Business Setup

Types of companies in Saudi Arabia

Types of companies in Saudi Arabia

Foreign investors interested in how to start a business in Saudi Arabia must first select one of the business forms available under local legislation. The New Corporations Regulations, a legal statute that took effect on May 2, 2016, govern how corporations are registered and operated in Saudi Arabia. Each company type has advantages and duties, and investors should select a legal entity based on their business plans or cash, our team of company formation specialists in Saudi Arabia can guide you in selecting the best structure. 

Business Forms for Investors in Saudi Arabia

The New Companies Regulations provide the following all companies in Saudi Arabia types in Saudi Arabia, which are available to both domestic and foreign businessmen: 

company list in Saudi Arabia include:

  •  joint liability
  • establishment/sole ownership
  • limited partnership
  • joint venture
  • joint stock company
  • limited liability business. 

The legislation on Saudi Arabia company creation additionally specifies unique business forms suitable for foreign firms interested in participating on the local market, as follows: 

  • Branches 
  • Representative offices. 

Foreign businessmen may operate in Saudi Arabia’s commercial market if they get a licence from the Saudi General Investment Authority (SAGIA).

The licence – foreign capital investment licence – is available to all foreigners who want to become shareholders in a local business, and our team of company registration agents in Saudi Arabia can advise you on the documentation you need to submit to the institution.

Saudi Arabian commercial legislation also allows foreign-owned enterprises to have full foreign ownership, but only in certain business categories. We can also help with immigration to Saudi Arabia.

The establishment or sole trader in Saudi Arabia

The setting up or single proprietorship/trader is a type of company in Saudi Arabia that lacks a corporate structure and is best suited for small-scale operations. This business structure can be established by a single entrepreneur who will be personally liable for the venture’s debts and responsibilities if it is unable to meet them. On the other hand, it is subject to basic creation conditions, and the settlor will receive all earnings.

It should be emphasised that this business type can only be founded by Saudi or Gulf Cooperation Council (GCC) citizens, therefore it is not used by foreign investors that come here.

If you wish to start a business in Saudi Arabia, our experts can help you choose the best legal structure for your needs. You can also rely on our Saudi immigration lawyers for help with relocating.

The limited partnership in Saudi Arabia

The limited partnership is an appropriate Saudi entity for international entrepreneurs new to the country and unfamiliar with the local business market. Because its structure requires at least two members and it is an excellent path to residency, it is ideal for lone investors looking to establish themselves here.

If you want to create a limited partnership in Saudi Arabia, the major features are:

  • The company requires at least one director
  • One partner serving as a general member 
  • another as a limited member.

If you wish to start this type of business in Saudi Arabia, our officers can provide further information. Our expertise can assist you with establishing a business in Saudi Arabia as quickly as feasible. We can also provide immigration advice to Saudi Arabia.

You may trust our Saudi accountants for tax and VAT registration assistance for your business. The first method must be completed during the company registration process, however the second can be done later. If you require assistance, please contact us to see how we can help.

Limited liability company in Saudi Arabia  

The most popular legal entity for formation in Saudi Arabia is a limited liability company, which can be registered by a single shareholder. The business form can have up to 50 shareholders. There are no financial requirements for establishing this form of company, although municipal authorities may impose a capital requirement based on the specific business activity. 

Aside from limited liability Saudi Arabia companies, international investors prefer to register the following company types: 

  • Joint Stock Saudi Arabia companies
  •  Branch Offices. 

Our team of company registration consultants in Saudi Arabia can provide investors with additional information about the various business kinds available in the nation.

The joint stock company in Saudi Arabia

Saudi Arabia, like other nations, has a variety of company structures, and international investors interested in establishing major operations can opt for a joint stock company if they intend to enter this market.

The primary characteristics of this Saudi business form are:

  • There must be at least two stockholders and three directors.
  • There are nationality requirements for stockholders.

The joint stock corporation can be entirely owned by one or more natural persons or Saudi arabia companies, including foreigners, and can engage in a variety of operations. To establish such a business, clearance from the Saudi Ministry of Commerce is required.

Because it can be used for significant projects, the Saudi joint stock company must employ an auditor and provide audited financial accounts each year.

We also have a team of immigration lawyers in Saudi Arabia who can assist you with your transfer to the nation.

Foreign companies expanding their operations in Saudi Arabia

Saudi Arabia is a popular destination for multinational corporations looking to expand in the Middle East. These can establish their presence here through the branch and the representative or liaison office, as these sorts of establishments are completely controlled by the parent corporation. They can, however, establish subsidiaries that are recognised as domestic firms. In this last instance, the parent business will be the only stakeholder of the subsidiary. However, it can only exist as a limited liability business.

Two types of companies in Saudi arabia can establish branch offices:

Examples of branches include the of:

  • International Saudi Arabia companies 
  • GCC-based companies.

If you require information on these types of firms that can be registered in Saudi Arabia, you can contact our local advisors.

Share capital requirements when setting up a company in Saudi Arabia

The taxation structure and share capital requirements are two of the most significant factors to consider when forming any type of company in Saudi Arabia.

When it comes to the share capital required for incorporating the various types of firms in Saudi Arabia, the following are the most significant things to consider:

  • Capital requirements apply to establishments and partnerships.
  • A limited liability company requires a minimum of 27,000 USD or 100,000 SAR,
  • A joint stock company requires a minimum share capital of 134,000 USD or 500,000 SAR, which must be deposited gradually.

