avoiding unnecessary fees.

Save time and effort

Establishing a company requires a lot of time and effort in dealing with bureaucratic procedures, and here a corporate lawyer can shorten many of these complications for you and allow you to focus on developing your business.

In addition, you can benefit from the professional expertise of specialized lawyers who have extensive experience in dealing with many different cases, which means that they are able to deal with your problems in the most effective way.

See also: Reducing the capital of a one-person company

Steps to establish a one-person company

An investor who wishes to establish a one-person company must do several things, which we will mention - in detail - in the following order:

• The investor begins by choosing his own business activity for which he will establish the company.
• The company owner chooses an appropriate and commercial name for his activity, in addition to creating his own logo, taking into account that the name and logo have not been used before.
• Clarifying the company's capital in which it is invested.
• Submit a registration application for the company, taking into account the submission of all necessary official papers and certificates in order to practice the profession.
• Fill out the form for establishing the company, which shows a variety of data, which we will mention - in detail - below:
  • Detailed address.
  • The company's trade name.
  • Company logo.
  • Clarifying the company's capital.
  • Clarifying the type of commercial activity being practiced.
  • Clarifying the name and information of the company's legal advisor.
  • There must be an auditor for the company.
• Pay the fees required to establish a one-person company.

See also: Steps to establish a limited liability company

 Papers necessary to establish a one-person company

When carrying out the procedures for establishing a one-person company, the investor needs to prepare a set of official papers and documents that he needs to submit in accordance with Law No. 72 of 2017, the most prominent of which are the following:

• A certificate of no ambiguity is obtained from the commercial registry.
• Bring an official document from the bank confirming that a deposit has been made of the company’s capital, taking into account the limit The minimum is one thousand Egyptian pounds.
• If a one-person company is established through a legal person, a power of attorney must be issued by the legal representative of the legal person.
• Bring the security inquiry form for the foreign investor or foreign partner in the company, making sure it is on CD.
• Submitting a power of attorney stating the establishment of a one-person company, provided that it is notarized in the real estate registry.
• A copy of the card or passport of the company founder and bring the original for review.
• Certified auditor’s certificate from the Register of Accountants and Auditors accepting appointment to the company as auditor, who undertakes the task of reviewing and approving the company’s budgets.
• An official extract obtained from the register of accountants and auditors, provided that it is addressed to the Investment Authority, provided that it stipulates the right to review and approve the company’s budgets.
• If the company has in-kind shares, a report must be submitted to evaluate those shares, with an acknowledgment from the founder approving that evaluation and confirming its validity.
• A copy of the Bar Association card of the lawyer who is responsible for signing and certifying contracts before the Bar Association, provided that it is within the validity period.

How much are the fees for establishing a one-person company?

The investor who wants to establish a one-person company within the Arab Republic of Egypt needs to pay some of the required fees in order to start his work. The value of these fees is divided as follows:

• The amount of fees required to obtain a certificate of non-ambiguity in the trade name is approximately 110 Egyptian pounds.
• Fees for registering the company and registering in the commercial registry amount to 350 Egyptian pounds.
• The fees required for registration in the Commercial Syndicate are 125 Egyptian pounds.
• Fees for ratifying the articles of incorporation are paid at the Bar Association, and these are determined according to the value of the capital.
• Fees paid for registering the company at the Chamber of Commerce amount to 2 per thousand of the capital.
• The real estate registration fee is paid at a rate of 0.25 per thousand, taking into account that the maximum is 1,000 pounds and the minimum is 125 Egyptian pounds.
• There is a fee for documenting the company contract, which is a quarter of a percent of the total value of the company’s capital.

The most important features of a one-person company

Establishing a one-person company within the Arab Republic of Egypt has some advantages and positives that are unique to this type of company, the most prominent of which are the following:

• It is one of the forms of companies that is suitable for new projects, and its owner can earn a lot of money and gradually expand his business activity, until it merges with some other entities.
• The person in charge of the company can make important decisions with ease because he is in charge of the entire administrative aspect, and there are no restrictions that may be imposed on him and he has all the powers.
• The existence of this type of company reduces exposure to fraud because it prevents fictitious companies.
• If the company owner faces any problems or financial stumbles in his business and is exposed to bankruptcy, he only loses his capital, but his private money remains safe, because the financial liability of the owner of that type of company is separate from his private financial liability.
• It is possible to convert a one-person company into a company, unlike a sole proprietorship.

