How to Set Up a Company in Saudi Arabia

The most common and recommended corporate forms for a foreign company setting up a sole-partner or sole-shareholder subsidiary in Saudi Arabia are the Limited Liability Company (LLC) and the Simplified Joint Stock Company (SJSC).

Why choose an LLC?  

• Limited Liability: The key advantage is that the partner’s liability is limited to the amount of capital invested in the company, protecting the foreign parent company's assets. In contrast, a branch – although easier to set up – poses several legal risks, as it is considered an extension of the parent company (i.e., it has no distinct legal personality), meaning its financial and legal liabilities are directly attributable to the parent company.

• Sole Owner Permitted: Saudi Company Law now explicitly allows the establishment of an LLC with a single partner, making it an ideal structure for a wholly owned subsidiary. 

• Operational Flexibility: Compared to a Joint Stock Company (JSC), whether closed or public, an LLC faces fewer corporate governance requirements. LLCs do not require a board of directors or the convening of annual public general assembly meetings, resulting in simplified management and greater operational efficiency.

Alternatives: JSC and SJSC Structures

While a traditional Joint Stock Company (JSC) remains an option, it is generally chosen for larger enterprises, especially those planning to go public or with many shareholders. This structure involves more complex requirements, such as a mandatory board of directors and stricter governance rules.

The Simplified Joint Stock Company (SJSC) offers a flexible alternative, blending features of both the LLC and JSC. Foreign investors may find the SJSC attractive due to minimal capital requirements, customizable governance and simplified management processes. And SJSC can be managed by one or more presidents or managers, or a board of directors, as specified in the company’s articles of association. This allows shareholders to tailor the management structure and appointment terms to their needs.

A) Capital:

LLC:  While Saudi law sets no minimum capital, in practice, at least SAR. 100,000 (about $ 26,666) is expected.  It is worth noting that some activities will require significant capitalization, such as trading activities, where the minimum capital for a foreign entity is set at SAR. 30,000,000 ($ 8,000,000).

SJSC: the minimum capital requirement applicable to a common JSC shall not apply to a SJSC. Notwithstanding the foregoing, a minimum of SAR. 100,000 will be deemed sufficient to allow the company to conduct its activities. As for the LLC, some activities will require significant capitalization such as trading activities where the minimum capital for a foreign entity is set at SAR. 30,000,000 ($ 8,000,000).

B) Foreign Ownership:

• 100% Foreign Ownership is Permitted: Saudi Arabia has significantly opened its economy, and 100% foreign ownership is now allowed for most sectors, including trading.
• The Negative List: A "Negative List" of strategic sectors remains, where foreign ownership is either prohibited or restricted to a certain percentage (e.g., certain military industries, oil exploration, real estate in Mecca and Medina, and some media activities).
• Registration is Key: The primary gateway is obtaining a registration from the Ministry of Investment (MISA). It is worth noting that the registration regime has recently replaced the licensing regime that was previously applied by the Ministry MISA assesses the application based on the proposed activity, capital, and economic impact.
• Registration Requirements: the following are the documents required to register a company in the Kingdom of Saudi Arabia:

1- A copy of the commercial registration (CR/Trade license) of the parent company, duly legalized or apostilled (Saudi Arabia is a party to The Hague Apostille Convention since December 2022);

2- If a member of a shareholder is a natural person, they are generally required to provide a copy of their passport as part of the incorporation process. In addition, individual managers or members of the Board of Managers who are foreign nationals will typically need to submit copies of their passports, along with their mobile phone numbers and email addresses.

3-Financial statements for the last fiscal year of the foreign company applying for registration as a shareholder, again, duly legalized or apostilled.  

4-A power of attorney issued by the shareholder to a Saudi law firm or agent to undertake the registration formalities legalized up to the Saudi embassy in the country of the shareholder or apostilled.

Holders of a Special Residency Permit also called “Special Talent Residency Visa” are exempt from submitting requirements (1-3) above. The areas in which the applicants for the Special Talent Residency Visa must demonstrate expertise in include scientific research, health care, information technologies, financial services, space and defense, renewable energy, mining, logistics and transport, tourism infrastructure, and food and agriculture.

