Company Formation Processes in Saudi Arabia

Obtaining a Business License in Saudi Arabia

Requirements for Establishing a Company in Saudi Arabia

DETAILS	LLC	JSC	BRANCH
NUMBER OF SHAREHOLDERS	From 1 to a maximum of 50 shareholders.	A minimum of 2 shareholders is standard. A single-shareholder JSC requires a minimum capital of SAR 5,000,000.	Not applicable.
CAPITAL REQUIREMENTS	Determined by the Ministry of Investment (MISA) based on the business activity and ownership structure.	SAR 500,000 (or SAR 5,000,000 for a single-shareholder entity).	Typically SAR 500,000, but may be higher or lower depending on the specific activity.
LIMITED LIABILITY	Yes	Yes	No
IF LOSSES EXCEED 50% OF CAPITAL	Shareholders are not personally liable for the LLC's debts. They must convene within 90 days to pass a resolution to either dissolve the company or continue its operations. The decision must be officially published.	Shareholders are not personally liable for the JSC's debts. They must convene a general assembly within 45 days to decide whether to dissolve the JSC or increase its capital.	The liability of the head office is not limited to the branch's capital. If losses exceed 50% of the capital, the parent company must decide within 90 days whether to dissolve the branch or continue its operations.
CORPORATE TAX ON ANNUAL NET PROFIT	20%	20%	20%
ZAKAT RATE (Payable by GCC-resident shareholders only)	2.5%	2.5%	2.5%
GOVERNMENT CONTRACTS & TAX FILINGS	Eligible to bid for government contracts. / Annual tax return required.	Eligible to bid for government contracts. / Annual tax return required.	Eligible to bid for government contracts. / Annual tax return required.
ANNUAL FINANCIAL STATEMENTS	Required	Required	Required
APPOINTMENT OF AN AUDITOR	Required	Required	Required

Company Formation Process Timeline in Saudi Arabia

STEP	LLC	JSC	BRANCH
REGISTER COMPANY NAME	1-2 business days	1-2 business days	1-2 business days
APPLY FOR & OBTAIN MISA LICENSE	2-4 weeks (activity dependent)	2-4 weeks (activity dependent)	2-4 weeks (activity dependent)
REVIEW & APPROVE INCORPORATION DOCUMENTS	5 business days	5 business days	5 business days
NOTARIZE ARTICLES OF ASSOCIATION	1-2 business days	1-2 business days	Not applicable
PAY FEES & OBTAIN COMMERCIAL REGISTRATION (CR)	1 business day	1 business day	1 business day
OPEN CORPORATE BANK ACCOUNT	2-3 weeks	2-3 weeks	2-3 weeks
REGISTER OFFICE ADDRESS	Required	Required	Required
COMMERCIAL REGISTRY FILING	2 business days	2 business days	2 business days
REGISTER WITH CHAMBER OF COMMERCE	1 business day	1 business day	1 business day
REGISTER WITH MINISTRY OF LABOR	1 business day	1 business day	1 business day
REGISTER FOR SOCIAL INSURANCE (GOSI)	2-3 business days	2-3 business days	2-3 business days
REGISTER FOR TAX (ZATCA)	2-3 business days	2-3 business days	2-3 business days

1. Limited Liability Company (LLC)

The LLC is one of the most common legal structures chosen by foreign investors for establishing a company in Saudi Arabia. The registration process requires a minimum of one shareholder and a maximum of fifty. If the number of shareholders exceeds this limit, the LLC must be converted into a Joint Stock Company within one year. Shareholders can be natural persons, corporate entities, or a mix of both. This business structure is particularly favored by foreign investors looking to form joint ventures with Saudi citizens or local Saudi companies.

What Can a Saudi Arabian LLC Do?

An LLC is authorized to conduct the commercial activities specified in its approved Commercial Registration (CR). It can participate in public and private sector contracts, sponsor foreign employees for residency permits (Iqama), open a corporate bank account, issue invoices to clients, and make payments to suppliers.

What Are the Ownership and Capital Requirements?

While an LLC is not legally required to have a board of directors, many companies choose to establish one and incorporate this structure into their Articles of Association and bylaws.

There are no restrictions on the percentage of foreign ownership in an LLC. The personal liability of each shareholder is limited to their respective capital contribution. While there is no general minimum capital requirement by law, the specific paid-up capital amount will vary depending on the business activity and ownership structure. The Ministry of Investment of Saudi Arabia (MISA), formerly SAGIA, will determine the required capital upon application.

Specific minimum capital requirements determined by MISA include:

Trading (with a minimum 25% Saudi partner): SAR 7 million total, with a minimum contribution of SAR 20 million from the foreign shareholder.

Trading (100% foreign-owned): SAR 30 million, with a commitment to invest at least SAR 200 million within the first 5 years.

Service/Property Investment: Project value of SAR 30 million.

Service/Property Financing: Projects of SAR 200 million with at least 40% Saudi shareholding.

Service/Transportation (with a minimum 30% Saudi partner): SAR 500,000.

Service/Other Transportation (100% foreign-owned): SAR 10 million.

