Entrepreneurs starting alone often face a dilemma: Should I register as a Sole Proprietorship (Individual Establishment) or a One Person Company (OPC)?
1. The Concept of Liability
- Sole Proprietorship: The owner has unlimited liability. If the business debts exceed its assets, the creditors can seize the owner's personal house, car, or savings.
- One Person Company (OPC): It is a limited liability entity. The owner's risk is limited only to the company's capital. Personal assets are safe (unless fraud involves personal assets).
2. Capital Requirements
- Sole Proprietorship: No minimum capital. Very cheap to set up.
- OPC: Requires a minimum capital of 1,000 EGP. The capital must be fully paid.
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Compare Company Types3. Dealing with Banks and Contracts
An OPC is perceived as a more formal corporate structure (a "Company"). It has its own legal personality separate from the owner, which often makes it easier to sign large B2B contracts or enter tenders compared to a Sole Proprietorship.
4. Taxes
- Sole Proprietorship: Subject to individual income tax brackets (progressive).
- OPC: Subject to Corporate Income Tax (currently flat rate of 22.5%).
Verdict: If you want to protect your personal assets and plan to scale, the OPC is the superior legal choice.