Start a Limited Liability Company in Saudi Arabia
Updated on Tuesday 29th June 2021
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Foreign investors who are interested in setting up a company in Saudi Arabia can open a limited liability company, the most common business form chosen for incorporation. The limited liability company (LLC) can be set up with only one shareholder and one director. One of the main advantages of the LLC in Saudi Arabia is that the company’s shareholders are liable for the debts incurred by the respective business only in the amount they have participated in the company’s capital. Investors may receive legal advice on the registration of an LLC from our team of agents in company formation in Saudi Arabia.
The Saudi limited liability company according to the Company Law
The Company Act is the main law that provides for the incorporation of various types of legal entities, among which the limited liability company is one of the most employed in Saudi Arabia. There are two types of LLCs here:
- the private one;
- the public one.
Among these, the private limited liability company is the most employed because of the faster and simpler registration procedure with the Saudi Companies House.
What should be noted is that the Company Law was renewed in 2015 and a new amendment was brought to it in 2018. According to Act, here are the main characteristics of this legal form:
- it has a distinct legal personality from its shareholders;
- under the new law, there is a limitation on the life of business created under this form;
- there are several documents that need to be prepared when registering an LLC;
- the business must have a local office in a Saudi Arabia city;
- a special license must be obtained in case the business has foreign ownership;
- as the main requirements, it must have at least one shareholder and one director.
If you are interested in the LLC as a vehicle to start a business in Saudi Arabia as a foreign investor, our company registration advisors are at your service with tailored services.
Company officers in an LLC in Saudi Arabia
The limited liability company must have at least one shareholder who can be a natural person or another corporation, as well as at least one director. However, if the number of shareholders is more than 20, they must appoint a Board of Directors. Also, if the minimum number of shareholders is 3, the LLC must have a Supervisory Board that will oversee the activities of the director. Also, the maximum number of members in this business form is 50.
In the light of the new changes in the legislation, it should be noted that the shareholders are no longer liable for the business’ debts in case it reaches a loss of at least 50% of its share capital, as it was before 2018.
Also, in the case of debt recovery, a creditor can collect the due amount from the net profits distributed to the shareholder by the company, provided that a judgment is issued in this sense.
There are various changes that provide for simplified LLC formation in Saudi Arabia, which is why this legal entity has become quite popular. So, if you are planning to launch a business, including a Saudi startup, you can use this vehicle. Our officers will help you incorporate it.
Capital of an LLC in Saudi Arabia
Business forms in Saudi Arabia have different capital requirements, imposed under the local legislation. The procedure of Saudi Arabia company formation for an LLC prescribes different categories for the minimum share capital, but as a general rule, there are no requirements in this sense. In 2021, the capital requirements in Saudi Arabia depend on the case of LLC based on the activities performed by the company. The Saudi Arabian General Investment Authority (SAGIA) can impose a minimum share capital of SAR 1 million for LLCs registered as industrial licensed LLC.
At the level of 2021, a Saudi limited liability company is required to keep 10% of the company’s net profits obtained in a financial year as statutory reserves. Our team of specialists in company registration in Saudi Arabia can provide further information on this topic.
How to determine the share capital of LLCs in Saudi Arabia
The amount of money to be invested, or the share capital is one of the main aspects to consider when you decide to open a company in Saudi Arabia. If you decide for an LLC, here is what you need to know:
- when the participants are foreign investors, the minimum amount required is set at 100,000 SAR or approximately 26,000 USD under the Foreign Investment Act;
- the amount increases if the company will operate as an industrial or agricultural enterprise and will reach 5 million USD (around 1,333,000 USD);
- a minimum share capital of 500,000 SAR (approximately 10,000 USD) is necessary if a SAIGA license is required.
If you want to establish an LLC in Saudi Arabia, our company formation agents can offer more information on the share capital requirements applicable in its case.
The foreign capital investment license in Saudi Arabia
Foreign investors who want to set up various ventures in Saudi Arabia must obtain a license from the General Investment Authority (SAIGA).
This is part of the company formation procedure in Saudi Arabia and must be completed before the actual incorporation of the LLC.
Speaking about the steps for opening an LLC in Saudi Arabia, they are:
- preparing the incorporation papers which must include a business plan;
- applying for the foreign capital investment license (available for non-Saudi and non-GCC investors);
- obtaining the Certificate of Registration;
- opening the company bank account and depositing the share capital;
- registering for taxation and with the municipality;
- applying for the necessary business licenses.
As a general rule, it can take around 2 months to set up an LLC in Saudi Arabia in the case of foreign entrepreneurs who must obtain the special capital license from SAIGA. This is why we recommend starting the registration procedures as soon as you decide to start a business in this country in order to avoid delays caused by unpredictable situations. However, you can rely on our specialists who can guide you for a smooth incorporation process. We can also prepare the necessary documents for having your enterprise running in no time.
Register an LLC in Saudi Arabia in 2021
One of the first procedures for setting up an LLC company in Saudi Arabia in 2021 is to obtain a company name, a step that must be completed with the Ministry of Commerce and Industry.
The legal entity is incorporated by drawing the company’s articles of association, which have to be deposited with the Ministry of Commerce and Industry, more specifically with the Unified Center/Companies Department working under the above-mentioned institution, for authentication. The procedure can be completed online and after the Ministry stamped the company’s articles of association, the document must be notarized at a public notary.
It is also necessary to open a corporate bank account, which can be used only after the legal entity received the certificate of registration. The bank account is necessary for depositing the company’s capital.
Other incorporation requirements refer to the registration with the Ministry of Labor or with the tax authorities in Saudi Arabia. Foreign investors are invited to contact our team of consultants in company registration in Saudi Arabia for further assistance on the incorporation of an LLC.