It’s essential for anyone intending to start a company, to select the most appropriate business structure in Saudi Arabia. The economy of the kingdom, its geographical position, and the favorable conditions for business development have fostered a high interest in entrepreneurs and investors in the country. However, before utilizing the higher-level business concepts that will be discussed later in the paper, it is prudent to illustrate the existing business structures, what is needed for a company’s setup, and the procedure involved in registering a company in Saudi Arabia.
Types of Business Structure in Saudi Arabia
Regarding establishing your business in KSA, choosing the proper legal structure is one of the important steps that must be undertaken to achieve the business purpose and comply with the existing laws of the target market. The most common forms of business organization in Saudi Arabia are:
Sole Proprietorship:
Ownership: Owned by one individual only.
Liability: Liability of the owner is unlimited.
Suitability: Suitable for tiny businesses or single-handed persons running a business.
Business License in Saudi Arabia: The owner is supposed to apply for a registration certificate for business operations.
Limited Liability Company (LLC):
Ownership: One or several shareholders can own either sole or non-sole as circumstances permit, as foreign shareholding participation is permitted.
Liability: The liability of each shareholder is restricted to the amount invested in capital shares.
Suitability: Foreign investors are attracted to LLC because of the limited liability and flexibility that combine the features of a corporation with those of a partnership.
This type disregards a hassle-free business setup. This requires a minimum capital investment and compliance with some rules.
Joint Stock Company (JSC)
Ownership: Shareholders own portions of the company, thus being the companies/debentures which are saleable.
Liability: Shareholder’s share in the company is the only extent for their liability.
Suitability: Appropriate for growth-oriented businesses or businesses aspiring to list in the stock exchange.
More capital and regulation are needed from the business perspective.
Branch Office:
Ownership: A foreign corporation can set up a branch in the Kingdom of Saudi Arabia.
Liability: All activities of the branch are under the responsibility of the parent company.
Suitability: The best option for foreign businesses aiming to have an operational visa in KSA without creating a legal entity.
The Foreign Investment license is from the Ministry of Investment for Saudi Arabia (MISA).
Representative Office:
Ownership: A foreign investor is allowed to establish a representative office in KSA.
Liability: The ultimate liability lies with the holding company.
Suitability: Availability of this option is for companies wishing to conduct market intelligence or business promotion without actual sale of products or services.
Cannot engage in trade unless special licenses are obtained.
Procedure for Register a company in Saudi Arabia
Most likely, your preferred business structure has already been decided. It is time to move on to the company registration steps in Saudi Arabia. Here’s a general outline:
Choose the Business Activity: Precisely articulate the kind of business that you plan to run since different rules govern different activities.
Reserve a Trade Name: Area where you must find an available trade name – determining such from the list compliant with the Saudi naming rules.
Draft the Articles of Association: This document specifies the objectives or reason for incorporation, owners and managers of the company.
Necessary Licenses: Depending on your business type, you may be required to obtain various licenses from government agencies like MISA or the Ministry of Commerce.
Chamber of Commerce: All companies are expected to have a mandatory registration with the local branch of the Chamber of Commerce.
Open Bank Account: The company’s capital, which is legally required to be deposited, must also be placed in a local bank account.
Business License: Last but not least, apply for a business license in Saudi Arabia to conduct your business legally.
Choosing the business structure is the first and most crucial step in building a business in Saudi Arabia. Even if you are a local entrepreneur or a foreign investor, knowing the business types, getting registered, and acquiring the prerequisites mentioned above for running the company will ease setting up a company in Saudi Arabia.
If you need help with anything, like choosing proper business structure or applying for the necessary business license, Helpline group will help you, which provides detailed services to help people set up their new businesses in Saudi Arabia. With their help the process will be easy.
