BUSINESS LICENSE TYPES
IN SAUDI ARABIA

REQUIREMENTS FOR ESTABLISHING A SAUDI COMPANY

PROCESS FOR ESTABLISHING A SAUDI COMPANY

1. LIMITED LIABILITY COMPANY (LLC)

An LLC is a one of the most common legal entities preferred by foreign investors to set up a company in Saudi company. A minimum of one shareholder and not more than fifty shareholders is required for the business registration process. If the shareholder count exceeds fifty, the LLC must be converted to a Joint Stock Company within a year. Shareholders may be natural persons, corporate entities, or a combination to form an LLC. This corporate vehicle is favoured by foreign investors looking to enter joint ventures with individual Saudi nationals or Saudi companies. 

WHAT CAN A SAUDI LIMITED LIABILITY COMPANY DO?

A limited liability company can engage in the business activities which are described under the approved Commercial Registration, participate in public or private sector contracts, sponsor foreign employees for residency, obtain a corporate bank account and invoice customers and pay suppliers etc. 

WHAT ARE THE OWNERSHIP & CAPITAL REQUIREMENTS FOR A SAUDI COMPANY?

The LLC is not required to have a board of directors. However, many companies decide to establish a board and integrate this requirement into their Memorandum and Articles of Association. 

There is no limitation on the percentage of foreign ownership for an LLC. Personal liability of each shareholder or partner is limited to the individual shareholders contribution to the share capital.  Since there is no legislative minimum capital requirement. Paid-up capital amounts will vary depending on the business activity and ownership structure. The Ministry of Investment of Saudi Arabia (MISA) will determine the amount of capital upon application. 

Specific minimum capital is prescribed by Ministry of Investment of Saudi Arabia (MISA):

• Commercial (with minimum 25% Saudi partner): SAR 7 million and a minimum contribution from the foreign shareholder of SAR 20 million and
• Commercial (100% foreign): SAR 30 million and commitment to invest at least SAR 200 million over the first 5 years.
• Service/property investment project value SAR 30 million
• Service/property financing projects SAR 200 million with 40 percent Saudi shareholding
• Service/transport (with minimum 30% Saudi partner) SAR 500,000
• Service / Other transport (100% foreign) SAR 10 million
• Contracting: SAR 500,000 (but have revenue/asset value requirements)

Ministry of Investment of Saudi Arabia (MISA) may request additional requirements or approvals for company incorporation. 

HOW TO SETUP A SAUDI LIMITED LIABILITY COMPANY?

Incorporating an LLC is initiated at the Ministry of Investment of Saudi Arabia. Once all the company legal documents are finalized, the Commercial Registration (CR) certificate is issued. At this point the LLC is required to fully complete all government registrations and external approvals in Saudi Arabia. Post company incorporation involves several government files and registrations, and this can take several weeks or months to completed enabling the LLC to be fully operational. 

The main Saudi government registrations include:

• Ministry of Human Resources and Social Development (HRSD)
• General Organization of Social Insurance (GOSI)
• Zakat, Tax and Customs Authority (ZATCA)
• National Address (SPL)

Note the above is not a complete list of Saudi government registration requirements. Saudi business and investment regulations are continuously changing. We recommend foreign businesses to engage with Creation Business Consultants to complete the entire process guaranteeing your business will comply with up-to-date regulations.

WHAT PRACTICES SHOULD BE CONSIDERED FOR OPERATING A SAUDI LLC?

It is recommended to:

• Seek tax and corporate structuring advice from our consultants to ensure the LLC structure is correct for your business model and group structure;

• Engage with Creation Business Consultants to guide you on the correct compliance processes for invoicing, accounting, bookkeeping, tax registration and reporting as per Zakat, Tax and Customs Authority (ZATCA) ; and 

• Appoint an auditor post company formation.

2. BRANCH OF A FOREIGN COMPANY 

A foreign company can setup and operate a foreign owned Saudi branch office. This entity type is also preferred by foreign companies to enter the Saudi market. 

WHAT CAN A SAUDI BRANCH DO?

Upon registration the branch business activities must match the parent company. Post setup the Saudi branch can only engage in commercial activities within the license’s scope, participate in public or private sector contracts, sponsor foreign employees for residency, obtain a corporate bank account, invoice customers and pay suppliers etc. 

WHAT ARE THE CAPITAL REQUIREMENTS FOR A SAUDI BRANCH?

