Before You Begin… Ask Yourself:

Are you starting a small business?
Do you plan to expand in the future?
Are you working solo or with partners?

These questions are your first step toward choosing the right legal structure for your business in Saudi Arabia.

In this article, we’ll help you navigate the most common types of companies recognized by Saudi law — and explain the key differences between a Sole Proprietorship and a Limited Liability Company (LLC), the two most popular options among entrepreneurs.

Types of Companies Recognized in Saudi Arabia

Sole Proprietorship

• Owned by one individual
  
  

• Suitable for small businesses
  
  

• No legal separation between personal and business finances
  
  

• The owner bears full personal liability for business obligations
  
  

Limited Liability Company (LLC)

• Can be formed by one to 50 shareholders
  
  

• Liability is limited to the company’s capital
  
  

• Provides clear separation between personal and business assets
  
  

Joint Stock Company (JSC)

• Designed for large-scale enterprises
  
  

• Requires a minimum capital of SAR 500,000
  
  

• Shares can be traded publicly
  
  

General or Limited Partnerships

• Less common, often used in family-owned or traditional businesses
  
  

Branch of a Foreign Company

• Enables international companies to expand into Saudi Arabia
  
  

• Requires approval from the Ministry of Investment (MISA)
  
  

Sole Proprietorship vs. LLC: What’s the Real Difference?

One of the most common challenges new business owners face is choosing between a Sole Proprietorship and an LLC — and each option comes with its own pros and cons.

A Sole Proprietorship is the simplest structure, owned and operated by a single individual. There’s no legal distinction between personal and business assets, and the owner carries full liability for any debts or risks. It’s quick to set up and has minimal regulatory requirements — but offers less legal protection and limited growth potential.

An LLC, on the other hand, provides stronger legal safeguards. It can be established by one or more shareholders (up to 50), and the liability of each is limited to their share of capital — typically starting from SAR 5,000 to SAR 10,000. While the setup process is more structured and requires internal management, it allows for more scalability, partnership opportunities, and long-term stability.

Choosing between the two depends on the size of your business, your risk appetite, future growth plans, and available capital.

A Quick Comparison: Sole Proprietorship vs. LLC

So… Which Legal Structure Is Right for You?

Choose a Sole Proprietorship if:

• You’re running the business on your own
  
  

• Your business model is low-risk
  
  

• You want a fast, simple setup without much paperwork
  
  

Choose an LLC if:

• You have partners or investors
  
  

• You’re planning for long-term growth
  
  

• You want to protect your personal assets
  
  

Start by thinking about your business model, your long-term vision, and how much capital you can invest.

Once you’ve figured out the right structure, Sidra’s expert team will walk with you every step of the way — from choosing the legal entity to obtaining your commercial registration and licenses.

You focus on growing your business.
We’ll take care of the rest.