Understanding different types of business licenses in Saudi Arabia

Saudi Arabia is a popular choice for aspiring and seasoned entrepreneurs as it is the largest market in the Middle East. Its strategic location, economic stability and ambitious development projects contribute to its esteemed status in the business world. The first and foremost step in establishing your business setup in Saudi Arabia is obtaining your trade license.

Types of business licenses in Saudi Arabia

How many types of licenses are there in Saudi Arabia? Considering the number of business structures available in the region and the specific requirements for each of them, it is easy to get confused. So, let’s make it simpler and easier.

In the following section, we will discuss the different business structures in Saudi Arabia and their requirements. Do proper research to understand each of them and choose the best one based on your needs.

1. Sole Proprietorship/Establishment

A sole proprietorship or establishment in Saudi Arabia is a company with a single owner.  As there are no other shareholders, the owner will be liable for all the assets and obligations of the company. No minimum capital requirements exist, and the establishments are subject to commercial registry law. This structure is suitable for small businesses as it is flexible and easy to adapt. Only Saudi or GCC nationals can own an establishment in Saudi Arabia.

2. Limited Liability Company (LLC)

Can a foreigner start a business in Saudi Arabia? Of course, yes! Foreigners mostly prefer a Limited Liability Company (LLC) when setting up a business in Saudi Arabia. It must have at least one shareholder and a maximum of 50 shareholders. The personal liability of each partner is limited to their contribution to the shared capital. Registering an LLC for foreigners is time-consuming as it requires the Ministry of Investment’s (MISA) approval.

3. Limited Partnership Company

A Limited Partnership company in Saudi Arabia can be formed by a director and two partners of any nationality, where one will be a joint partner and the other will be a limited partner. While the joint partner is liable for the debts and obligations of the company, the limited partner’s liability is confined to his/her contribution to the capital. A limited partnership company doesn’t require any minimum capital for registration.

4. Joint Stock Company

Foreign investors looking to start a large company in Saudi Arabia can choose a Joint Stock Company. It must have two shareholders and three directors. The Joint Stock Companies must appoint an auditor and submit audited financial reports annually.

5. Branch of a Foreign Company

This structure suits foreign companies planning to test the waters in the Saudi market. They can set up a branch in Saudi Arabia while the parent company will be the sole shareholder. The branch will act as a liaison office for the foreign investor in Saudi Arabia and cannot engage in trading activities.

Benefits of doing business in Saudi Arabia

Saudi Arabia attracts businessmen/investors with its business-friendly policies and dynamic economy. Let’s have a look at the key benefits of starting your business in this country:

• Tax benefits: Tax is always one of the key factors to consider while choosing a country for your business. Saudi Arabia is in favour of businessmen in this regard as there’s minimal personal tax and corporate tax is only 15%. Though VAT is applicable in the country, many goods are exempt and, therefore, subject to a zero-tax rate.
• Innovation: Saudi Arabia is known for innovation; the country’s ambitious development projects have attracted global attention. With Vision 2030, Saudi Arabia plans to diversify its oil-based economy to ensure long-term economic success.
• Welcoming environment: Saudi Arabia is opening itself to the world with enticing business and investment opportunities. The country is also trying to be a tourist hotspot, which is another positive factor for those planning to relocate here.
• Safety and standard of living: Saudi Arabia is one of the safest countries in the world. Foreigners planning to start a business in this country can enjoy a peaceful and secure stay. The country also promises a luxurious lifestyle and high standards of living.

Several steps are involved in establishing your business in Saudi Arabia, including choosing the right structure for your company, obtaining business licenses and approvals, documentation and banking assistance. It is quite natural for you to feel overwhelmed by the complexities of the process, which can be easily avoided by approaching a business consultant. Having helped several entrepreneurs start their businesses in Saudi Arabia, our consultants are well-versed in the region’s laws. We can help you start your business in the region by ensuring end-to-end support.