The Kingdom of Saudi Arabia (KSA) offers several types of business structures for local and foreign investors, depending on the nature of the business and ownership preferences. Here are the main business types in Saudi Arabia:
1. Sole Proprietorship (Establishment)
- Owned by a single individual, who is fully responsible for the business’s liabilities and debts.
- Common for small and medium enterprises (SMEs).
- Typically reserved for Saudi nationals or GCC citizens unless a foreigner has a specific license.
2. Limited Liability Company (LLC)
- One of the most popular business types.
- Requires 1-50 shareholders, with liability limited to their investment.
- Foreign investors can own 100% of an LLC under specific licenses, such as the MISA license.
3. Joint Stock Company (JSC)
- A business owned by shareholders, with shares freely transferable.
- Requires at least five shareholders and a minimum capital of SAR 500,000.
- Common for large businesses planning to go public or operate on a significant scale.
4. Branch Office
- A branch of a foreign company operating in Saudi Arabia.
- Requires approval from relevant Saudi authorities and is fully owned by the parent company.
- Used for companies expanding their operations into Saudi Arabia.
5. Representative Office
- Allows a foreign company to promote its products or services without engaging in direct business operations.
- Not permitted to conduct commercial transactions or generate revenue.
6. General Partnership
- Owned by two or more partners who share unlimited liability for the business’s debts.
- Rarely chosen due to the high-risk nature of unlimited liability.
7. Limited Partnership
- Combines general partners (with unlimited liability) and limited partners (liable only to the extent of their investment).
- Less common due to regulatory complexities.
8. Joint Ventures
- Temporary partnerships between two or more entities for a specific project or business purpose.
- Each partner maintains its legal identity while collaborating on the venture.
9. Professional Company
- Suitable for licensed professionals, such as doctors, lawyers, engineers, and accountants.
- Owned by individuals who provide specialized services, with personal liability often applicable.
10. Holding Company
- Formed to control other companies, managing assets and investments.
- Often used to centralize the management of subsidiaries.
Regulatory Considerations:
- Foreign Ownership: Foreign investors require a MISA license to operate most business types.
- Commercial Registration (CR): All businesses must register with the Ministry of Commerce and obtain a commercial registration.
- Restricted Sectors: Some industries, such as real estate or telecommunications, may require Saudi ownership or specific approvals.
Zoha Hussain