When it comes to taxes, the company is required to register with the Saudi Tax and Zakat Authority.

Taxation of the list of companies in Saudi Arabia in Saudi Arabia

The following are the principal taxes that must be paid in Saudi Arabia, regardless of the type of company that might be established:

  • The company tax rate is 20%.
  • an additional 5% remittance levy for branches.
  • The capital gains tax rate is similarly 20%.

Companies must file their tax filings within 120 days after the end of the financial year, which begins on January 1st and ends on December 31st. Any delay can result in penalties of 1% of revenue or 5% to 25%, depending on how late the reports were.

Please contact one of our specialists for assistance with the registration of a local corporation.  

Selecting the Perfect Company Type for Your Saudi Venture

Embarking on a business venture in Saudi Arabia involves a crucial decision-making process, with one of the initial and fundamental choices being the type of company structure to adopt. Each structure comes with its own set of advantages and disadvantages, making it imperative for entrepreneurs to carefully weigh their options based on their business goals and operational preferences.

Sole Proprietorship

Pros:

  • Simple and cost-effective to establish.
  • Complete control over decision-making.
  • Minimal regulatory requirements.

Cons:

  • Limited access to capital.
  • Personal liability for business debts.
  • Challenges in succession planning.
  • Sole proprietorships are ideal for small-scale enterprises where the owner seeks maximum autonomy and has limited capital requirements.

Partnership:

Pros:

  • Shared decision-making and responsibilities.
  • Potential for increased capital infusion from multiple partners.
  • Flexibility in structuring profit distribution.

Cons:

  • Shared liability among partners.
  • Potential for conflicts and disagreements.
  • Limited ability to attract investment compared to other structures.
  • Partnerships suit businesses with multiple owners looking to pool resources and share responsibilities.

Limited Liability Company (LLC):

Pros:

  • Limited liability protection for owners.
  • Flexible profit distribution.
  • Easier transfer of ownership.

Cons:

  • More complex than sole proprietorship or partnership.
  • May require more extensive documentation.
  • Potential for conflicts among members.
  • LLCs are suitable for businesses that desire a balance between liability protection and operational flexibility.

Joint Stock Company:

Pros:

  • Enhanced ability to raise capital through the sale of shares.
  • Limited liability for shareholders.
  • Clear separation between ownership and management.

Cons:

  • Stringent regulatory requirements.
  • Complex governance structure.
  • Dilution of ownership control.

Joint Stock Companies are recommended for larger enterprises with significant capital requirements and a need for diverse ownership.

Choosing the right company type for your Saudi venture is a pivotal decision that demands careful consideration. Evaluate your business goals, financial capacity, and risk tolerance to align with the most suitable structure. Seek professional advice to navigate the intricacies of local regulations and ensure compliance. By understanding the pros and cons of each company type, you can make an informed decision that sets the foundation for the success and sustainability of your business in the dynamic Saudi Arabian market.

FAQs

Q: What are the main types of company structures in Saudi Arabia?

A: The primary company structures in Saudi Arabia include Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Joint Stock Company. Each structure has distinct characteristics catering to different business needs.

Q: What is the key advantage of a Sole Proprietorship in Saudi Arabia?

A: Sole Proprietorships are advantageous for their simplicity and cost-effectiveness. Business owners have complete control over decision-making, and the setup involves minimal regulatory requirements.

Q: Can foreign investors establish a Sole Proprietorship in Saudi Arabia?

A: While foreign investors can establish a Sole Proprietorship, it is crucial to note that certain sectors may have restrictions or require specific approvals from relevant authorities.

Q: What distinguishes a Partnership from other company types in Saudi Arabia?

A: Partnerships involve two or more individuals sharing ownership and responsibilities. They are suitable for businesses with multiple owners looking to pool resources and share decision-making.

Q: What is the significance of Limited Liability in a Limited Liability Company (LLC)?

A: Limited Liability in an LLC means that the personal assets of the owners (members) are protected from business debts and liabilities. This structure provides a balance between liability protection and operational flexibility.

Q: Can foreign nationals be members of a Saudi Limited Liability Company?

A: Yes, foreign nationals can be members of a Saudi LLC. However, there may be specific ownership restrictions in certain sectors, and approval from relevant authorities may be required.

Q: What sets a Joint Stock Company apart in terms of ownership and capital?

A: Joint Stock Companies allow for the sale of shares to raise capital. They offer limited liability for shareholders and a clear separation between ownership and management. This structure is suitable for larger enterprises with substantial capital requirements.

Q: Are there specific industries where Joint Stock Companies are more commonly used in Saudi Arabia?

A: Joint Stock Companies are often preferred in sectors requiring significant capital investment, such as banking, telecommunications, and large-scale industrial projects.

Q: Can a company structure be changed after establishment in Saudi Arabia?

A: Yes, it is possible to change the company structure in Saudi Arabia. However, the process involves legal and regulatory considerations, and approval from relevant authorities may be required.

Q: What professional advice is recommended when choosing a company type in Saudi Arabia?

A: Seeking the guidance of legal and business professionals with expertise in Saudi Arabian regulations is highly recommended. They can provide valuable insights and ensure compliance with local laws during the company formation process.

Related Articles

Subscribe to our newsletter

Enter your email to receive our monthly newsletter

Popular Articles