Introduction
The Limited Liability Company (LLC) is one of the most common legal structures in Saudi Arabia due to the legal protection it offers to partners and its ability to limit financial risks. With ongoing efforts to support investment and government facilitation, the company formation process has become more streamlined. In this article, we outline the official legal steps to establish an LLC in Saudi Arabia according to the Saudi Commercial Law.
What Is a Limited Liability Company?
An LLC is a business entity where the number of partners does not exceed 50. Each partner is liable for the company’s obligations only to the extent of their share in the capital, which helps protect their personal assets.
Official Steps for Company Formation
- Choosing a Trade Name
– The name must not be already registered.
– It can be reserved online via the
Ministry of Commerce platform. - Defining the Business Activity
– Clearly specify the business type (commercial, industrial, consultancy, etc.)
– Some activities may require additional approvals (e.g., healthcare, education). - Preparing the Articles of Association
– Must be documented electronically and include: partner names, capital shares, capital amount, management structure, and profit distribution.
– Can be drafted by a lawyer or through pre-approved templates on the
Ministry of Commerce website. - Registering the Company
– Through the
Commercial Registration Portal.
– Requires completing partner data, business activity, and uploading the Articles of Association. - Opening a Company Bank Account
– After obtaining the commercial registration, a corporate bank account must be opened to deposit the capital. - Obtaining a Tax Certificate and Tax Number
– Mandatory registration with the
Zakat, Tax and Customs Authority (ZATCA). - Registering with “Qiwa” and GOSI Platforms
– Link your company with labor and social insurance systems through
Qiwa and
GOSI.
Legal Requirements for Establishment
- There is currently no minimum capital requirement.
- A single individual can establish an LLC.
- Shares may not be publicly traded as in joint-stock companies.
Advantages of a Limited Liability Company
- Legal protection for partners
- Flexible management structure
- Ability to engage in most commercial activities
- Encouragement for both local and foreign investors
Common Mistakes to Avoid
- Failing to clearly define the manager’s authority in the Articles of Association.
- Inequitable distribution of capital shares, leading to future disputes.
- Delays in tax registration, resulting in penalties.
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