How to Register a Sole Proprietorship Establishment in Saudi Arabia
The Kingdom of Saudi Arabia has one of the greatest economies in the world and it will keep on growing for years to come. Thus, the government is encouraging people to start the process of registering a sole proprietorship or establishment in Saudi Arabia, implementing laws that protect all investors.
In this article, you will learn about the process of registering an establishment in Saudi Arabia. Founding a sole proprietorship can be very beneficial, but it can also be a complicated task. Nevertheless, with the necessary support system, you can achieve it with ease. Let us guide you:
- What is an establishment or sole proprietorship?
- What are the types of establishments in Saudi Arabia?
- How can I register an establishment in Saudi Arabia?
- Advantages of registering an establishment in Saudi Arabia
- Downsides of registering an establishment in Saudi Arabia
- How can EOR Middle East help you?
1. What is an establishment or sole proprietorship?
Companies owned and run by one person are defined as establishments or sole proprietorships. This business model allows freelancers, independent contractors, investors, and 1099 employees to be in charge of their commerce. Sole proprietors receive all profits and their responsibilities are not limited. Usually, establishments are considered side-jobs.
Establishments in Saudi Arabia are usually formed by one individual, nevertheless, it is possible to have shareholders and employees. These proprietorships are not legally separated from the owners; they are under the same name most times. Also, with the help of a good agency they are easy to establish.
Saudi Arabia is the perfect place for investors and entrepreneurs. Outsiders and locals alike are starting to establish companies and business endeavors all over the region. Nevertheless, foreigners can always need extra help to start their companies on these new grounds to deal with their extra paperwork, permits, and translations.
Even when most investors aim for the petroleum, gas, and oil industries, The Kingdom of Saudi Arabia is constantly developing in other areas. The government is actively seeking professionals in areas such as:
- Web Developing
Founding an establishment in Saudi Arabia is a great idea. You will have many opportunities to offer your services and grow your business while doing so. Big corporations are always on the lookout for independent contractors to complete certain assignments and enhance their workforce. Therefore, establishing a sole proprietorship can be beneficial.
Additionally, if you want to expand your proprietorship once it is settled you can change business models. With the help of an agency, you could transform your establishment in Saudi Arabia into an LLC. Dealing with a large amount of paperwork for this process can be stressful. Thus, receiving the support of experts can be a great solution.
2. What are the types of establishments in Saudi Arabia?
An establishment in Saudi Arabia is referred to as a private business. Only one person is responsible for all profits, liabilities, losses, and decisions resulting from operating this business. It is one of the most common types of business in the country. These are the types of establishments in Saudi Arabia:
2.1 Self-employed business owner and freelancers
A self-employed business owner is a person who manages a trade to make revenue. They can conduct their business on a full-time basis or as a part-time project. Generally, they pursue any kind of work available for one person such as writers, graphic designers, accountants, and consultants.
This type of business owner usually works remotely, allowing them to have more freedom with their schedule. They usually do not have a contract tying them with their employer. For example, a self-employed business owner can be someone who buys and resells merchandise online or someone who owns a retail business.
2.2 Independent Contractors
The role of an independent contractor is similar to the role of an employee. They are typically hired to perform a specific assignment but do not receive any benefits during the completion of it. Usually, independent contractors perform activities such as plumbing, construction, and carpenters. You can employ workers from Oman or any other country.
Unlike employees, these contractors can accept the projects they feel most comfortable with or decline them. One of their main benefits is how much control they have concerning the work process. For example, an independent contractor can be someone who works as a wedding planner, providing their services for different couples at the same time.
Another type of establishment in Saudi Arabia can be a franchise. In this case, the franchisee needs to pay a fee to a franchisor for the rights to use a company brand. The proprietor has to follow a prearranged business model which controls areas such as marketing, pricing, and operations.
Additionally, the franchisor requires franchisees to pay a percentage of the franchise unit’s gross sales, commonly known as royalties. This can be a good option for a sole proprietor who does not have a lot of business experience. As the franchisor offers the blueprint for a successful business model and operational support.
3. How can I register an establishment in Saudi Arabia?
To operate an establishment in Saudi Arabia you need to register it first. Only Saudi or Gulf Cooperation Council member state nationals can register a sole proprietorship in the region. The Ministry of Commerce is the entity in charge of availing this registration process.
When registering an establishment in Saudi Arabia, you need to choose a legal name for your business. Usually, this name can be your own since you will be the one in charge of your incomes and taxes. Also, you need to state the type of business and the validity period of this commercial register.
