Setting up a company in Saudi Arabia has become faster and clearer since the new Companies Law came into force in 2023 and company services moved online through the Saudi Business Center. Fast procedures do not make the first decisions easy, though: the legal form, the split of shares, management powers and how a partner can exit are all hard to change later.
This article explains the types of company, the steps to set one up, and what to watch for, including for foreign investors.
Types of company under the Companies Law
- Limited liability company (LLC): the most common form for small and medium businesses. Each partner's liability is limited to their share, and a single owner is allowed.
- Simplified joint stock company: a new, flexible form suited to start-ups and venture funding; a single owner is allowed.
- Joint stock company: for larger projects, with more detailed governance rules; shares may be offered to the public under capital market rules.
- General partnership: partners are jointly liable for the company's debts with their personal assets.
- Limited partnership: general partners with unlimited liability and limited partners liable only up to their contribution.
- Professional companies: for licensed professions such as law, accounting and engineering, with special rules.
Choosing the right form
How many partners are there? Will you need investors later? Do you want to protect personal assets from company debts? How large is the project? For most small and medium businesses an LLC is enough; projects planning funding rounds may be better served by a simplified joint stock company.
Steps to set up a company
- Reserve a trade name: check availability and reserve it online.
- Articles of association: activity, capital, shares, management, profit distribution and share transfers.
- Commercial Registration: the company is registered and receives its unified national number.
- Further registrations: Chamber of Commerce, the Zakat, Tax and Customs Authority, the General Organization for Social Insurance and the labor platforms.
- Licences: some activities need licences from the competent authority before starting.
- Bank account: opened in the company's name, with capital deposited where required.
Foreign investors
Foreign investors can set up or join a company in Saudi Arabia under the investment rules after obtaining the required investment licence, taking into account activities with special conditions. The founding documents are in Arabic; a bilingual version should state which language prevails.
Articles of association and the shareholders agreement
The articles are the official document filed with the register. A shareholders agreement covers what is better kept private, such as:
- how major decisions are made and voting thresholds;
- how a partner exits and how their share is valued;
- pre-emption rights when a partner sells;
- non-compete and confidentiality;
- how disputes between partners are resolved.
Common mistakes
- Using a generic template without tailoring it to the partners.
- Not providing for a partner's exit or death.
- Giving managers broad powers without limits or oversight.
- Mixing company and personal money.
- Starting operations before the required licences are in place.
Frequently asked questions
Can one person own a company?
Yes: an LLC or a simplified joint stock company.
What is the difference between a sole establishment and a company?
A sole establishment has no legal personality separate from its owner; a company does.
Can a foreigner own 100% of a company?
In many activities, yes, with an investment licence; some activities have conditions or restrictions.
Setting up your company?
Usus Law Firm handles company formation, from choosing the form and drafting the articles and shareholders agreement to registration and licences, and then governance and contracts. Book a free consultation in Riyadh, Tabuk or online.
This article is general legal information and is not a substitute for advice on your specific case. Contact Usus Law Firm: +966 53 034 9349.
