In addition to being the biggest Arab state and the world’s second-biggest oil producer and exporter, several investors have chosen to form a company in Kingdom of Saudi Arabia as it was rated 62nd in terms of ease of doing business in the World Bank’s 2020 report.
The country has become an excellent location for foreign businesses, as the local institutions, via the Saudi Arabian General Investment Authority, have established a legislative framework that welcomes the needs of foreign businessmen.
Why set up a Company in Saudi Arabia
Best known for its enormous oil industry, Saudi Arabia is the biggest free-market economy in the Middle East and North Africa. And with a high level of secure business climate and political stability, Saudi Arabia offers low incorporation costs and 100% foreign ownership in retail and wholesale areas
The main reasons why foreign investors are attracted to doing business in Saudi Arabia are:
- one-stop system facilitating and easing business startups
- formation of a company can be completed in a short period of time
- cost of registering a company is only 5.4% of the per capita income of the entrepreneur.
- insurance of minority investors
- availability of cross-border trading and investments
- easy resolution of bankruptcy and financial restructuring
Types of legal entities available in Saudi Arabia
Before commencing the company formation process in Saudi Arabia, an investor must first assign a business form under which the company will operate.
The forms of companies available for businesses in Saudi Arabia are:
- limited liability company: this is the most generally formed company in Saudi Arabia. An LLC company is not allowed more than 50 shareholders. Also, LLCs can be used for the formation of holding companies in Saudi Arabia.
- sole proprietorship: this type of business is recommended for single entrepreneurs conducting simple activities
- the general partnership company: this type of company requires a minimum number of 2 members,
- joint stock company: it consists of capital that is divided into shares of proportional value.
- limited partnership company: this is a partnership company in which some or all partners have limited liability.
- the private and public limited liability company
Foreign companies can also establish their presence in Saudi Arabia through branch offices and subsidiaries.
Register a company in Saudi Arabia
Forming a company in Saudi Arabia means completing various steps that must be respected by both local and foreign entrepreneurs. These steps are:
- choosing a name for the business/ company
- selecting the applicable type of business entity
- compiling documents such as Certificate of Incorporation, Power of Attorneys, Board Resolution, etc.
- opening a company bank account in order to deposit the required share capital,
- filing incorporation papers with the Companies Register
- acquiring the tax registration and VAT numbers,
- applying for the essential business licenses and permit
After selecting the appropriate business form, the trading name reservation is the next step to finalize registering a company in Saudi Arabia. The assigned name must be different and to confirm that this requirement is met, one can submit three names for reservation.
Foreign investors can also form companies in Saudi Arabia’s free zones under very beneficial conditions.
Company’s registration requirements in Saudi Arabia
After agreeing on the business structure, the investors setting up the company in Saudi Arabia are expected to follow the following steps:
- preparing the necessary documents
- submitting an application to the Saudi Arabian General Investment Authority and collecting an investment license.
- getting authorization from the Companies Department at the Ministry of Commerce and Industry following the submission of the Articles of Association and the chosen name.
- signing the Articles of Association in front of a notary public
- publishing the company name in the official gazette.
- registering with the applicable departments and attain a work visa for the company manager.
- registering with the Commercial Registry at the Ministry of Commerce and Industry and the Chamber of Commerce.
- registering with the Department of Zakat and Income Tax (DZIT), Ministry of Finance to attain a file number and certificate of business.
- registering with the General Organisation of Social Insurance.
Documents to prepare to start a company in Saudi Arabia
The documents needed to set up a Saudi company varies depending on the company form. The primary list of documents required includes company trade license copy, Memorandum & Articles of Association, Resolution, Power of Attorney, and Shareholder’s, Directors, and signatories’ passport copies. Also, a bank statement reflecting the amount of money needed for the type of entity.
Share capital requirements for Saudi businesses
The investment for creating a Saudi entity varies according to the license type, business activities, and shareholding structure. The only business structure that doesn’t require a minimum share capital is the sole proprietorship.
Opening a corporate bank account in Saudi Arabia
Opening a corporate bank account has to be done after the company registration numbers are allocated. The registration procedure expects Saudi Arabian companies to open a capital account to deposit the necessary paid-up share capital.
If you want to set up your company in Jeddah, Saudi Arabia, please contact your Damalion expert now.
