How to Start a Limited
Liability Company
(LLC) in Saudi Arabia?
Establishing a Limited Liability Company (LLC) in Saudi Arabia
has become one of the most popular choices for
entrepreneurs and investors willing to setup business in
the KSA.
But an LLC formation in Saudi needs to be done right, and
investors must ensure that they meet legal requirements and
criteria for having their LLC company here. This article gives
you a comprehensive overview of the steps, requirements,
and considerations for starting an LLC in Saudi Arabia.
What is an LLC in Saudi Arabia?
An LLC is a type of legal entity that limits the liability of its
shareholders to the extent of their shareholdings. It is a
flexible and common structure for small to medium-sized
businesses and is well-suited for joint ventures between local
and foreign investors.
Key features of an LLC in Saudi Arabia include:
Limited liability for shareholders.
A minimum of two and a maximum of 50
shareholders.
Profits distributed as per the ownership structure.
Advantages of Starting an LLC in Saudi Arabia
- Full Foreign Ownership: In most sectors, foreign
investors can now own 100% of an LLC, eliminating the need
for local sponsors in many cases.
- Access to Government Initiatives: LLCs can benefit from
grants, loans, and other support provided to private
companies under Vision 2030.
- Wide Business Scope: LLCs can operate across different
industrial sectors, including trading, consulting, and
manufacturing.
- Legal Protections: LLCs are governed by Saudi Arabia’s
Company Law, ensuring a well-defined legal framework.
- Ease of Operations: An LLC offers flexibility in
management and profit distribution.
Step-by-Step Guide to Starting an LLC in Saudi Arabia
1. Choose Your Business Activity and Sector
Before starting an LLC, determine the nature of your
business. Certain sectors, like telecommunications, may have
specific restrictions or licensing requirements.
Key Consideration: Ensure your business activity aligns
with Saudi Arabia’s positive investment list. Some activities
may still require a local partner or specific government
approvals.
2. Select a Business Name
Your LLC’s name must comply with Saudi naming regulations.
Once you finalize a name,
Avoid names that are offensive or religiously
inappropriate.
Ensure the name is unique and not already
registered.
Register your proposed business name with the Ministry of
Commerce (MOC).
3. Shareholder and Management Structure
An LLC in Saudi Arabia must have at least two shareholders.
These can be individuals or corporate entities. Decide the
ownership percentages and capital contributions for each
shareholder. Other requirements of the structure include:
- Management: At least one manager, who need not be a
Saudi national.
- Auditor and Supervisory Board: Required for LLCs with
more than twenty shareholders.
- Local Office: Mandatory for maintaining legal compliance.
- Supervisory and Auditing Obligations: LLCs with over
twenty shareholders must establish a supervisory board
comprising at least three members. Annual financial audits
must be conducted by a licensed auditor.
4. Capital Requirement:
The minimum share capital required varies by industry. In
most sectors, the minimum capital is SAR 500,000, but this
can be higher for certain regulated activities.
5. Draft and Notarize Articles of Association (AOA)
The AOA outlines the LLC’s structure, purpose, and
governance. It should include the following details:
Business activities.
Shareholder details and capital contributions.
Profit distribution ratios.
Management structure and decision-making
processes.
The AOA must be notarized by a certified Saudi notary
public.
6. Obtain a Commercial Registration (CR)
The Commercial Registration (CR) is issued by the Ministry of
Commerce (MOC) and serves as the legal license to operate
your business in Saudi Arabia. The list of required documents
for CR application include:
Drafted and notarized AOA.
Shareholder identification (passport copies or
company registration documents for corporate
entities).
Proof of capital deposit in a Saudi bank account.
Evidence of the company’s physical office address in
Saudi Arabia.
7. Register with the General Authority for Zakat and
Tax (GAZT)
All LLCs must register with GAZT to obtain a Tax Identification
Number (TIN). This is essential for filing taxes, including:
Corporate tax (20% for foreign-owned entities).
Value Added Tax (VAT) at 15% if your turnover
exceeds SAR 375,000 annually.
8. Get Licenses and Approvals
Depending on your industry, you may need additional
permits or licenses from specific regulatory bodies. For
example:
The Saudi Arabian General Investment Authority
(SAGIA) issues foreign investment licenses.
The Saudi Food and Drug Authority (SFDA) regulates
businesses in the food, pharmaceutical, and
cosmetics sectors.
9. Open a Corporate Bank Account
Once your LLC is registered, you must open a corporate bank
account in Saudi Arabia. Banks require:
Commercial Registration.
Tax Identification Number (TIN).
Identification of authorized signatories.
10. Apply for Employee Visas
If you intend to hire expatriates, you must apply for
employee visas through the Ministry of Human Resources and
Social Development (MHRSD). This includes:
Work permits.
Residency permits (Iqama) for employees and their
dependents.
Make sure your LLC complies with Saudi labor laws, including
the Nitaqat program, which mandates certain levels of Saudi
national employment.
Costs of Establishing an LLC in Saudi Arabia
The cost of establishing an LLC in Saudi Arabia depends on
several factors including your operating industry, location,
and business size. Key expenses include:
SAGIA licensing fees (for foreign-owned businesses).
Notarization and translation fees for documents.
Office space leasing costs.
Annual license renewal fees.
Legal and Regulatory Considerations
- Corporate Taxation:
Foreign-owned LLCs are subject to a 20% corporate tax rate
on profits.
- Zakat:
Saudi-owned LLCs and joint ventures must pay Zakat, a
religious wealth tax calculated at 2.5% of the company’s total
assets.
- Economic Substance Regulations (ESR):
LLCs engaged in certain activities must demonstrate
substantial economic presence in Saudi Arabia.
- Compliance:
Businesses must align with regulations supporting economic
diversification like Saudization quotas and sustainability
practices.
How Experts Can Simplify LLC Formation in Saudi Arabia?
Partnering with professionals like Nimbus Corporate Services
can significantly simplify the LLC formation process and
here’s how it can happen.
Document Preparation: Drafting and notarizing
Articles of Association (AoA) and Memorandum of
Association (MoA).
Investment Licensing: Ensuring compliance with
SAGIA requirements and expediting approval.
Bank Account Setup: Assisting in opening
corporate bank accounts.
Tax and Regulatory Compliance: Handling
registrations with GAZT and local municipalities.
Final Thoughts
Starting an LLC in Saudi Arabia is a strategic move for
businesses seeking to capitalize on the Kingdom’s booming
economy and investor-friendly reforms. By following the
outlined steps, ensuring regulatory compliance, and
leveraging the resources provided by the Saudi government,
you can establish a strong presence in this thriving market.
Are you ready to take the next step toward setting up your
LLC in Saudi Arabia? Let the experienced consultants
of Nimbus Corporate Services guide you through the
process and ensure your business is built on a solid
foundation.