The company must deposit an amount equivalent to the capital required for a subsidiary. It is mandatory to complete the paid-up capital requirement and deposit this to a local Saudi bank. The parent company adopts full liability for the business activities the Saudi branch participates in. 

HOW TO SETUP A SAUDI BRANCH?

To form a Saudi branch office, you must have an existing company in another country. The Saudi branch office is 100% owned by the foreign investor (parent company). 

Incorporating a Saudi branch is initiated with the Ministry of Investment of Saudi Arabia (MISA). The Ministry of Commerce and Industry issues the Commercial Registration for the branch. The branch setup may be quicker than an LLC or JSC since there are no reserve requirements or Articles of Association to be approved. 

It is recommended to seek tax and corporate structuring advice from our consultants to ensure forming a Saudi branch office is the correct course for your company group structure. An auditor must be appointed once the branch setup is finalized.

3. JOINT STOCK COMPANY (JSC)

Saudi joint stock is the equivalent of a publicly listed company. Closed JSC are unlisted, public JSC is listed on the Saudi Stock Exchange and are subject to a much higher degree of oversight. This company setup structure is popular with multinational companies or companies that are already publicly listed on other stock exchange markets. The company laws in Saudi states if the number of shareholders exceeds more than fifty in a limited liability company must be converted to a joint stock company within a year. Further regulations imposed on JSCs increase compliance costs considerably as compared with LLCs.

WHAT CAN A SAUDI JOINT STOCK COMPANY DO?

The JSC can engage in the business activities which are described under the approved Commercial Registration, participate in public or private sector contracts, sponsor foreign employees for residency, obtain a corporate bank account, invoice customers, pay suppliers, and disburse dividends etc. 

WHAT IS THE OWNERSHIP & CAPITAL REQUIREMENTS FOR A SAUDI JOINT STOCK COMPANY?

For a Saudi joint stock company setup, a minimum of two shareholders are required. There is no maximum number of shareholders. At least three directors (can be non-Saudi residents) must be appointed for the company incorporation. Shareholders may be natural persons, corporate entities, or a combination to form a Saudi joint stock company. The shareholder register must be lodged with the Ministry of Commerce (MOC) and updated as required.

The minimum share capital requirement to incorporate a JSC in Saudi Arabia is SAR 500,000. The Ministry of Commerce and Industry may approve for the capital to be paid in stages. The capital of this entity is divided into negotiable shares of equal value and are typically provided via share certificates.  A joint stock company is liable for debts and liabilities arising from its activities. 

HOW TO SETUP A SAUDI JOINT STOCK COMPANY?

Incorporating a Saudi joint stock company is initiated at the Ministry of Investment of Saudi Arabia (MISA). Once all the company legal documents are finalized, the Commercial Registration certificate is issued.

Like the LLC set up, the post incorporation involves several government files and registrations, and this can take several weeks or months to be completed to enable the JSC to be fully operational. 

The main Saudi government registrations include:

• Ministry of Labor and Social Development (MLSD)
• General Organization of Social Insurance (GOSI)
• Zakat, Tax and Customs Authority (ZATCA)
• Local business address (Wasel)

Note this is not a complete list of Saudi government registration requirements. Saudi business and investment regulations are continuously changing. We recommend foreign businesses engage with Creation Business Consultants to complete the entire process guaranteeing your business will comply with up-to-date regulations.

It is recommended to seek tax and corporate structuring advice from our consultants to ensure the JSC structure is correct for your business model and group structure. An auditor must be appointed once the company formation is completed.

4. TECHNICAL AND SCIENTIFIC SERVICES OFFICE (TSO) 

Technical and Scientific Services Offices are meant to provide technical support to the parent company’s Saudi Arabian agent or distributor. TSO is not permitted to carry out any sale activities and there is no minimum capital requirement.

5. THE ESTABLISHMENT 

The Establishment structure for a Saudi company is similar to sole proprietorship in other regions. This company type has a single owner and is only eligible to Saudi or a GCC nationals. The company owner of an Establishment is personally liable for any debts the business may accumulate. 

WHAT CAN A SAUDI ESTABLISHMENT COMPANY DO?

This company can engage in the business activities which are described under the approved Commercial Registration, participate in public or private sector contracts, sponsor foreign employees for residency, obtain a corporate bank account and invoice customers and pay suppliers etc.