What is the difference between a sole proprietorship and a corporation? What is the importance of transforming institutions into companies?
In this article, we will explain to the owners of individual institutions, investors and entrepreneurs the difference between a sole proprietorship and a company, and the importance of converting institutions to companies in the Kingdom of Saudi Arabia.
A sole proprietorship is established by one person and he is responsible for it, and its ownership is limited to its founder, and the funds of a sole proprietorship are not separated from the private funds of its founder, while the company is established by a person or group of persons, and the ownership of the company is divided among the partners according to the proportion of the affiliated shares Each of them is in the capital, and the company has a financial liability independent of that of the partners.
The importance of converting a sole proprietorship into a company appears in that all the financial and legal obligations of the sole proprietorship rest with the owner of the establishment as he is the only person responsible for it, for its financing, and for the payment of any financial dues to the corporation, and he bears all legal obligations arising from non-payment of these entitlements, whether from The institution’s funds or from his own funds, in addition to the fact that the losses of the individual institution fall on the sole responsibility of its founder.
This is in contrast to what exists in the systems of various companies such as the system of a limited liability company, a simple partnership company, or a joint stock company, in which the partner does not bear any financial or legal obligations on the company except to the extent of his share in the company’s capital only, and without approaching his own money, as well as As for the company’s losses, they are distributed to the partners according to the amount of each partner’s share.
Thus, it is clear from the above that establishing a company is better than establishing a sole proprietorship, especially in terms of bearing losses and not exceeding them to the private properties of the partners, and the extent of the benefits that will accrue to the owners of institutions after converting them into companies, the most important of which is achieving continuity of commercial activity, in addition to increasing growth opportunities. By concluding deals with parties that prefer dealing with companies and do not prefer dealing with individual institutions.
If you want to convert an individual institution into a company, we are here to help you with that, and we provide you with all the necessary legal services to transform the institution into a company in the Kingdom of Saudi Arabia through an integrated team of specialized lawyers, including carrying out all the procedures for converting the institution into a company, and completing the required papers Obtaining the commercial register, preparing and drafting the company’s articles of incorporation, and documenting the company’s contract.
To request legal advice, we recommend Al Othman Lawyers and Consultants office for its specialization in this field.
And for free legal advice, do not hesitate to contact us at: 535008888
