Business Setup

Forming a Limited Liability Company in Saudi Arabia

Forming a Limited Liability Company in Saudi Arabia

Foreign investors looking to establish a company in Saudi Arabia often opt for a limited liability company (LLC), the most common business structure for incorporation. An LLC in Saudi Arabia can be established with a minimum of one shareholder and one director. A key advantage of this business form is that shareholders’ liability for the company’s debts is limited to the amount they have invested in the company’s capital. For assistance with the registration of an LLC, our team of company formation experts in Saudi Arabia is available to provide legal advice. Contact us for guidance on both company formation and immigration to Saudi Arabia.

The Saudi limited liability company according to the Company Law

The primary legislation governing the incorporation of various types of legal entities in Saudi Arabia is the Company Law, under which the limited liability company (LLC) is a popular choice. There are two types of LLCs in Saudi Arabia:

  • Private LLC
  • Public LLC

The private LLC is preferred due to its quicker and simpler registration process with the Saudi Companies House.

Significantly, the Company Law was updated in 2015, with further amendments in 2018. Key features of an LLC under this law include:

  1. It has a distinct legal personality separate from its shareholders.
  2. There are limitations on the duration of businesses established in this form under the new law.
  3. Several documents are required for LLC registration.
  4. The business must have a local office in a Saudi Arabian city.
  5. A special license is necessary if the business has foreign ownership.
  6. At least one shareholder and one director are mandatory.

If you are considering an LLC to start a business in Saudi Arabia, our company registration advisors offer specialized services to assist you. We aim to help you establish your business in the shortest possible time.

Bookkeeping services in Saudi Arabia

Bookkeeping is a critical and often time-consuming aspect of business accounting, particularly for larger enterprises. Our accountants in Saudi Arabia can manage your bookkeeping needs, ensuring that all accounts payable and receivable are accurately maintained. Contact us to avail of our bookkeeping services.

Company officers in an LLC in Saudi Arabia

An LLC in Saudi Arabia must have at least one shareholder, who can be either a natural person or another corporation, and at least one director. If there are more than 20 shareholders, a Board of Directors must be appointed. Additionally, if the number of shareholders reaches three, a Supervisory Board is required to oversee the director’s activities. The maximum number of shareholders in an LLC is 50.

Recent legislative changes have impacted shareholder liability, notably that shareholders are no longer personally liable for the company’s debts if the company incurs losses amounting to at least 50% of its share capital, as was the case prior to 2018. In the event of debt recovery, creditors can only claim amounts from the net profits distributed to the shareholders, subject to a legal judgment.

The simplified procedures introduced by these legislative changes have increased the popularity of LLCs in Saudi Arabia. If you are planning to launch a business, including a startup, an LLC is a viable option. Our officers are ready to assist you with the incorporation process.

Capital of an LLC in Saudi Arabia

Business forms in Saudi Arabia have varying capital requirements dictated by local legislation. While the general rule is that there are no minimum share capital requirements for forming an LLC, specific conditions can apply based on the company’s activities. For example, in 2024, the Saudi Arabian General Investment Authority (SAGIA) mandates a minimum share capital of SAR 1 million for LLCs with industrial licenses. Additionally, Saudi LLCs must allocate 10% of their net profits each financial year to statutory reserves. Our team of company registration specialists in Saudi Arabia can provide detailed guidance on these requirements.

An LLC is an excellent option for foreign entrepreneurs considering relocation to Saudi Arabia, and our immigration lawyers are available to assist with this process.

How to determine the share capital of LLCs in Saudi Arabia

Determining the share capital is a critical step when establishing a company in Saudi Arabia. For an LLC, consider the following:

Foreign investors must provide a minimum share capital of SAR 100,000 (approximately USD 26,000) under the Foreign Investment Act.

If the LLC operates in industrial or agricultural sectors, the minimum share capital requirement increases to USD 5 million (around SAR 1,333,000).

An LLC requiring a SAGIA license must have a minimum share capital of SAR 500,000 (approximately USD 10,000).

Our company formation agents are available to provide comprehensive information on the specific share capital requirements for setting up an LLC in Saudi Arabia.

You may Also Read: Can a Foreigner Own a Business in Saudi Arabia

The foreign capital investment license in Saudi Arabia

Foreign investors looking to establish ventures in Saudi Arabia must secure a license from the Saudi Arabian General Investment Authority (SAGIA). This step is integral to the company formation process and must be completed before the LLC can be officially incorporated.

The steps for opening an LLC in Saudi Arabia are as follows:

  1. Prepare the incorporation documents, including a business plan.
  2. Apply for the foreign capital investment license (required for non-Saudi and non-GCC investors).
  3. Obtain the Certificate of Registration.
  4. Open a company bank account and deposit the share capital.
  5. Register for taxation and with the municipality.
  6. Apply for the necessary business licenses.

Generally, the process of setting up an LLC in Saudi Arabia can take around two months for foreign entrepreneurs, primarily due to the requirement to obtain the SAGIA license. To avoid delays, it is advisable to start the registration procedures promptly. Our specialists are available to ensure a smooth incorporation process, handling the preparation of necessary documents to get your business up and running efficiently.

Once incorporated, our team of accountants can provide services to ensure your company remains compliant with all regulations.

You may Also Read: Establishing Regional Headquarters in Saudi Arabia: Navigating Tax Incentives and Compliance

Register an LLC in Saudi Arabia in 2024

In 2024, one of the initial steps for setting up an LLC in Saudi Arabia is to obtain a company name, which must be registered with the Ministry of Commerce and Industry.

The incorporation process involves drafting the company’s articles of association and submitting them to the Unified Center/Companies Department under the Ministry of Commerce and Industry for authentication. This process can be completed online. After the Ministry has stamped the articles of association, they must be notarized at a public notary.

Additionally, you will need to open a corporate bank account, which becomes operational once the company receives its Certificate of Registration. The bank account is essential for depositing the company’s share capital.

Why set up an LLC in Saudi Arabia

Estimates at the beginning of the year project a 1.5% real GDP growth for 2024. If oil production increases to 9.5 million barrels per day, a 2% decrease in real oil GDP might occur. However, with eased monetary policies and successful structural reforms—such as increased foreign direct investment and a rise in tourist arrivals—the non-oil sector could grow by 3% to 4%. This growth is significant, even if Vision 2030 doesn’t achieve its highest non-oil sector growth targets, as a 3% to 4% expansion would be a positive outcome, especially with a continued reduction in unemployment.

Other incorporation requirements include registration with the Ministry of Labor and the tax authorities in Saudi Arabia. Foreign investors can reach out to our team of consultants for assistance with LLC incorporation. Our immigration lawyers are also available to support your relocation efforts.

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