Contracting: SAR 500,000 (subject to specific revenue/asset value requirements).

MISA may impose additional requirements or require further approvals for company incorporation depending on the specific case.

How to Establish a Saudi Arabian LLC?

The process begins with an application to the Ministry of Investment (MISA). Once all legal documents are finalized and approved, a Commercial Registration (CR) certificate is issued. At this point, the LLC must complete all necessary government registrations and obtain any required external approvals. This post-incorporation phase involves various government filings and can take several weeks or months to complete, after which the LLC will be fully operational.

Key government registrations include:

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

Please note that this is not an exhaustive list of all registration requirements. Business and investment regulations in Saudi Arabia are subject to change. We strongly recommend that foreign businesses engage with professional consultants like World Company Setup to navigate the entire process and ensure full compliance with current regulations.

Best Practices for Operating a Saudi LLC

We recommend the following:

Obtain tax and corporate structuring advice from our consultants to confirm that the LLC is the optimal structure for your business model and corporate group.

Engage with World Company Setup Consultants to guide you through the proper compliance procedures for invoicing, accounting, bookkeeping, tax registration, and reporting in accordance with the Zakat, Tax and Customs Authority (ZATCA).

2. Foreign Company Branch

A foreign company can establish and operate a fully foreign-owned branch in Saudi Arabia. This entity type is another popular choice for foreign companies seeking to enter the Saudi market.

WHAT CAN A SAUDI BRANCH DO?

The commercial activities of the branch must mirror those of its parent company at the time of registration. Once established, a Saudi branch can conduct business within the scope of its license, enter into public or private sector contracts, sponsor foreign employees for residency, open a corporate bank account, and manage invoicing and payments.

What Are the Capital Requirements for a Saudi Branch?

The parent company must invest capital equivalent to that required for a subsidiary. Fulfilling the paid-up capital requirement by depositing it into a local Saudi bank is mandatory. The parent company retains full liability for all activities undertaken by its Saudi branch.

How to Establish a Saudi Company Branch?

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

The setup process is initiated with the Ministry of Investment (MISA). The branch's Commercial Registration is then issued by the Ministry of Commerce. Because a branch does not have its own Articles of Association that require approval, the setup process can be faster than that of an LLC or JSC.

It is advisable to seek tax and corporate structuring advice from our consultants to ensure that a branch is the most suitable option for your corporate group structure. An auditor must be appointed upon completion of the branch setup.

3. Joint Stock Company (JSC)

A Saudi Arabian Joint Stock Company is the equivalent of a public or public limited company. "Closed" JSCs are not listed on the stock exchange, whereas "Public" JSCs are traded on the Saudi Stock Exchange (Tadawul) and are subject to a much higher level of regulatory oversight. This structure is popular among large multinational corporations or companies already listed on other stock exchanges. Saudi company law mandates that if an LLC's shareholder count exceeds fifty, it must be converted into a JSC within one year. The additional regulations applicable to JSCs result in significantly higher compliance costs compared to LLCs.

What Can a Saudi Joint Stock Company Do?

A JSC can conduct the commercial activities defined in its approved CR, participate in public and private sector contracts, sponsor foreign employees, open a corporate bank account, manage invoicing and payments, and distribute dividends to shareholders.

What Are the Ownership and Capital Requirements of a Saudi JSC?

A minimum of two shareholders is required to establish a JSC. There is no maximum limit on the number of shareholders. At least three directors, who do not need to be Saudi citizens, must be appointed for the company's incorporation. Shareholders can be natural persons, corporate entities, or a combination. A register of shareholders must be filed with the Ministry of Commerce (MOC) and kept updated.

The minimum capital requirement to establish a JSC in Saudi Arabia is SAR 500,000. The Ministry of Commerce may approve the payment of this capital in installments. The capital of a JSC is divided into negotiable shares of equal value. The company is liable for all debts and obligations arising from its operations.

How to Establish a Saudi Joint Stock Company?

The establishment of a JSC is initiated with the Ministry of Investment (MISA). After all legal documents are completed and approved, the Commercial Registration (CR) certificate is issued.

Similar to the LLC setup, the post-incorporation phase involves various government filings and registrations. Completing this stage to ensure the JSC is fully operational can take several weeks or months.

Key government registrations include:

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

Please be aware that this is not a comprehensive list of all registration requirements. Saudi business regulations are continuously evolving. Foreign businesses should seek professional advice to ensure the chosen JSC structure is appropriate for their business model and to navigate the full registration process in compliance with current laws. An auditor must be appointed after incorporation is complete.

4. Technical and Scientific Services Office (TSO)

A Technical and Scientific Services Office is established to provide technical support to the parent company's agent or distributor in Saudi Arabia. A TSO is not permitted to engage in any direct sales activities and has no minimum capital requirement.

5. Establishment

A Saudi Arabian "Establishment" is a business structure similar to a sole proprietorship. This entity type has a single owner and is available only to citizens of Saudi Arabia or other Gulf Cooperation Council (GCC) nations. The owner of an Establishment is personally and fully liable for all debts and obligations the business may incur.