Read also: The most important steps for establishing an import and export company

Disadvantages of establishing a one-person company

After we have explained the advantages of establishing a one-person company, it is our turn to mention the most important disadvantages and drawbacks of this type of company, the most prominent of which are the following:

• The founder provides some personal guarantees when he deals with any other institution or company.
• The person in charge of administrative and financial control is only one person, and in most cases he is the owner of the company, and this is a great burden on him.
•  The one-person company is accused of having weak credit and therefore it is difficult to obtain loans.

How are the legal affairs of a one-person company managed?

In the context of our discussion about establishing a one-person company, we will explain how the legal affairs of this type of company, which is considered a common model for small and medium-sized businesses, are managed in order to adhere to the laws and maintain the efficient running of business, through the following basic points: 

Registration and legal establishment

Make sure that the company is registered in the relevant government records and obtains all the required licenses and permits. This requires some basic requirements such as naming and choosing a name for the company and ensuring that it does not conflict with other trademarks.

In addition, the company's articles of association and articles of incorporation must be drawn up, which specify the basic objectives and procedures.

Tax registration

Register with the relevant tax authorities and secure a tax number, submit tax returns periodically and comply with all tax laws. 

Contracts and Agreements Management

Drafting standard contracts for agreements with clients, suppliers and employees. This requires legal advice that is obtained by resorting to a specialized lawyer when drafting or reviewing important contracts to avoid ambiguous clauses.

Compliance with legal and regulatory requirements

Follow up on legal developments and work regulations in the industry to which the company belongs, and verify internal policies and procedures to ensure compliance with laws and legislation.

Intellectual property rights

It involves protecting the brand, securing patent rights, copyrights, and intellectual property, while ensuring that all contracts include clear clauses to protect the company’s intellectual property.

Dealing with judicial affairs and disputes

Knowing the basic legal procedures and how to file complaints and defend the company in the event of disputes, and using a lawyer when necessary to intervene in legal cases and disputes.

Human Resources Management

This means preparing clear and comprehensive employment contracts that include all rights and duties for both parties, while adhering to labor laws and ensuring compliance with local labor laws, including working hours, wages, and vacations.

Risk Management and Insurance

 Conducting a periodic analysis of potential risks that the company may face and taking preventive measures. 

Insurance

Obtain appropriate insurance such as liability insurance, health insurance, and property insurance.

See also: The difference between a limited liability company and a one person company

Frequently asked questions related to the steps of establishing a one-person company

Here are the most common questions asked by investors wishing to establish a one-person company in Egypt, including the following:

What is the minimum capital to establish a company?

The capital required to establish a company can vary between different countries according to local legislation.

For example, in many countries, a company can be established with as little as $1 in capital, but in reality, you may need a much larger amount to run the company efficiently and successfully.

Therefore, before establishing any company, it is important to research local requirements and consult with a lawyer or financial expert to ensure that you are in compliance with the regulations and legislation in force in the country in which you wish to establish the company.

How to start a company without capital?

Establishing a company without capital is a big challenge, but it is not impossible. Here are some ways you can use to establish a company without capital: 

• Relying on personal resources: You can use your skills and knowledge to build a company without the need for a large capital. For example, if you have a certain skill or experience in a certain field, you can use that to establish your own company.
• Partnerships: You can look for partners who are interested in the idea you want to implement, and who can support you financially or with their management expertise to establish the company.
• Crowdfunding: You can use crowdfunding platforms to collect donations from the public to support your idea and build your company.
• Seeking external funding: You can submit funding applications to relevant financial institutions or government agencies that support entrepreneurship.
• Benefit from government programs: You can search for government programs that support entrepreneurship and young people who want to establish companies without capital.

We mentioned the most important conditions for establishing a one-person company and the documents required for that. It is worth noting that this type of company differs from a sole proprietorship, as the first is considered a capital company while the second is an individuals company, so the founder of the one-person company can be a real person or a legal entity. While individual companies must be owned by a real person.

Sources:

mnasserlaw.com

sadanykhalifa.com