This registration process can become easier with the help of an agency. They can take care of any legal query, from compiling the necessary documents to delivering them to the authorities. Additionally, if you have subcontractors, agencies offer payroll outsourcing services to manage any necessary payments.
In the same vein, a professional employer organization agency can also help you achieve your expansion goals in the Middle East. Once your establishment in Saudi Arabia is doing well, you can transform it into an LLC. With the help of a PEO, you can achieve it in no time.
4. Advantages of registering an establishment in Saudi Arabia
Due to the government’s incentives to make the economy grow, there are many benefits in registering an establishment in Saudi Arabia. Starting a sole proprietorship can be an intimidating process, there are a lot of things to take into consideration before establishing one. However, it is important to know that the advantages can be plenty when you have a great team of experts by your side.
4.1 Having complete control
The main advantage of founding an establishment in Saudi Arabia is having complete control of your business. When having a sole proprietorship, you do not need to make decisions based on the desires of any legal partners. You will have the freedom to make any necessary decision by yourself.
With the right kind of advice, you will be able to change strategies. Consequently, you will be taking your startup in any direction you want it to grow. Also, if you feel like you have too many responsibilities, acquiring the services of an employer of record can be of great use.
4.2 Availability to hire workers
As a sole proprietor, you can employ as many people as you would like. Allowing you to grow your reach and your workforce without having to step into formally incorporating your business. Additionally, you have the possibility of hiring overseas employees, permitting you to delegate certain assignments to focus on other aspects of your business.
It is important to note that as the sole owner of an establishment in Saudi Arabia, you are in charge of their well-being. Nonetheless, if you are a good manager, your workers will help you grow and expand your business as much as you would like.
4.3 More independency
With a sole proprietorship, you can choose your projects, working hours, finances, vacation time, and more. You have the upper hand in how many assignments you take at the same time and you also have the chance to subcontract.
Additionally, you can operate your business under your name and you do not need to open a business checking account. You will not be accountable at the same levels of requirements and disclosure that the Saudi Arabian government holds on LLCs or other bigger corporations.
5. Downsides of registering an establishment in Saudi Arabia
Owning an establishment in Saudi Arabia can seem like a good idea, but not everyone is ready to manage a business on their own. Conducting a business is full of challenges and drawbacks. Just like in any other Middle Eastern region, you will need permits and other types of paperwork.
5.1 Personal liability
Sole proprietors do not receive any of the benefits that come from owning a legal business entity. Ultimately, you are on your own to deal with your business transactions. You are responsible for your company’s payroll, debts, financial, tax, and legal queries.
For example, if someone sues your company, your personal assets accounts can be used to cover expenses. Having support from a business consultancy is important as it will help you minimize risks. Additionally, they offer a wide range of complementary services that will allow your company to easily succeed.
5.2 Difficulty obtaining financing
Another downside of founding an establishment in Saudi Arabia is that it can be difficult to secure financing and loans. This is because most banks rather work with developed companies than startups. Since there is no backup, if you are unable to cover a loan, banks can take your personal property as payment.
It can be hard for sole proprietors to build business credit since they do not have company credit cards or bank accounts. Additionally, all the responsibilities fall into the proprietor, the organization as a whole is reliant on that individual’s finances and credit history.
5.3 It may be difficult to sell your business
If you decide that you do not want to run your business it may be difficult to sell it or trespass it to someone else. Since an establishment in Saudi Arabia is attached to a sole proprietor, it will end once you are not able to maintain it.
It is possible to sell a sole proprietorship, but not in a typical way. Instead of selling your whole business, you would have to sell your business assets individually. In this way, the buyer will not be able to maintain your business name.
6. How can EOR Middle East help you?
To help you develop an establishment in Saudi Arabia, EOR Middle East is here to help. We offer a vast variety of services for your business to help you sort any difficulties you may have. Our agency is the best option for individuals looking to start a company here.
We provide the essential tools and technology to cover any necessity. EOR Middle East has a 98% success rate, 800+ satisfied ratings, and years of experience that make us the greatest agency in regions such as Qatar, Kuwait, Jordan, Israel, Lebanon, and the UAE.
Are you looking for an agency to help you start an establishment in Saudi Arabia? If you are interested in our wide range of services, you can call us at 00 971 433 16 88. You can also refer us by email at [email protected]. Our agents will clear any of your queries.
Additionally, if you want to be part of our team of experts, go to thetalentpoint.com and submit your resume or CV. You can also contact us via email at [email protected]. Our agents will gladly review your application.