Types of Business Entities in Saudi Arabia: Which One is Right for You?

Choosing the right business entity in Saudi Arabia depends on several factors including your business goals, ownership structure, liability preference, and investment capital. Here’s a breakdown of the main types of business entities in Saudi Arabia to help you decide which one might be right for you: For more information please visit Business setup in saudi arabia

1. Sole Proprietorship (Establishment)

Best for: Small local businesses, individual entrepreneurs.

Features:

• Owned and operated by a single individual (must be a Saudi or GCC national).
• Full personal liability for debts and obligations.
• Simple to establish and operate.
• Not suitable for foreign investors.

2. Limited Liability Company (LLC)

Best for: Small to medium-sized businesses, joint ventures.

Features:

• Can have 1 to 50 shareholders.
• Liability is limited to the amount of capital invested.
• Popular among foreign investors (requires a local partner unless 100% foreign ownership is approved under MISA).
• Minimum capital: SAR 500,000 for most foreign-owned LLCs.
• Must appoint an auditor and file annual financial statements.

3. Joint Stock Company (JSC)

Best for: Large enterprises, companies planning to list on the stock exchange.

Features:

• Suitable for large-scale operations.
• Requires at least 2 shareholders (5 for publicly listed).
• Liability is limited to share capital.
• Must have a Board of Directors and hold annual general meetings.
• Minimum capital: SAR 500,000 (SAR 10 million for public JSCs).

4. Branch of a Foreign Company

Best for: Multinational companies expanding into Saudi Arabia.

Features:

• 100% foreign-owned.
• Operates as an extension of the parent company.
• Must be licensed by MISA (Ministry of Investment).
• Subject to the same laws and taxation as local entities.

5. Representative Office (Technical and Scientific Services Office – TSSO)

Best for: Non-commercial support or promotion activities.

Features:

• Cannot engage in commercial activity.
• Used for liaison, market research, or technical support.
• Must be licensed by MISA.
• No revenue generation allowed.

6. General Partnership

Best for: Local partnerships with mutual trust.

Features:

• Two or more partners jointly liable for the debts of the business.
• Unlimited liability.
• Less common due to risk of personal liability.

7. Limited Partnership (Commandite Company)

Best for: Investors who want limited liability and no management role.

Features:

• Includes both general (active) and limited (silent) partners.
• General partners have unlimited liability; limited partners are only liable for their investment.

Choosing the Right Entity: Key Considerations