The Kingdom of Saudi Arabia is the largest Arab land and one of the biggest economic hubs in the middle east. It is the hotspots to setup international trades and is open for foreign investments. Set up a business in Saudi Arabia is convenient as far as you abide the rules and regulations of business here.
In this article, we will see about business setup process and cost in Saudi Arabia, the advantages and disadvantages of company incorporation, and finally, you will get a good discussion about business sponsorship here in KSA.
Business Setup process in Saudi Arabia
In order to set a business in KSA, there are several mandatory steps a foreign investor need to take in account. But before get to know these steps, first it is compulsory to acknowledge the corporation types allowed for foreign investors in this nation. In Saudi Arabia, foreign investment can be conducted on following types:
- Subsidiary Company also known as Limited Liability Company (LLC) in KSA
- Joint stock company
- Branch Office
Subsidiary Company also known as Limited Liability Company (LLC) in KSA is the most common type among foreign investors here in KSA, keeping that in mind, we will concentrate on LLC company incorporation process in Saudi Arabia.
LLC business setup process in Saudi Arabia
Business name reservation
Firstly, company naming is the step of business setup process in KSA. The name reserve regulations have to be kept in account strictly and without valid name reservation one cannot initiate the business registration process here. The entire name reservation process is online.
Cost: No charge
Appeal General Investment Authority for Investment License
The next step is to obtain an Investment license from the General Investment Authority. Without this license a foreign investor cannot establish any business in KSA. The whole process can be done by submitting recommended application form to the Saudi Arabian General Investment Authority (SAGIA). Additionally, there are several other documents you will be recommended to submit once appealing for this license.
Cost: 2000 SR
Approval of company documents
In this phase, approval for company documents need to be gathered from Companies Department. For this all the documents first need to be submitted to the Unified Center in KSA. Here company AoA documents, company name confirmation letter, SAGIA license, required application form and proposed company’s owner’s ID copy need to be submitted.
Cost: Separate amounts need to be paid individually for each service in national Banks.
Notarize all business documents
Next, in the incorporation setup process in Saudi Arabia is Notarize all business documents and legaliz those accordingly. The process is mostly digitalized, so the process is much faster and convenient. This has to be done right after AoA approval is obtained. For this procedure an investor needs to have following documents ready:
- Original copy company AoA
- Sign approvals of company shareholders in Company Directorate
- Approval of all shareholders in company AoA
- Copy of SAGIA license
- Copy of AoA and registration certificate of every shareholders
- ID card copies of at least two company witnesses
Cost: No Charge
Official Gazette publication
An official gazette has to be published which includes company name, AoA documents, approval certificates, and other legal papers related to the new company establishment in Saudi Arab.
Cost: The cost range varies from 650 to 5500 SR
Open corporate bank account
A corporate bank account has to be opened to comply with incorporation process in KSA. This account will help to transect government fees submission in various incorporation processes. Moreover, this account will be a means of various financial management and transections related with the new company.
Cost: Minimum 100,000 SR deposit for the LLC incorporation and initiation
Setup an office premise
Setting up an office premise is although not compulsory but it is recommended to keep a formal address of the business once approached for a standard company setup in KSA. As this procedure is not compulsory, lease and tenant agreement are not needed as well. So, if not needed, this step of fixing a business premise can be skipped
Cost: Depends on company needs
Membership registration in Chamber of Commerce
A membership of Chamber of Commerce has to be signed up and obtained, which is a part of business incorporation procedure here. The fees for the membership have to be paid in the same premise where the Unified center in KSA is located
Cost: 2000 SR
Register with Commercial registry
This is the final step of business registration in KSA. Through this step you can obtain a commercial certificate. All the legal paperwork and documents obtained in previous steps of incorporations has to be compiled together and need to be submitted to the Commercial Registry at the Ministry of Commerce and Industry. Like other procedures, this submission has to be conducted in Unified center in KSA. Within 2 working days your papers will be verified and you will get your commercial certificate if all documents are up to the mark.
Cost: No charge to up to 8100 SR
Advantages and Disadvantages of setup a business in Saudi Arabia
When thinking of business setup process in KSA, you will come across several benefits and few drawbacks as well. In this part of article, we have listed out the advantages and possible disadvantages of company incorporation.
Advantages of setting up business in KSA
- LLC can be started with only one shareholder and one director
- The liability, if any is limited to company’s capital and doesn’t affect personal finance and assets
- LLC is the common startup path to entering into the joint venture companies in KSA
- In Saudi LLC deals with the project that works with both private and public sectors
- The LLC can sponsor multiple employees for residency purpose
Disadvantages of setting up business in KSA
- Initial capitalization is compulsory and in most cases this amount is large
- Foreign individuals cannot involve with other partnership companies or open another foreign branch office once partnered with Saudi individuals in an LLC company. This rule falls under SAGIA’s general policy
- Foreign owners cannot have full control over company management unless the other partner is an affiliate here.
Sponsorship requirements for business opening in KSA
In order to get the idea of sponsorship requirements to start a business in KSA one first briefly understand the concept of sponsorship. To conduct a business in Saudi Arabia as a foreign investor, getting a sponsorship is compulsory.
Sponsor or Kafeel in gulf nation generally defines as local guarantor who carries out all administrative works behalf of the foreign investor trying to open a venture here.
It has to be noted that foreign investor cannot open their own bank account in KSA, unless local sponsor is present and by now you already know that opening a bank account is a compulsory step in company setup process.
This clearly shows that, sponsorship unlocks the door for foreign investors to invest in Saudi Arabia. Below we have listed out the requirements for sponsorship in order to setup a company in this Arabian nation.
- The initial requirement for seeking a local business sponsor is to research for the local business environment in the place of KSA where you want to establish the business. You would definitely like a sponsor in a relevant field to carry out business.
- Find the best suited local company or individual who have a good track record, reputation, and relevant experience for your sponsorship.
- The sponsor has to be paid regularly as per early agreements for the sponsorship service.
- As the local sponsor will be your local guarantor, make sure the business proposition is legal and does not contravene any of the corporate rules and regulations of KSA.
- You and your papers will be verified thoroughly by the sponsor. Here you have to pass the reliability issue.
- The sponsorship rate can start from 200 SR and may go up depending on the type of foreign investment.
- You will be confronted with standard agreements when signing up with the sponsor. So once the sponsor has been found to set up a business in Saudi Arabia, go through the agreements and paperwork thoroughly to minimize legal tensions later on.