Start LLC Company in Saudi - Nimbus

1. How to Start a Limited Liability Company (LLC) in Saudi Arabia? Establishing a Limited Liability Company (LLC) in Saudi Arabia has become one of the most popular choices for entrepreneurs and investors willing to setup business in the KSA. But an LLC formation in Saudi needs to be done right, and investors must ensure that they meet legal requirements and criteria for having their LLC company here. This article gives you a comprehensive overview of the steps, requirements, and considerations for starting an LLC in Saudi Arabia. What is an LLC in Saudi Arabia? An LLC is a type of legal entity that limits the liability of its shareholders to the extent of their shareholdings. It is a flexible and common structure for small to medium-sized businesses and is well-suited for joint ventures between local and foreign investors. Key features of an LLC in Saudi Arabia include: •Limited liability for shareholders. •A minimum of two and a maximum of 50 shareholders. •Profits distributed as per the ownership structure. Advantages of Starting an LLC in Saudi Arabia

2. - Full Foreign Ownership: In most sectors, foreign investors can now own 100% of an LLC, eliminating the need for local sponsors in many cases. - Access to Government Initiatives: LLCs can benefit from grants, loans, and other support provided to private companies under Vision 2030. - Wide Business Scope: LLCs can operate across different industrial sectors, including trading, consulting, and manufacturing. - Legal Protections: LLCs are governed by Saudi Arabia’s Company Law, ensuring a well-defined legal framework. - Ease of Operations: An LLC offers flexibility in management and profit distribution. Step-by-Step Guide to Starting an LLC in Saudi Arabia 1. Choose Your Business Activity and Sector Before starting an LLC, determine the nature of your business. Certain sectors, like telecommunications, may have specific restrictions or licensing requirements. Key Consideration: Ensure your business activity aligns with Saudi Arabia’s positive investment list. Some activities may still require a local partner or specific government approvals. 2. Select a Business Name Your LLC’s name must comply with Saudi naming regulations. Once you finalize a name, •Avoid names that are offensive or religiously inappropriate. •Ensure the name is unique and not already registered. Register your proposed business name with the Ministry of Commerce (MOC). 3. Shareholder and Management Structure An LLC in Saudi Arabia must have at least two shareholders. These can be individuals or corporate entities. Decide the ownership percentages and capital contributions for each shareholder. Other requirements of the structure include:

3. - Management: At least one manager, who need not be a Saudi national. - Auditor and Supervisory Board: Required for LLCs with more than twenty shareholders. - Local Office: Mandatory for maintaining legal compliance. - Supervisory and Auditing Obligations: LLCs with over twenty shareholders must establish a supervisory board comprising at least three members.Annual financial audits must be conducted by a licensed auditor. 4. Capital Requirement: The minimum share capital required varies by industry. In most sectors, the minimum capital is SAR 500,000, but this can be higher for certain regulated activities. 5. Draft and Notarize Articles of Association (AOA) The AOA outlines the LLC’s structure, purpose, and governance. It should include the following details: •Business activities. •Shareholder details and capital contributions. •Profit distribution ratios. •Management structure and decision-making processes. The AOA must be notarized by a certified Saudi notary public. 6. Obtain a Commercial Registration (CR) The Commercial Registration (CR) is issued by the Ministry of Commerce (MOC) and serves as the legal license to operate your business in Saudi Arabia. The list of required documents for CR application include: •Drafted and notarized AOA. •Shareholder identification (passport copies or company registration documents for corporate entities). •Proof of capital deposit in a Saudi bank account. •Evidence of the company’s physical office address in Saudi Arabia. 7. Register with the General Authority for Zakat and Tax (GAZT) All LLCs must register with GAZT to obtain a Tax Identification Number (TIN). This is essential for filing taxes, including: •Corporate tax (20% for foreign-owned entities). •Value Added Tax (VAT) at 15% if your turnover exceeds SAR 375,000 annually. 8. Get Licenses and Approvals

4. Depending on your industry, you may need additional permits or licenses from specific regulatory bodies. For example: •The Saudi Arabian General Investment Authority (SAGIA) issues foreign investment licenses. •The Saudi Food and Drug Authority (SFDA) regulates businesses in the food, pharmaceutical, and cosmetics sectors. 9. Open a Corporate Bank Account Once your LLC is registered, you must open a corporate bank account in Saudi Arabia. Banks require: •Commercial Registration. •Tax Identification Number (TIN). •Identification of authorized signatories. 10. Apply for Employee Visas If you intend to hire expatriates, you must apply for employee visas through the Ministry of Human Resources and Social Development (MHRSD). This includes: •Work permits. •Residency permits (Iqama) for employees and their dependents. Make sure your LLC complies with Saudi labor laws, including the Nitaqat program, which mandates certain levels of Saudi national employment. Costs of Establishing an LLC in Saudi Arabia The cost of establishing an LLC in Saudi Arabia depends on several factors including your operating industry, location, and business size. Key expenses include: •SAGIA licensing fees (for foreign-owned businesses). •Notarization and translation fees for documents. •Office space leasing costs. •Annual license renewal fees. Legal and Regulatory Considerations - Corporate Taxation: Foreign-owned LLCs are subject to a 20% corporate tax rate on profits. - Zakat: Saudi-owned LLCs and joint ventures must pay Zakat, a religious wealth tax calculated at 2.5% of the company’s total assets. - Economic Substance Regulations (ESR): LLCs engaged in certain activities must demonstrate substantial economic presence in Saudi Arabia.

5. - Compliance: Businesses must align with regulations supporting economic diversification like Saudization quotas and sustainability practices. How Experts Can Simplify LLC Formation in Saudi Arabia? Partnering with professionals like Nimbus Corporate Services can significantly simplify the LLC formation process and here’s how it can happen. •Document Preparation: Drafting and notarizing Articles of Association (AoA) and Memorandum of Association (MoA). •Investment Licensing: Ensuring compliance with SAGIA requirements and expediting approval. •Bank Account Setup: Assisting in opening corporate bank accounts. •Tax and Regulatory Compliance: Handling registrations with GAZT and local municipalities. Final Thoughts Starting an LLC in Saudi Arabia is a strategic move for businesses seeking to capitalize on the Kingdom’s booming economy and investor-friendly reforms. By following the outlined steps, ensuring regulatory compliance, and leveraging the resources provided by the Saudi government, you can establish a strong presence in this thriving market. Are you ready to take the next step toward setting up your LLC in Saudi Arabia? Let the experienced consultants of Nimbus Corporate Services guide you through the process and ensure your business is built on a solid foundation.