Saudi Arabia is an ideal location that’s favorable for doing business by foreign investors. In the highly competitive market economy of today, choosing the right business entity in Saudi Arabia is very important for running a successful business in the country. Some key points that could help you choose from the different types of companies in Saudi are highlighted below.
Navigating Business in Saudi Arabia
Understanding the needs and preferences of Saudi Arabian consumers through a thorough market research to fill the gaps in the market is the first step. Here thorough knowledge of the local culture and religious practices among the Saudi Arabian nationals plays a significant role.
Opening a company in this country can be somewhat challenging with local values and customs of the citizens. Cultural sensitivity paves the way for trust and acceptance in the business community of the country.
Complying with the legal and regulatory requirement for operating a business within Saudi Arabia is mandatory. Consultation with local legal experts will aid in choosing the optimum legal structure for your business.
Choosing the Right Company Type in Saudi Arabia
Foreign investors or individuals or non-Saudis must choose the right legal structure for your company for an exciting business venture. That said, the types of available company structures for choosing the right type of your company and its impact on your start-up are indicated below:
A sole proprietorship offers simplicity and complete control over your company structure bearing all responsibilities, risks and rewards. This feature makes it an ideal choice for your start-ups.
Next is partnership. This is where two or more individuals form a partnership to share business ownership. Partnerships can be further categorized as general, limited and limited liability partnerships.
Another factor is ownership and control. This governs the business as autonomous or even shared in the decision making process. Different business structures have various degrees of liability protection.
Identifying specific business needs and goals are mandatory. With each business being different or varied, taxes also vary from business to business. Once taxes have been identified, each business structure has to fulfill certain legal requirements. It’s mandatory to follow the regulations of the country.
Local Regulations like Federal Laws must be made aware of. Compliance with these laws impacts the smooth functioning of your business. Ensure that you have researched well and understood the law outlined by the country’s regulating bodies.
Determining the initial capital required for each business structure is equally important. This greatly influences the successful start of the business and its steady growth.
Next, personal liability is another crucial factor. Some business structures offer more protection liability than others.
Choosing the right business structure for your company is vital. The chosen legal entity should have an in-depth structure permitting adaptability, flexibility and growth in the long run. It is also essential that your company establish long term business growth plans.
Types of Companies Under Saudi Law
Let’s shift our focus to what types of business entities are available in Saudi Arabia. The New Companies Regulation of Saudi makes available these types of business entities for local and foreign businessmen:
- Joint liability company
- Establishment/sole proprietorship
- limited partnership company
- Joint venture
- Joint stock company
- Limited liability company
The most common form of legal entity is a limited liability company in Saudi Arabia that can be registered by a single shareholder. This business form may have 50 shareholders in one go. Generally, no capital requirements arise for this form of business, but may have capital depending on the business activity imposed by the local authorities.
Besides the limited liability company, foreign investors also prefer to register the following company types:
- Joint stock companies
- Branch offices
The joint stock company in Saudi Arabia
Foreign investors interested in setting up large operations can choose the joint stock company if they plan to enter this market. The main requirements of this Business form are:
- It must have at least two shareholders;
- It must have at least three directors;
- There are nationality requirements for the shareholders.
The joint stock company can be fully owned by one or more natural persons or companies who can be foreigners, and it is suitable for various activities. In order to create such a business, an approval from the Saudi Ministry of Commerce is required.
As these can be used for larger projects, the Saudi joint stock company is required to appoint an auditor and file audited financial statements every year.
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