How to Set Up a Limited Liability Company (LLC) in Saudi Arabia: Step-by-Step Guide
The limited liability company (LLC) is the most common form for entrepreneurs in Saudi Arabia. We explain how to set one up online and what you need before and after applying.
A limited liability company (LLC) in Saudi Arabia is set up online through the Ministry of Commerce's digital platforms: you reserve the trade name, enter the partners, capital and activity details, approve the articles of association, and then the commercial registration (CR) is issued. After registration comes the stage of registering with other government authorities so the company is ready to operate.
Why do entrepreneurs choose an LLC?
- Protection of personal assets: as a rule, each partner's liability is limited to their share in the capital.
- Can be formed by one person or more.
- Flexible management: it can be managed by one or more managers, whether partners or outsiders.
- Clear procedures that are available online.
This form suits online stores, professional offices, restaurants and trading and service businesses of all sizes. Many sole proprietors move to an LLC as their business grows, to separate their personal assets from the business's obligations or to prepare for bringing in a new partner in an organised way. However, limited liability is not absolute: a manager or partner may be held personally liable in cases of violations, mismanagement or commingling of funds, as determined by law.
What do you need to prepare before incorporation?
Before logging in to the platform, settle the following decisions with your partners:
- The proposed trade name, plus alternatives.
- The partners and each one's share, and whether any of them are entities or foreign investors.
- The capital and how it will be contributed (cash or in kind).
- The activity, according to the approved activities guide, checking any licences it requires.
- The manager or managers and their powers.
- The registered address of the company.
What are the steps to set up an LLC?
- Reserve the trade name through the Ministry of Commerce's services and make sure it complies with the trade name rules.
- Start the incorporation application and select the limited liability company form.
- Enter the partners' details, shares, capital, activities and management.
- Prepare the articles of association, either using the available template or with custom drafting that reflects the partners' agreement.
- Partners approve the articles electronically through their accounts, or through their legally authorised agents.
- Pay the fee set by the competent authorities; please check it on the platform, as it may change.
- Issue the commercial registration (CR) and publish the articles of association according to the approved procedures.
If a foreign investor is among the partners, an investment licence from the competent authority is usually required before incorporation can be completed. If one of the partners is an existing entity, proof of the authority of its signatory will be required, such as a partners' resolution or a valid power of attorney including the clauses for incorporating companies. Preparing these documents properly before you start helps avoid your application being rejected or returned for completion.
What are the steps after the commercial registration is issued?
The CR alone is not enough to start operating. You will usually also need to:
- Register with the authorities responsible for zakat and tax.
- Register with the social insurance system and the employment authorities when hiring staff.
- Obtain the municipal licence or any activity-specific licences, if applicable.
- Open a bank account in the company's name, and keep the company's funds completely separate from the partners' personal funds from day one.
- Register on e-commerce platforms and authenticate the store if the activity is online.
Why not always rely on the standard articles of association template?
The standard template is useful for speeding up the process, but it usually does not deal with sensitive matters such as:
- How a partner exits and how their share is valued.
- Right of first refusal when shares are sold.
- How important decisions are made and the majority required.
- Resolving disputes between partners.
- What happens to a share on a partner's death or incapacity.
- Non-compete and confidentiality obligations between the partners.
It is therefore advisable to prepare a partners' agreement to complement the articles of association, covering what the articles do not have room for. A partnership usually starts with full understanding, but disputes often surface during growth, difficulties or when a partner wants to exit, and at that point the written text is the only reference. Find out more about our partnership contracts service.
Frequently Asked Questions
Q: Can one person set up a limited liability company? A: Yes. The Companies Law allows an LLC to be formed by a single person.
Q: Is there a minimum capital requirement? A: The partners set the capital to suit the activity, taking into account any requirements imposed by the regulators of certain activities, so check the requirements for your specific activity.
Q: Do I need both a trade name and a trademark? A: The trade name identifies the business in the commercial register, while a trademark protects your products and services. It is advisable to carry out a trademark search before adopting the name.
How can we help?
FATIMA AL ASMARI Law & Intellectual Property Company in Jeddah supports you through setting up your company, from choosing its form and drafting its articles to protecting its trademark, serving clients across all regions of the Kingdom. Book a corporate consultation or call +966 56 685 9556.
Legal sources
This article is for general awareness and is not legal advice.
