LLC & Private Company Formation in Saudi Arabia | A Complete Guide

Saudi Arabia has become one of the major destinations attractive to foreign and regional investors. Vision 2030 programs, economic diversification, and fast improvement in business-friendly regulations have made a large investment range available to foreign and regional entrepreneurs. 

Are you an entrepreneur about to start a startup, or an international company planning to break into the Kingdom, or just a GCC investor looking for scalable opportunities? Two of the most common vehicles are the Limited Liability Company (LLC) and the Private (Pvt) Company.

Both provide flexibility, protection, and credibility; however, they differ in their specific requirements, regulatory nuances, and general operations. This guide discusses everything about setting up an LLC or private company in Saudi Arabia, including the set-up stages, ownership rules, benefits, costs, and compliance obligations.

Understanding LLC & Private Companies in Saudi Arabia

What Is an LLC?

A Limited Liability Company (LLC) is a business that has the maximum number of shareholders in the kingdom. It can be established by:

• A single owner, or
• Up to 50 shareholders

LLC companies offer limited liability protection, which indicates that shareholders only have to reimburse the value of their shares and cannot use their personal assets.

What Is a Private (Pvt) Company?

A Private Company usually works like an LLC in the Kingdom of Saudi Arabia, but over the entire holding, it always operates as:

• Members without a public offering of shares
• Limitations in the transfer of shares not agreed to by all members

Most privately owned companies in Saudi Arabia form under the LLC structure, making it the default vehicle available for entrepreneurs and SMEs within the market.

Who Can Establish an LLC or Private Company in Saudi Arabia?

Saudi Arabia allows:

• Saudi citizens
• GCC nationals
• Foreign investors (with MISA license, formerly SAGIA)

Establishing LLCs by foreign companies or individuals requires obtaining permission from MISA before commencing, allowing full foreign ownership in several sectors, namely:

• Consulting
• IT & technology
• Manufacturing
• Real estate development
• E-commerce
• Trading (special rules apply)

Some activities, such as insurance or recruitment, require additional licensing or joint ventures.

Key Advantages of LLC / Pvt Company Formation

1. Limited Liability Protection

The assets of owners remain unaffected by claims of debts/liabilities arising from business lawsuits.

2. Full Foreign Ownership Options

Saudi Arabia allows 100% foreign ownership in several activities, thus making LLCs highly attractive to foreigners.

3. Strong Market Access

Companies registered in the Kingdom can:

• Operate locally
• Bid for government contracts
• Hire staff freely
• Open offices across regions

4. High Credibility for Investors & Clients

For example, LLC is one of the most well-known and trusted forms that:

• Banks
• Government bodies
• Corporate partners
• International clients

5. Suitable for Medium to Large Enterprises

Unlike sole proprietorships, LLCs support your organization for business expansion, investment, and partnerships, which means that it will be possible for you to grow.

Requirements to Set Up an LLC or Private Company

Different types of activity will have different requirements. However, in general terms, the following apply:

1. Minimum Shareholders

• 1 to 50 shareholders
• A single-shareholder LLC is permitted.

2. Articles of Association (AoA)

A detailed document outlining:

• Capital structure
• Shareholding percentages
• Management roles
• Profit distribution
• Voting rights

3. Manager Appointment

Every LLC must have at least one director and/or board member.

4. Registered Office Address

Legal and regulatory correspondence must be at a physical address.

5. Minimum Capital Requirements

Most sectors have no minimum capital requirement. However, for foreign companies:

• SAR 500,000+ for general activities
• SAR 25 million+ for trading (for 100% ownership)
• Higher capital for regulated industries

6. MISA License (for foreign ownership)

This is essential for non-Saudi investors.

Step-by-Step Process for LLC / Pvt Company Formation

Step 1: Obtain MISA Investment License (Foreign Investors Only)

Submit:

• Passport copies or commercial registration (if corporate shareholder)
• Business plan or activity description
• Financial statements

MISA will approve an application for participation in the Saudi market as a foreign entity in step two.

Step 2: Reserve a Company Name

The Ministry of Commerce portal provides immediate name reservation, subject to availability and legal standards.

Step 3: Draft and Notarize Articles of Association

The AoA must be drafted according to the Saudi corporate law. After drafting, an appropriate submission is made to the Ministry portal for notarization of the AoA.

Step 4: Apply for Commercial Registration (CR)

This gives rise to an LLC under the law; this receives thereafter the CR after being approved.

Step 5: Register with the Chamber of Commerce

This step is necessary to enter into business operations, sign contracts, and transact with the government.

Step 6: Issue Municipality / Activity-Specific Licenses

Activities that include retail, construction, restaurants, consulting, or industrial operations need other permits.

Step 7: Register with ZATCA

Companies must register for:

• VAT (if turnover exceeds the threshold)
• Corporate income tax (for foreign-owned entities)
• Zakat (for GCC & Saudi owners)

Step 8: Open a Corporate Bank Account

Banks may require:

• CR
• AoA
• Manager ID
• Office lease agreement

Step 9: Register with MHRSD & GOSI for Hiring

These are the registrations necessary before hiring staff:

• Wage Protection System (WPS)
• GOSI (social insurance)
• Qiwa platform (contracts & work permits)

Once complete, the company is fully operational.

Costs Involved in LLC / Pvt Company Formation

These expenses differ according to:

• Activity type
• Licensing authority
• Capital requirements

Common fees include:

• MISA license fees
• Commercial Registration fees
• Chamber of Commerce membership
• Municipality license
• Legalization and documentation
• Professional/legal support

Foreign companies should also consider:

• Dependent fees for visas
• Saudization requirements
• Office rent and professional indemnity insurance (as applicable)

Compliance & Ongoing Responsibilities

An LLC shall have, after its formation, its regular obligations:

1. Tax & Zakat Filing

Every year, or quarterly as per activity and the amount of income.

2. Financial Audits

An LLC must prepare audited financial statements.

3. Saudization Requirements

The government requires companies to maintain certain levels of Saudis in specific jobs.

4. Proper Employment Contracts

All contracts via Qiwa and all payroll via WPS.

5. DEWA / Municipality / Other Renewals

Licenses are to be renewed on-time to avoid penalties.

LLC vs Pvt Company vs Other Structures

Type	Ownership	Liability	Foreign Access	Best For
LLC	1–50 shareholders	Limited	Strong	SMEs, international companies, investors
Pvt Company	Private shareholders	Limited	Good	Family businesses, groups, SMEs
JSC	2+ shareholders	Limited	Very strong	Large enterprises, public offerings
Branch Office	100% foreign	Parent company liability	Strong	International expansions
Sole Proprietorship	1 owner	Unlimited	Limited	Small shops, freelancers

Final Thoughts

Setting up an LLC or private company in the Kingdom of Saudi Arabia thus gives a foothold to entrepreneurs and international investors in one of the world’s fast-growing economies. With reforms favoring investment, digitally driven systems, and a plethora of market opportunities, the Kingdom sets a dramatic foundation for long-term business success.

However, the setup and operation of a law-abiding company requires very careful attention to licensing, legal structure, tax, Saudization, and subsequent HR requirements. Engaging experts will tremendously ease the processes involved and decrease the risks.