For new tech entrepreneurs: what company type should you register your entity as?
As an entrepreneur, it’s very important to choose the right company type for your business.
Feb 16, 2022
As an entrepreneur, it’s very important to choose the right company type for your business. This will help you have the right framework where you can operate as soon as possible.
The choice of the company type should be made based on criteria. These include: the number of partners you have, the initial capital amount required and the activity you wish to undertake.
The blend of your answers to all the above criteria will allow Hekouky to choose a company type for you. However, in the case of new tech businesses these entrepreneurs usually choose one of two company types: a single member company or an LLC.
We are going to give you an understanding of why this is the common choice entrepreneurs make. This is so you can see if an LLC or a single member company is the right fit for your company.
We have divided our response into the following sections: the partners’ limited liability, the flexibility in the initial capital’s amount, and the flexibility you have in choosing your company’s name.
What is the extent of the partners’ liability in your company?
Both a single member company and an LLC are limited liability companies. This means that even if the company incorporated cannot pay off its debts, the liability does not extend to the private money of the founder. This means that their personal finances are more secure and they are better able to protect their assets.
How many partners are needed to incorporate the business?
In a single member company, only one partner or one owner is allowed. However in an LLC the number of partners can range from 2 to 50 people, not more however.
What is the required capital amount you need to incorporate your company?
For the single member company type, the minimum initial capital required is 50 K EGP. Also, this amount needs to be deposited in a bank account until the incorporation is completed. However, in the case of an LLC the minimum initial capital necessary is quite small. In practice usually the absolute minimum required initial capital the GAFI representative allows for an LLC is 1K EGP. In addition, no bank deposit with the amount is necessary.
How can you choose your company name?
In a single member company, part of its name must include the functions of the company or its founder’s name.
For an LLC, part of the company’s name must also reflect it’s chosen purpose. For example, the company name could be: Zigzago for car repairs. The company name cannot be Zigzago on it’s own.