How To Set Up A Sole Establishment Company In KSA

Introduction

Are you an entrepreneur looking to establish your business presence in the thriving economy of Saudi Arabia? Setting up a Sole Establishment company can be an excellent choice to kickstart your venture in this dynamic market. With its strategic location, robust infrastructure, and favorable business environment, Saudi Arabia offers ample opportunities for budding entrepreneurs. This article will explain the intricacies of setting up a sole proprietorship in the Kingdom of Saudi Arabia, focusing on the entire process. and The benefits and why this list can be key to unlocking your business’s potential, and in the end we will walk you through the main steps to set up a sole proprietorship in Saudi Arabia.

What is the Sole proprietorship in Saudi Arabia?

In Saudi Arabia, a sole proprietorship is called an establishment. This is a business owned and operated by one person. There are no other shareholders and no minimum capital is required.  Sole proprietors have unlimited liability, meaning they are personally responsible for all of their corporation’s assets and liabilities. Institutions are not subject to company law;  This format is ideal for small businesses. Easy to set up and operate. Saudi  Arabia’s economy is growing and the business environment is changing rapidly. Sole proprietorships are flexible and easy to adapt as only one person makes the decisions. Only Saudi or GCC citizens can register a company in Saudi Arabia. To run a business, you must first register with the relevant authorities.

Advantages & Disadvantages of sole proprietorship

Advantages of sole proprietorship	Disadvantages of sole proprietorship:
Easy to set up.	Unlimited liability.
low cost of Business structure.	difficulty in raising capital.
Easy to register.	must pay self-employment tax on all income.
Easy recordkeeping.	inability to take on business debt, and may be considered unprofessional.

What is the procedure for incorporating a company in Saudi Arabia?

• Choose your company name – Define a formal and unique identity for your organization, ensure legal compliance, and build a strong brand image.
• Complete business registration – Legally register your company to engage in legal business activities.
• Chamber of Commerce Registration – Mandatory documents must be submitted to the Chamber of  Commerce.
• Register with the Ministry of Labor  – Register your company with the Saudi  Ministry of Labor to comply with labor laws.
• Director General Visa Issuance – To expedite the process of approving the director general  visa and residence permit, the Ministry of Labor and Social Development manages important labor  documents.
• Register a state address for your company – Establish an authorized business address to be included in government records.
• Qiwa Portal  Registration – Ministry of Labor and Social  Development – Electronic solutions to improve labor sector services provided by the Ministry of  Labor and Social  Development through the Qiwa platform.
• Register for Zakat, VAT, and Business Taxes: Register your business to be compliant with Zakat, VAT, and  Business Taxes in Saudi Arabia.

Steps for Opening a main individual establishment file through the Qiwa platform:

1. The user selects “Open a main establishment file service”.
2. He acknowledges the accuracy of the data.
3. He selects the type of establishment and its activity: “individual or company”.
4. He selects the labor office to which the establishment belongs.
5. He selects the sub-economist.
6. He enters the applicant’s description data.
7. He enters the establishment name.
8. He specifies the type of financial calendar “Hijri or Gregorian”. 

Issuance of commercial register:

The organization registration is completed by the Saudi Ministry of Commerce. On the website, you can choose electronic services. This service allows you to enter the business registry without visiting any department of the Ministry.

• First, create an account and log in to the electronic service. Next, click on My C.R. 
• And then, click on Register business launch. You will be able to choose the business name, type, and time to confirm the registration. 
• The registration fee is SAR 200 per year. Payment bills will be sent to your mobile phone via SMS. The chamber of commerce fees are increased depending on the type of work and the annual level of the business registration. 
• Once your payment is accepted, and if everything is correct, you will be issued a Business Registration (C.R.). 
• You can print it by visiting this link without having to go to the Department of Commerce. The entire process can be done in person by visiting the Department of Commerce or one of its branches. 
• Once you have your CR, you can start running your business. However, you are not registered for taxes yet.

Conditions for opening a main establishment file:

Entering all licenses required for the activity according to the license list according to the Ministry of Human Resources and Social Development.

To read more about the possibility of 100% foreign ownership of the company in KSA .

Saudi Arabia’s Corporate Tax System:

Saudi Arabia has many taxes to consider. All tax registrations can be done online through Zakat,  Excise, and Customs authorities. There is a guide for each tax record in the GAZT electronic service:

• Value Added Tax (VAT)
• ZakatTax

Saudi citizens are not required to pay their income tax. They only have to pay zakat, which is 2.5%. The standard VAT rate in Saudi Arabia is 5% on all goods and services.

To read more about corporate taxes in Saudi Arabia..

Procedure for establishing a sole proprietorship in Saudi Arabia:

1. Market Research and Feasibility: Conduct in-depth market research to understand your business and KSA target market. Evaluate the viability of your business idea and identify possible challenges. 
2. Business Plan Development: Develop a comprehensive business plan that outlines your goals, strategies, and financial projections. A well-organized business plan is essential to attracting investors and guiding the growth of your business. 
3. Choose a business name: Choose a unique and meaningful business name that matches your brand image. Make sure the name you choose complies with KSA business name guidelines.
4. Office Location and Setup: Choose the right location for your business. Determine your office space, considering things like accessibility and business needs.
5. Legal Structure and Licensing: Determine the legal structure of your sole proprietorship. Obtain the necessary licenses and permits from the relevant authorities.
6. Open a bank account: Choose a bank that meets your business needs and provides the services you need.
7. Visa Application: Read about visa requirements for business owners in  Saudi Arabia. Start processing your visa with any personnel.
8. Marketing and Sales: Use digital platforms and traditional marketing methods to reach your target audience. 
9. Compliance and Regulations: Stay informed about local regulations and compliance requirements. Regularly update your business processes to adapt to any regulatory changes.

Registering a branch of a sole proprietorship:

This service is only offered to sole proprietors who wish to issue branch registrations.

Service Documents:

• Copies or numbers of key business records.
• Power of attorney from the applicant, accompanied by a certificate of identity of the authorized natural person or legal entity.

Service Fee: Payment of fees to the government agency providing the service.

Place of Application for the Service: Website – Electronic Services Portal

Expected Time to Implement the Service: Two working days.

Conclusion

The Saudi government is working to improve the country’s business environment to reduce its dependence on oil exports. To achieve this goal, the government provides a favorable fiscal and regulatory environment. Startup costs are very low, taxes are very low and easy to manage, and venture capital is available. These factors make Saudi Arabia the best place to start a business. Therefore, in this article, we have tried to provide you with all the information related to establishing a sole proprietorship for those who are looking forward to this.

References:

• Ministry of investment ,2023, service manual. 10th Edition. P.g 81.
• ، الموارد البشرية والتنمية الاجتماعية Open establishment file, Retrieved from: https://www.hrsd.gov.sa/ministry-services/services/251214 (28/7/2024) 11:43 pm.
• Sole proprietorship company formation in ksa, Retrieved from: https://saudibss.com/sole-proprietorship-company-formation-in-ksa/ (29/7/2024) 6:45 am.
• Establishment ,Retrieved from: https://saudihelplinegroup.com/establishment/ (29/7/2024) 7:30am
• Anja simic ,2021 (updated 2024), how to register a sole proprietorship in Saudi Arabia. Retrieved from: https://www.deel.com/blog/register-establishment-sole-proprietorship-in-saudi-arabia/ (29/7/2024) 10:03 am