Types of Companies in Saudi Arabia and Their Characteristics: A Comprehensive Guide for Investors

the types of companies that can be established in Saudi Arabia according to the commercial laws and regulations, along with the features and specifications of each type. If you are considering starting a new company in Saudi Arabia, it is essential to understand these types and their characteristics.

The Importance of Companies in Saudi Arabia

Companies play a crucial role in the development of the Saudi economy. They are one of the primary sources of income and provide a wide range of job opportunities. Companies contribute to improving business processes, the investment sector, and encourage innovation and development, thereby enhancing sustainable growth in the Kingdom. Saudi Arabia places great emphasis on the establishment and development of companies in accordance with applicable laws.

Classification of Companies in Saudi Arabia

Saudi Arabia hosts a wide variety of local and international companies operating across different sectors. Companies are classified based on the type of activity, its nature, size, and the number of shareholders involved. Saudi law defines company types according to the new Companies Law, and it is mandatory for companies to adhere to recognized legal forms to avoid being considered unauthorized.

Types of Companies in Saudi Arabia

1. General Partnership (شركة التضامن)
   • Characteristics: Consists of two or more individuals who are personally liable for all the company’s debts and obligations. Partner shares cannot be traded on the financial markets, and no partner can transfer their share without the consent of others.
   • Advantages: The company name is based on the partners’ names, and profits and losses are distributed among partners according to their capital share.
2. Joint Stock Company (شركة المساهمة)
   • Characteristics: Requires a contribution of capital from the founders, divided into tradable shares. Shareholders have limited liability for the company’s debts up to the value of their shares.
   • Advantages: Can be either public or private, subject to specific regulations under the Commercial Companies Law, and is the most common type of company in the Kingdom.
3. Limited Liability Company (LLC) (الشركة المحدودة)
   • Characteristics: Established by a group of shareholders who determine the capital and obligations. The company is responsible for its debts and obligations, with a separate legal identity from its owners.
   • Advantages: Provides legal protection for the shareholders’ assets and attracts foreign investments.
4. Limited Partnership (شركة التوصية البسيطة)
   • Characteristics: Comprises a general partner who bears full responsibility for the company’s debts, and a limited partner who is only liable for their share of the capital.
   • Advantages: The limited partner may transfer their share to other partners or third parties with the consent of all partners.
5. Public Company (الشركة العامة)
   • Characteristics: Requires significant capital contributions from government entities or other stakeholders, with shareholders having limited liability.
   • Advantages: Widely prevalent in the Kingdom, playing a significant role in the Saudi economy.
6. Sole Proprietorship (الشركة الشخصية – شركة ذات الشخص الواحد)
   • Characteristics: Owned by a single individual who is fully responsible for the company’s debts. Usually managed by one person or a family.
   • Advantages: Offers great flexibility in management and decision-making.
7. Cooperative Company (الشركة التعاونية)
   • Characteristics: Based on the principles of participation and solidarity among its members. Often non-profit organizations that distribute profits based on the level of member participation.
   • Advantages: Covers a broad range of economic sectors and is characterized by its cooperative nature.
8. Foreign Company (الشركة الأجنبية)
   • Characteristics: Foreign companies can establish branches in the Kingdom and operate under the Foreign Investment Law.
   • Advantages: Subject to Saudi laws and regulations and requires registration with the Ministry of Commerce and Investment.
9. Silent Partnership (شركة المحاصة)
   • Characteristics: Formed by two or more individuals who share capital among themselves. It is not registered in the commercial register and is not subject to the legal requirements of companies.

Advantages: Operates discreetly without a formal name, allowing each partner to conduct business under their own name.