Saudi Arabia is supporting its economic diversification. Therefore, it creates the best conditions to attract foreign investors. One of the best options for who wants to invest is the creation of an LLC company in Saudi Arabia. This investment option stands out among several others for its practicality and popularity. Likewise, it is no secret to anyone that Saudi Arabia is a country with many riches. This makes it a very interesting country to invest in.
In this article, you will learn what an LLC company in Saudi Arabia is and what are some of the advantages of having this type of company in this country. At the same time, we will also explain the documentation and procedures necessary for its creation, as well as some important financial aspects on this topic.
Advantages of Establishing an LLC in Saudi Arabia
Before getting into the matter, the acronym (LLC) stands for Limited Liability Company. In this sense, an LLC company in Saudi Arabia is one that binds its shareholders only with the company’s assets. That is, shareholders should not respond to their debtors with their personal assets. From this concept emerges the first advantage of establishing an LLC company in Saudi Arabia:
The assets of the partners are different from the assets of the company
An LLC company in Saudi Arabia is a common form of company. This is a legal entity different from the partners’ assets. Therefore, this means that the partners have a liability limited to the share capital they have in the company for its debts and obligations.
In this sense, the company’s partners are not personally responsible for its debts and obligations beyond their initial investment, unless they have agreed otherwise in a contract.
Flexibility regarding the ownership and management of the company
The laws of Saudi Arabia require that for the creation of an LLC in the country, it is necessary to meet the requirement of at least having one or more shareholders, who may be natural or legal persons. The flexibility lies in the fact that, for example, foreign investors can establish an LLC company in Saudi Arabia with absolute ownership or by associating with Saudi or foreign citizens or national or foreign legal entities.
Flexibility in the creation of company structures
In this type of company, the partners are free to decide the shareholding of each of them. For their part, they can establish their functions. Also, they can appoint a registered manager, who will be in charge of managing the daily operations of the company.
Doing business is simple
The government of Saudi Arabia makes decisions to simplify the processes of creating these companies along with minimizing bureaucracy. Saudi Arabia is a country that is characterized by its ease of doing business. This means that the country implements the best conditions for investors.
Possibility of doing business with the government
LLC companies in Saudi Arabia have the advantage of being able to bid to participate in government contracts. These facilities are intended to promote greater dynamism of the local economy, especially small business and medium-sized businesses.
Likewise, the Saudi government points out those LLCs have preferences in tenders and projects. Without a doubt, this facilitates and creates greater opportunities for growth and expansion in this type of company.
Greater benefits and incentives regarding the payment of taxes
The country offers LLC benefits and tax incentives. This means greater competitiveness between these types of companies. For example, the income tax rate for LLCs Company in Saudi Arabia is capped at 20%. On the other hand, in sectors such as manufacturing and software development, the maximum rate is 15%.
Likewise, KSA has signed tax agreements with different countries with the objective of avoiding double taxation.
Business Continuity
An LLC company in Saudi Arabia can continue operations regardless of changes in ownership or management. That is, the company will continue to operate fully despite changes in shareholders or the departure of partners.
As you can see, establishing an LLC company in Saudi Arabia brings a series of benefits to investors. The Saudi government is committed to creating the most favorable environment with the aim of diversifying its economy. Therefore, the processes of creating this type of company today are much simpler. Without a doubt, all the advantages mentioned above make Saudi Arabia a much more attractive option.
In general terms, investors can take advantage of the different benefits that an LLC company in Saudi Arabia offers to position their company in the dynamic and prosperous Saudi market.
Essential Documents for a Smooth LLC Formation
To register an LLC company in Saudi Arabia, the following documentation is required:
Registration request
Investors must submit and complete an LLC registration application with the Ministry of Commerce and Industry of Saudi Arabia. In this sense, this application must contain basic information about the company to be formed, such as the name of the LLC, the address of the headquarters, the commercial activity, and the ownership structure, among other important aspects.
Company statutes
LLC partners must agree on the bylaws of their company. The bylaws are the rules that will govern the operation and management of the LLC. The statutes should include information about the partners, their shareholding, the distribution of profits and losses, and other important details.
Partnership contract
Apart from the company’s bylaws, partners must agree to the terms and conditions of their partnership contract. Unlike the company’s statutes that govern its operation, this association contract will govern the relationships between the partners. In this sense, this partnership contract must include information on the rights and responsibilities of each partner, as well as the procedures for making decisions and the form of entry or exit of partners.
Identification copies
For its part, you must provide copies of valid identification of the partners and the registered manager of the LLC. This may include passports, national ID cards, or other identification documents valid in the country.
Proof of payment of social capital contributions
Partners must present proof of payment of the corresponding registration fees. This amount will vary depending on the share capital contribution of each of the shareholders.
