Selecting the right legal structure is the foundation of any successful business setup in Saudi Arabia. The entity type you choose determines your ownership rights, regulatory obligations, tax liabilities, and future scalability. Saudi Arabia offers a range of options for both foreign and local investors, each with distinct legal and operational implications. This guide breaks down the most common company types available to investors and helps you determine which is most appropriate for your venture.
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Limited Liability Company (LLC)
The Limited Liability Company (LLC) is the most widely used legal entity in Saudi Arabia for both foreign and local investors. It combines liability protection for shareholders with operational flexibility. An LLC can be owned 100% by foreigners in most sectors, though regulated industries may require a local partner or additional external approvals.
This blog is a part of our Setting Up a Business in Saudi Arabia
Key features include:
- Liability of shareholders is limited to their capital contribution.
- Requirement for at least one general manager residing in Saudi Arabia.
- No public share offering permitted.
- Managed by one or more directors appointed by shareholders.
- The minimum capital requirement varies from activity and is generally in the range of SAR 500,000 for foreign-owned LLCs (subject to sector-specific rules). Some LLCs may also need to prove a capital deposit before registration.
Joint Stock Company (JSC)
A Joint Stock Company (JSC) is typically used for large ventures intending to raise capital through public or private share offerings. While more complex to incorporate and manage, it offers stronger governance and higher investor confidence, suitable for infrastructure projects, financial services, and industrial ventures.
Key points:
- Requires at least 2 shareholders and 3 directors.
- Minimum capital of SAR 500,000 (private JSC) or SAR 10 million (public listed JSC).
- Can be fully or partially foreign-owned.
- Audited financials and strict governance are mandated.
- Subject to Capital Market Authority (CMA) regulation for public offerings.
Foreign investors with ambitious long-term expansion plans may consider JSCs for IPO preparation or large-scale financing strategies.
Branch of a Foreign Company
Setting up a Branch Office of a foreign company is a popular option for businesses that want to operate in Saudi Arabia without incorporating a new legal entity. A branch is fully owned by the parent company and can engage in commercial activities similar to those of the parent company, provided they are approved by the Ministry of Investment of Saudi Arabia (MISA license).
Highlights:
- Requires a foreign investment license from MISA.
- No local partner required.
- Same liability as the parent company.
- Can operate for profit, hire staff, open bank accounts, and enter contracts.
However, branches are restricted from certain regulated activities and must comply with the same tax and labor laws as local entities.
Technical and Scientific Services Office (TSO)
A Technical and Scientific Services Office (TSO) is suitable for foreign companies that want to provide technical support or scientific consulting services to their local Saudi partners, distributors, or clients. Unlike a branch or LLC, a TSO cannot engage in direct commercial activities or sales.
Key characteristics:
- No commercial or profit-making activities.
- Focused on liaison, support, and training roles.
- Requires a foreign investment license.
- Must appoint a local representative and maintain a physical presence.
TSOs are ideal for companies in the technology, engineering, or pharmaceutical sectors that want to build brand presence before full-scale market entry.
Representative Office
A Representative Office is similar in function to a TSO but with even narrower scope. It is not licensed to perform any technical services or advisory work. Its purpose is limited to market research and liaison activities.
This structure is rarely used and often acts as a short-term entry strategy before transitioning into an LLC or branch setup.
Joint Ventures
Joint Ventures (JVs) in Saudi Arabia can be structured as LLCs or contractual partnerships. They are particularly common in regulated sectors like construction, oil & gas, and defense, where a local partner is required. A JV enables foreign investors to leverage the local partner’s network, licenses, and resources.
Key characteristics:
- Must define roles, profit sharing, and dispute mechanisms clearly.
- Requires a carefully negotiated JV agreement.
- Depending on structure, it may be registered as a legal entity (LLC) or operate based on an agreement.
A JV can also be a stepping stone to a more autonomous setup once market familiarity is achieved.
Final Thoughts
Choosing the right legal structure in Saudi Arabia requires balancing regulatory compliance, business goals, and sector-specific requirements. While an LLC remains the most accessible and flexible option, sectors like finance, defense, or energy may require joint ventures or more complex structures. A thorough legal and strategic evaluation will save time and resources down the road.
For tailored advice and full-service assistance with entity setup in Saudi Arabia, reach out to our Company Formation team at ATB Corporate.
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Amy is a legal consultant at ATB Corporate, with a unique blend of skills for corporate, commercial and litigation matters. She is a law graduate and certified in Intellectual Property from the World Intellectual Property Organization.