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Today, establishing a sole proprietorship is one of the most important goals of young small investors who want to achieve excellence and stay away from everyday business and routine jobs

Many of them have sought to achieve this dream over the past years, especially after the Egyptian government's recent trends have increased to encourage investors and business owners to participate in improving Egypt's economic conditions

Accordingly, the Egyptian government amended the previous investment law to help Egyptian youth establish projects and establish a successful individual company, making it much easier than establishing a joint-stock company, which needs a long time, and making an IPO establish it

Unfortunately, some young people do not know how to set up a sole proprietorship so far. Today's article may greatly help them realize it and take a step towards establishing their own company

What is meant to set up a sole proprietorship?

It is a company owned by one person who engages in a commercial, professional, economic, agricultural, or industrial business. The company owner is primarily responsible for its financial liability so that he bears all payments due to the company, so it is sometimes called the “One Person Company.”

However, the company and its owner have separate financial liability from its members. The individual company can be converted into a joint-stock company through partners in solidarity with it.

There is a significant difference between a sole proprietorship a limited liability company. Two or more persons own limited liability companies, and each is responsible for the company’s profits and debts to the extent of their prior share of capital.

It belongs to partnerships. The owner of partnerships is responsible for all profits, losses, and debts from his funds. The particular establishment does not have a separate financial liability from its owner, nor can it be transferred from an establishment to a company. 

?What are the conditions for establishing a sole proprietorship

Of course, the Egyptian Investment Law did not leave it to everyone's experience but set out a set of conditions for establishing a single individual company that must be met before starting to establish the company, including:

The company is owned by a single natural person and is considered a merchant by Egyptian law.

The lowest value of the company's capital is 100,000 EGP. When establishing a sole proprietorship, it is placed on its bank account.

The applicant must be an adult, fully qualified, and at least 21 years old when applying for the company's establishment.

An investor can increase capital through shares of reserve transfer or make other shares.

The investor can reduce capital if it is less than 50,000 EGP. This is done by canceling some shares or reducing their nominal value.

With the constant encouragement of the State, many young people have moved to create their own individual company, and of course, everything has its advantages and disadvantages. Therefore, at the ECPA website, we tried to collect small investors' most important advantages and disadvantages due to establishing a sole proprietorship. 

What are the steps to establish a sole proprietorship in Egypt

The employer takes several sequential steps to become the owner of a sole proprietorship, which is more accessible than establishing a joint-stock company. An investor wishing to establish an individual facility in the Investment Authority must provide the required documents and follow the following steps to extract the commercial register, which proves to be the owner of a company individual.

This means that establishing a sole proprietorship is divided into two stages processing documents and applying for the record. 

A simplified video discussing the types of companies, the difference between each type, and legal advice related to company establishment services 

Features of a sole proprietorship

Of course, the Egyptian Investment Law did not leave it to everyone's experience but set out a set of conditions for establishing a single individual company that must be met before starting to establish the company, including:

The company is owned by a single natural person and is considered a merchant by Egyptian law.

The lowest value of the company's capital is 100,000 EGP. When establishing a sole proprietorship, it is placed on its bank account.

The applicant must be an adult, fully qualified, and at least 21 years old when applying for the company's establishment.

An investor can increase capital through shares of reserve transfer or make other shares.

The investor can reduce capital if it is less than 50,000 EGP. This is done by canceling some shares or reducing their nominal value.

With the constant encouragement of the State, many young people have moved to create their own individual company, and of course, everything has its advantages and disadvantages. Therefore, at the ECPA website, we tried to collect small investors' most important advantages and disadvantages due to establishing a sole proprietorship. 

?What are the steps to incorporate sole proprietorship

 

See the preliminary articles of incorporation form and fill in its data

In opening an account at the bank, the company’s owner shall provide a certificate stating that it has a unique commercial name that is not similar to other companies. This certificate is valid for only seven days

The company owner gets a free form from the Investment Services Center to incorporate sole proprietorship

He has to deposit the funds planned to be invested in a bank account inside its account. The bank freezes this account and does not conduct any financial transactions until the company owner extracts a commercial register for the new company

The bank sends a report to the Investment Authority to report that the company’s capital has been frozen. In addition, it is confirmed that the company’s name and existing data are matched

A form is issued to ensure that the itinerary is correct for the company profile

It is delivered with a request for publication within the investment sheet

The responsible employee reviews the submitted documents and ensures their integrity and completeness, and then enters the data into the initial contact form

The fees for incorporating sole proprietorship in Egypt at Bank of Alexandria are paid through payment permissions and paying the fees due to the Trade Union and receiving the payment receipt for each of them and photographing it in 3 copies

Delivery of payment permissions and three copies of the incorporation section

The owner of the company is eventually delivered a commercial register

In the event of a desire to change any item within the initial contract, the investor must first obtain approval from the General Investment Authority before changing it, following the text and obligation of the Egyptian Investment Law

What documents are required to

?set up a sole proprietorship

A copy of the investor’s ID or proof of his identity

Copies of the attorney certificates for incorporation if the applicant is an accounting office or agent of the investor

It is a declaration not to work in the country’s public sector or one of its companies or the public sector of business. It is provided by the investor, agent, joint partner, or non-partner manager

These are not all documents, but a set of documents are required to implement steps to establish a sole proprietorship.

Drawbacks of a sole proprietorship

The investor is fully responsible for the company’s debts, obligations, and repayment.

The owner is one individual, so the capital is limited by what the investor owns and cannot be easily increased.

The company is subject to the investor. If it continues under the management of a group of heirs, it is not considered sole proprietorship due to the number of owners. It may end with the expiration of the owner’s life.

The advantages offered by taxes are few compared to other companies.

The investor, the owner of a sole proprietorship, is prohibited from making an IPO either when established or increased its capital later through partners.

The owner cannot display ownership of the company in the form of shares or securities that accept sale and trade.

He cannot establish another individual company in his name.

The practice of borrowing, banking, and insurance business in individual companies faces difficulties due to their limited business.

One of the disadvantages experienced by a sole proprietorship is that it holds the owner responsible for its success or failure, making him constantly physically and psychologically pressured.

If you are an individual who has prior experience with establishing a sole proprietorship, please share it with us in the comments via your website, ECPA.

Establishing a sole proprietorship is not tricky, but it needs to have primary capital and study the field of work well, and have complete knowledge of the market of the product or service it will provide. If you are ready to do so, fully trust that the State will provide you with all the support it needs to make your company successful.

فريقنا - علاء الديبكي

Member of the Board of Directors for Legal Affairs