What You Need to Know About LLC Formation in Saudi Arabia

Setting up a business in Saudi Arabia has become increasingly attractive to both local and foreign investors, with international investors showing growing interest in the Saudi market, especially with the economic reforms under Vision 2030. Among the various legal structures available, the Limited Liability Company (LLC) is a legal entity recognized under Saudi law and stands out as the most common and flexible option for entrepreneurs and corporations alike. LLCs are the preferred business structure for many due to their low setup requirements, limited liability, flexible management, and the ability for 100% foreign ownership, offering significant legal protections.

In this blog, we highlight what you need to know about LLC formation in Saudi Arabia, covering ownership rules, licensing requirements, tax obligations, and compliance with local labour laws. Whether you’re exploring new market opportunities or expanding an existing business, these insights will help you make informed decisions and ensure a smooth entry into the Saudi market.

1. MISA Licence Comes First 

You cannot legally establish a foreign-owned LLC without obtaining a MISA Investment Licence (also known as a foreign investment license). This licence is your gateway to doing business as a foreign investor and is a prerequisite for commercial registration.

To-Do:

• Apply for your MISA licence via the Invest Saudi portal. The application process can be completed online for convenience.
• Prepare detailed business documentation in advance.
• Factor in the licence fee, which varies based on activity. 

2. Full Foreign Ownership

Saudi Arabia now permits full foreign ownership of LLCs in many industries, as part of its broader efforts to attract foreign investment, including consultancy, IT, wholesale, and manufacturing. However, industrial or agricultural sectors may have different ownership or capital requirements. Sensitive sectors such as defence, oil & gas, and certain retail categories may still require a Saudi partner or impose special conditions.

To-Do:

• Check if your business activity is on the MISA-approved list for 100% foreign ownership.
• Consider hiring a local consultant to verify compliance with sector-specific restrictions. 

​​​​​​​3. You Can Set Up with Just One Shareholder

You don’t need a large group of investors to get started; an LLC in Saudi Arabia requires at least one shareholder to be established. Saudi law allows single-member LLCs, giving solo entrepreneurs and foreign corporations flexibility. The maximum number of shareholders is 50.

To-Do:

• Decide whether to register as a single-shareholder entity or with partners.
• Prepare shareholder identity documents (passport copies, corporate documents if applicable).

4. Capital Requirements for LLC Formation in Saudi Arabia

Most local LLCs no longer face fixed minimum capital requirements. There is no statutory minimum share capital for most sectors, but certain regulated industries and foreign ownership structures may have specific requirements. The minimum capital requirement for a foreign-owned LLC in Saudi Arabia is SAR 100,000 (approximately USD 26,000).

However, fully foreign-owned companies are an exception:

• The typical minimum capital is SAR 500,000. Minimum share capital requirements can vary depending on the business sector, type of ownership, and licensing conditions.
• Some sectors, including trading, real estate, contracting, and engineering, may require up to SAR 30 million, particularly under MISA’s Principal Company Model.
• Regulated industries like banking, insurance, and financial services have their own mandatory capital thresholds.

To-Do:

• Confirm capital requirements for your sector and ownership type.
• Declare a capital amount aligned with your business scale, as this impacts credibility, visa quotas, and banking.
• If fully foreign-owned, consult MISA or a business advisor early in the process.

5. A Physical Office in Saudi Arabia is a Must

You must have a physical office, co-working Spaces or commercial premises in Saudi Arabia to register your LLC. Virtual addresses, P.O. boxes, or overseas offices will not satisfy legal requirements. Proof of lease or ownership is mandatory during registration; otherwise, the process will not proceed. Documentation required for LLC registration must be submitted in Arabic and notarized.

To-Do:

• Secure a commercial office space or serviced office lease.
• Ensure your tenancy contract is registered with the Ejar (Ijari) system.

6. No income tax in Saudi Arabia

One of the key advantages of operating in Saudi Arabia is that there is no personal income tax, individuals, whether residents or foreigners, do not pay tax on their salaries or wages. LLCs are required to maintain accurate and transparent financial records in accordance with Saudi Accounting Standards, aligned with International Financial Reporting Standards (IFRS).

However, business taxation depends on ownership. The Saudi tax system differentiates between foreign-owned and locally owned entities:

• Foreign-owned companies pay 20% corporate tax on profits.
• Saudi or GCC nationals generally pay Zakat (2.5%) instead.
• Additionally, a 15% VAT applies to taxable transactions, which must be factored into your financial planning

7. Saudization Enforcement is Key to Regulatory Compliance

The Saudisation (Nitaqat) programme requires companies to employ a certain percentage of Saudi nationals. The quota varies depending on your sector and business size, and non-compliance may result in penalties.

To-Do:

• Check your sector’s Saudisation quota using the HRSD (Ministry of Human Resources) online tools.
• Plan a recruitment strategy including Saudi nationals.
• Keep records of compliance for audits.

8. Commercial Registration Finalises Your Legal Status.

After securing your MISA licence, you must register your company with the Ministry of Commerce (MoC); registration with the Saudi Companies Registry is a key step in the process to obtain a Commercial Registration (CR). This formalises your LLC and establishes your business as one of the recognized legal entities in Saudi Arabia.

To-Do:

• Complete CR registration online or through a legal representative.
• Ensure all shareholder documents and office lease agreements are ready.
• Keep a copy of your CR for all official transactions.

9. Professional Support Is Essential for a Smooth Setup.

Forming an LLC in Saudi Arabia involves multiple critical steps from obtaining your MISA licence and renting office space to registering with the Ministry of Commerce and meeting Saudisation obligations. These steps have specific requirements and deadlines that can be difficult without professional expertise.

That’s why engaging professional advisors, such as those at TASC Outsourcing, is vital. Our support helps you avoid mistakes and streamlines the entire process. Professional support is also valuable for ongoing business operations and compliance, ensuring your company meets regulatory standards throughout its lifecycle

How TASC Helps:

• Ensuring paperwork is accurate and correctly submitted.
• Navigating complex regulations with confidence.
• Keeping you on track with deadlines and compliance.
• Offering advice tailored to your business needs.

Plan Right, Execute Smart!

Setting up an LLC in Saudi Arabia is a strategic move full of potential, offering significant advantages for those looking to form a company in Saudi Arabia, such as a private limited liability company or an LLC company. From securing licences and registering your company to managing tax and Saudisation rules, each step is critical to success, and Saudi Arabia establishing a business entity requires careful planning and compliance.

With proper planning, reliable professional support, and a clear understanding of local regulations, you can avoid pitfalls and start your Saudi venture on the right foot.

Your Next Move? Leave It to TASC.

If you’re thinking of forming an LLC in Saudi Arabia and need guidance from start to finish, TASC is here to support you.

Contact us today for expert advice on LLC formation and regulatory compliance in Saudi Arabia.