It is widely reported that the duration of the Special Talent Residency Visa is five years. This visa can be renewed for one more term if the applicant meets applicable eligibility criteria.

The requirements differ slightly between an LLC and a SJSC, as the latter may be managed either like an LLC or a common JSC.

For a Limited Liability Company (LLC):

• Manager(s): The company is managed by one or more managers appointed by the partner(s). The manager can be a natural person (also a foreign national) or a legal entity.
• Articles of Association (AoA): The internal governance rules are defined in the AoA. This document outlines the powers of the manager, meeting procedures, and profit distribution.
• Auditor: The company must appoint a certified auditor registered in Saudi Arabia.
• Financial Statements: The company must prepare annual financial statements.
• General Assembly: The partner/s must hold a general meeting once a year within six (6) months from the end of the fiscal year to approve the company’s financial statements and appoint/re-appoint auditors and approve the General Manager/ Board of Managers report concerning the management of the company.

For a Simplified Joint Stock Company (SJSC):

The company can be managed by one or more presidents, managers, a board of directors or any other form of management. The articles of association (AOA) should specify the process of appointing and removing management, along with their powers, authorities, and work procedures. If the AOA does not address these matters, the shareholders will determine the relevant provisions.

To incorporate a company in Saudi Arabia, the founder(s) must meet the following requirements:

• Registration Certificate from MISA (Ministry of Investment): this is a key step, as the registration certificate approves the foreign investment and the proposed activity.
• Commercial Registration (CR) from the Ministry of Commerce, which can be considered as the company's birth certificate and legal identity in Saudi Arabia.
• Municipal License, a license from the local municipality where the business will be physically located.
• Chamber of Commerce Membership, registration with the local Chamber of Commerce is mandatory.
• Tax Registration (Zakat, Income and Tax Authority – ZATCA). Registration for Corporate Income Tax (CIT) is required. There is no VAT registration at the incorporation stage, but it may be required later if taxable supplies exceed the mandatory threshold (currently set at SAR 375,000).
• GOSI Registration: registration with the General Organization for Social Insurance for employees’ pensions and benefits.
• Sector-Specific Licenses, if operating in a regulated sector (e.g., healthcare, finance, education, engineering, banking, insurance, telecoms etc.) a license from the relevant government authority (e.g. CST, SAMA, SFDA, Education Ministry) is required before the Commercial Registration can be issued.

Given that all key registrations and licenses have been outlined above, the incorporation process for a subsidiary in Saudi Arabia is now mainly digital via the Saudi Business Center (SBC) platform. The core steps are:

• Reserve the company name through the Ministry of Commerce portal.
• Apply for the MISA Investment Registration Certificate via the MISA portal.
• Upload the approved Articles of Association (AoA) on the SBC platform for attestation.
• Submit all required documents to obtain the Commercial Registration (CR) through the SBC or Ministry of Commerce.
• Open a corporate bank account and deposit the required capital.
• Complete any municipal and sector-specific licensing, as needed.

Once these digital steps are completed, register with the Chamber of Commerce, GOSI, and ZATCA, as required for ongoing operations.

• Obtaining a sector-specific license is often the most challenging and lengthy part of the process, requiring a deep understanding of the regulator's specific requirements.
• Dealing with multiple authorities (MISA, SBC, Ministry of Commerce, sectoral regulators, ZATCA, etc.) can be complex and time-consuming without local expertise.
• All foreign documents (e.g., parent company's certificate of incorporation) must be legalized up to the Saudi Embassy/Consulate or “apostilled” in the home country and then translated into Arabic by a certified translator in Saudi Arabia.
• Understanding Local Law and Culture. Business practices, legal interpretations, and the importance of personal relationships can be very different from other countries.
• Companies must comply with quotas for hiring Saudi nationals, which affects the number of work visas available for foreign employees.
• Last but not least, finding reliable local counsel and partners can be a challenge. The quality of legal, tax, and corporate service providers varies greatly, and choosing the right expert is essential to avoid compliance pitfalls and operational delays. For tailored support with company incorporation in Saudi Arabia, do not hesitate to contact us.