Now, it is important to note that the presentation of all these documents is carried out before the Ministry of Commerce and Industry of the country. On the other hand, if the LLC has foreign capital, this foreign shareholder must process obtaining a special license called “foreign capital investment license”.
This special license for foreign investors is granted by the General Investment Authority. Obtaining this license must be prior to the incorporation of the LLC. In this order of ideas, in Saudi Arabia, the foreign capital investment license is a requirement for foreign investors and companies to establish and operate businesses in the country.
Key Steps to LLC Formation in Saudi Arabia
- The first step to establishing an LLC company in Saudi Arabia is to have its corporate name. This step is carried out before the Ministry of Commerce and Industry.
- The constitution of the LLC is carried out by drafting the company’s statutes, which must be submitted to the Ministry of Commerce and Industry of the country, more specifically in the Unified Center/Department of Business that depends on this ministry. This is so that these documents go through the authentication process.
For its part, this procedure can be processed online and after the Ministry seals the statutes of the LLC, these statutes must be presented before a notary public for their legalization.
- After this, the LLC now has its own legal personality. Therefore, the next step is the opening of a legal bank account. The need to open a bank account lies in the fact that the partners must deposit their share capital contribution.
- Once this procedure has been completed, the next steps to formalize the LLC company in Saudi Arabia are to register the company with other organizations such as the Ministry of Labor, the country’s tax authorities, or any other authority depending on the activity commercial of the company.
Budgeting and Financial Considerations
Different forms of companies in Saudi Arabia have different capital requirements, taxes, among other aspects. Now, in the process of establishing an LLC company in Saudi Arabia, the minimum amount of share capital of an LLC will depend on the commercial activity of the company. In general terms, the Saudi Arabian General Investment Authority (SAGIA) may require that the minimum share capital for LLCs with an industrial license be SAR 1,000,000, which is equivalent to approximately US$ 260,000.
For its part, a LLC must maintain 10% of the net profits obtained by the company in the financial year. This 10% will be a legal reserve.
Now, an important point to consider in the financial aspects when establishing an LLC is the minimum amount to invest. In this sense, it is important to know the following rules when investing in an LLC company in Saudi Arabia:
- If the LLC has only foreign partners, the minimum amount of share capital will be 100,000 SAR, which is the equivalent of about 26,000 US dollars.
- For its part, the amount of the LLC’s capital stock will increase if its commercial activity is in industry or agriculture. Specifically, the minimum amount of share capital for these companies will be 5 million SAR, which is a little more than 1,300,000 US dollars.
- On the other hand, if to operate the LLC you require a foreign capital investment license, a minimum share capital of 500,000 SAR or about 100,000 US dollars is mandatory.
Insights from industry experts: Navigating Saudi Business
In today’s accelerated global business dynamics, it is vitally important to understand the trends and behavior of current and potential customers regardless of the size and shape of the companies.
Saudi Arabia, without a doubt, is a dynamic and evolving market. This country presents its investors with unique opportunities to expand their businesses internationally in the case of foreign investors.
According to a recent report from the International Monetary Fund, Saudi Arabia’s economy will grow by 2.6 percent in 2023. In this order of ideas, according to this report titled: “IMF Global Economic Prospects”, Saudi Arabia had the highest economic growth in the Middle East in 2022, with 8.7%.
On the other hand, according to the 2023 World Innovation Index, in the last four years, including the years of the covid 19 pandemic, Mauritius, Indonesia, Saudi Arabia, Brazil, and Pakistan are the countries that have raised the most in the classification of the countries with the most innovative economies on the planet.
In short, according to different international economic organizations, Saudi Arabia has been showing exceptional economic growth in the last year. This is a situation that investors can take advantage of in this climate of economic prosperity in the country.
Do you want to establish an LLC in Saudi Arabia? Join your best option, C-UAE
With the projection, economic growth, and favorable environment for both national and foreign investors, Saudi Arabia is undoubtedly one of the best options to invest in the world. Logically, if you are a foreign investor, you probably do not know in depth the procedure for creating the most popular form of company in Saudi Arabia, LLCs.
Luckily, you can count on the support offered by C-UAE. We have the best business formation experts in Saudi Arabia.
So if you want to invest in this great country of economic opportunities such as Saudi Arabia, you must turn to the services of a great company, such as C-UAE.
If you want to have more direct contact with us to have more information about our professional services or for any other requirement, you can do so through next channels:
- Phone number: +97143316688.
- Email: contact@c-uae.com.
Do not worry about unnecessary waits or delays. We have enough staff to quickly and efficiently address all the requirements, doubts, and requests you have.
