Company formation in Saudi Arabia in 2022: The company establishment in Saudi Arabia is based on different factors and parameters. For example who is the client – Saudi or foreigner, types of businesses- services/manufacturing/trading/etc. The company formation in KSA follows different parameters for male and female applicants. Company registration procedures in Saudi Arabia also depend on the types of companies because of the new Companies Law 2016. Types of companies ranging from – establishment, LLC, joint stock company, limited partnership, branch office, representative office, agency agreement, etc. Read the full article for all needful information related to company formation in Saudi Arabia.
We provide all necessary legal services related to pre and post company formation in Saudi Arabia for local or foreign clients both. We help from the beginning to company formation and thereafter for development of business irrespective of the business entity you choose in the Middle East. Let’s first know the reasons to start a business in Saudi Arabia.
Why company formation in Saudi Arabia – Reasons for business in KSA
There are a number of reasons why you should go for the formation of a company in Saudi Arabia to start a business. One of the most vibrant reasons for company formation in KSA is Vision 2030 of the Saudi Crown Prince. Under this vision the KSA is using its investment power to establish a more diverse and sustainable economy. It can be an integral driver of international trade by connecting three continents – Asia, Africa and Europe due to its strategic location to them. The other valid reasons for company formation in Saudi Arabia to establish businesses are given below:
- Crown Prince’s Vision 2030 for Saudi upliftment.
- The Saudi population is expected to grow to 38.38 million by 2025.
- The state annual budget is increasing because of new welfare schemes.
- The country’s gross domestic product (GDP) is also growing year to year.
- The country’s online market is expected to be 19.28 million consumers in 2022.
- 100% foreign-owned businesses were allowed in the Kingdom.
- The Saudi government has to maintain its subsidies for which citizens pay zero taxes, so it needs revenues from other sources like business firms.
- The state-owned companies distort the Saudi economy but private companies can be regulated for revenue generation.
- Private companies and businesses can better mobilize and use the country’s rich resources, etc.
But before starting the formation of a company for a business you should know which type of company is viable for you.
Types of company formation in Saudi Arabia
There are different types of companies to be registered for starting a business in Saudi Arabia. It depends on the clients’ choice which type of company they want to establish for their business as given below:
- The establishment (Proprietorship) in Saudi Arabia
- Limited liability company (LLC) in Saudi Arabia
- Joint stock company (JSC) in Saudi Arabia
Partnership – general and limited by shares (LP) in Saudi Arabia
- Branch office (BO) in Saudi Arabia
- Representative office (RO) in Saudi Arabia
- Agency agreement (AA) in Saudi Arabia
- The GCC branch company in Saudi Arabia
If you are interested in establishing any type of company from the list given above in Saudi Arabia, you can contact our legal consultant for company formation in Saudi Arabia. They will help you in all legal formalities to develop your company and flourish it along with the requirements of company formation in Saudi Arabia as given below.
Requirements of company formation in Saudi Arabia
Anyone whether new or old entrepreneur, local or foreigner who wants to set up a company in Saudi Arabia for starting a business must fulfill some requirements. They must have a registered address and a unique trading name before company formation in KSA. The other requirements are as follows:
- Type of operation/business with minimum number of shareholders, directors, and capital requirements.
- A foreign investor requires at least one shareholder and one director for private limited liability commercial registration in Saudi Arabia.
- At least 100, 000 SAR (approx. 26,700 USD) is required as a paid up value to the minimum share capital for an LLC formation in Saudi Arabia.
- The minimum share capital 500K SAR (approximately $ 134,000) for joint stock or public company registration process in Saudi Arabia.
- In case of general partnership, it needs at least two partners and at least one director with minimum share capital of 500,000 SAR.
- In case of limited partnership at least a minimum of 2 to maximum 50 partners with a minimum capital of 1 million SAR are required.
After requirements know the main thing i.e. the steps and procedures of company registration in Saudi Arabia.
10 steps for company registration procedure in Saudi Arabia
The company registration in Saudi Arabia is based on various steps and procedures to establish and run businesses for different types of entities. The company formation steps are
License from MISA (SAGIA): Foreign investors need to obtain a license by incurring specific fees. Their company documents are to be legalized by the Saudi consulate.
Reservation of company name: It can be done through the Ministry of Commerce and Industry (MCI) which is valid for 2 months.
Submission of Articles of Association (AOA): AOA is submitted to the Ministry of Commerce and Industry for authentication and approval.
Notarization of AOA: After the approval of AOA bearing the stamp of the Ministry of Commerce and Industry it gets notarized with a Notary public.
Bank account and deposit of capital: The company founders have to open a corporate account and deposit the share capital as paid up value.
License from the Municipality: The registered company has to obtain a business location license from the Municipality and registered with the post office “Wasel”.
Registration Fee: The company registration fee is paid at the unified center. It cost around 500 SAR as registration fee and 650 SAR for publication of summary articles of association (AOA).
Certificate of registration: It is obtained within 2 days of application and submission of approved documents to the Ministry of Commerce and Industry (MCI) after requirements are fulfilled and all the documents are found correct.
Company signatories and seal: Company signatories are designated with company seal.
Chamber of commerce (COC) membership: Membership registration is obtained after paying its fee of 2000 SAR.
Registration with Ministry of Labor: It is registered with the Ministry of Labor by submitting a certificate of registration, AOA, certificate of COC with attested signatory, etc.
Registration for insurance: It is mandatory to register with the General organization for social insurance as per Saudi law.
Registration with the department of Zakat: Zakat is a religious tax assessed on taxable income of certain assets.
There are many resources other than oil and gas which are unexplored in Saudi Arabia. If businesses started after company formation or registration in Saudi Arabia by utilizing these resources there are huge scope, for example in infrastructure, finance, services sector, communication and so on. Thus huge opportunities of trade and business are available in Saudi Arabia, to have it first contact our Fahad Al-tamimi business development consultant.
Frequently Asked Questions (FAQs)
Q. How can I incorporate a company in Saudi Arabia?
Ans. Go through the heading above: “10 steps for company registration procedures in Saudi Arabia”.
Q. Can a foreigner own a company in Saudi Arabia?
Ans. Non-Saudi and other foreigners are now permitted 100% ownership of their company in the Kingdom to establish and run business in Saudi Arabia for enhancing the Kingdom’s economic potential under Vision 2030.
Q. How much does it cost to open a company in Saudi Arabia?
Ans. You can see it under heading “Requirements of company formation in Saudi Arabia”
Q. Can we do online business in Saudi Arabia? OR Is home-based business legal in KSA?
Ans. None of the home-based businesses is legal in Saudi Arabia. The online or home-based businesses require certain licenses to be obtained from the Ministry of Commerce for their operation.
Q. What are the types of companies in Saudi Arabia?
Ans. The types of companies which can be established in Saudi Arabia are: joint liability companies, limited partnership companies, joint ventures, joint stock companies and limited liability companies (LLCs).