How to Register a Business in the US from Saudi Arabia

Step 1: Benefits of starting your US business from Saudi Arabia

Starting a US business from Saudi Arabia offers a multitude of benefits that can significantly contribute to both personal and professional growth. One of the key advantages is the diversification of revenue streams. By tapping into the vast and affluent US market, Saudi entrepreneurs can expand their customer base and increase their sales potential. This not only reduces the risks associated with relying solely on the local market but also provides opportunities to capitalize on the economic stability and purchasing power of American consumers.

Moreover, the US is renowned for its business-friendly environment, characterized by strong legal protections for intellectual property, robust funding options, and a plethora of resources available for entrepreneurs. Saudi business owners can take advantage of these aspects to innovate and expand their operations more effectively. Additionally, forming a US-based business can enhance credibility and brand reputation, opening doors to partnerships, collaborations, and investment opportunities that might be otherwise inaccessible. Embracing this international perspective can provide Saudi entrepreneurs with a competitive edge, fostering long-term growth and sustainability.

Step 2: How to start your US business from Saudi Arabia

Starting a US business from Saudi Arabia involves several steps and requires an understanding of both US and international regulations. The first step is to choose a suitable business structure, such as a Limited Liability Company (LLC), Corporation, or Partnership. Depending on the structure, you'll need to register with the relevant state authorities. It's common to begin with a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS), which is necessary for tax purposes and to open a US bank account.

Next, you should establish a physical address in the US; this can be done via a registered agent service that provides a business address and mail forwarding. Opening a US bank account is crucial for financial transactions, and this usually requires the physical presence of the business owner in the US. Additionally, understanding the taxation differences and complying with both US and Saudi Arabian tax obligations is necessary to ensure smooth operation. Consulting with legal and financial advisors who specialize in international business can provide guidance and help navigate the complexities of cross-border entrepreneurship.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Saudi Arabia

Understanding Compliance Requirements for Running a US Business in Saudi Arabia

Running a US business in Saudi Arabia requires an understanding of various compliance requirements. The regulatory framework in Saudi Arabia is markedly different from that in the United States. Below are some key considerations that US businesses should be mindful of when operating in Saudi Arabia.

Legal Registration and Business Licensing

The first step for any foreign business is to legally register and obtain the necessary business licenses. The Saudi Arabian General Investment Authority (SAGIA) is the primary body responsible for foreign investment licensing. The specific licenses and forms required can vary depending on the nature of your business.

• Obtain an investment license from SAGIA
• Register with the Ministry of Commerce and Investment
• Acquire a commercial registration certificate
• Complete any industry-specific certifications

Employment and Labor Laws

Compliance with Saudi Arabia's labor laws is crucial. These laws differ significantly from US employment regulations and cover areas such as hiring practices, work permits, and employee rights.

1. Saudization (Nitaqat): This policy requires businesses to hire a minimum percentage of Saudi nationals. The percentages vary by sector and business size.
2. Work Visas: Foreign employees must have valid work visas. The employer is often responsible for the visa process.
3. Employment Contracts: Contracts must comply with local labor laws, including specifics on wages, working hours, and termination conditions.

Taxation and Financial Reporting

Understanding the taxation system in Saudi Arabia is essential. The country has specific regulations regarding corporate taxes, Zakat, and VAT.

• Corporate Tax: Generally applied to foreign-owned entities at a rate of 20%.
• Zakat: A compulsory contribution for Muslim-owned businesses, calculated based on various financial elements.
• Value Added Tax (VAT): Implemented at a standard rate of 15% on most goods and services.
• Financial Reporting: Businesses are expected to maintain accurate financial records and submit annual financial statements in compliance with Saudi standards.

Cultural and Ethical Considerations

Understanding and respecting Saudi cultural norms and ethical considerations is vital for successful business operations.

1. Business Etiquette: Building relationships and trust is integral. Initial meetings are often formal, and it is customary to engage in light conversation before discussing business matters.
2. Religious Practices: Respect for Islamic customs, including daily prayer times and Ramadan, is expected. Businesses may need to adjust work hours accordingly.
3. Gender Segregation: Be aware of the regulations regarding gender segregation in the workplace and public spaces.

Import and Export Regulations

If your business involves the import or export of goods, you must adhere to Saudi customs regulations.

• Obtain the necessary import/export licenses and certificates
• Ensure compliance with Saudi product standards and labeling requirements
• Be aware of restricted and prohibited items to avoid legal issues

Successfully running a US business in Saudi Arabia requires careful consideration of these compliance requirements. Engaging local legal and business consultants can help navigate these complexities, ensuring a smooth and lawful operation within the Kingdom.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Saudi Arabia

Understanding Tax Obligations for Running a US Business in Saudi Arabia

Operating a US business in Saudi Arabia comes with specific tax obligations and regulations that business owners must navigate carefully. Understanding these considerations is crucial for compliance and optimizing business operations. Here are the key points to consider:

1. Corporate Income Tax

Foreign entities, including US businesses, are subject to corporate income tax in Saudi Arabia. The standard rate is 20% on taxable income. It's essential to accurately assess and report taxable income to avoid penalties.

2. Zakat Requirements

Zakat is a religious wealth tax applicable to Saudi-owned businesses and individual Saudi shareholders. However, joint ventures or partnerships involving foreign entities, such as US businesses, may be accountable for Zakat on the Saudi partner's portion.

3. Withholding Tax

Payments made to non-residents for services performed in Saudi Arabia, such as royalties, management fees, and other technical services, are subject to withholding tax. Rates vary depending on the nature of the payment:

• Royalties: 15%
• Management Fees: 20%
• Technical Services: 5%

4. Value-Added Tax (VAT)

Saudi Arabia implemented a VAT system, and businesses must comply with VAT rules. The standard VAT rate is 15%. US businesses providing goods or services in the Kingdom may need to register for VAT, charge VAT on taxable supplies, and file periodic VAT returns.

5. Transfer Pricing

Saudi Arabia has adopted OECD Transfer Pricing Guidelines. US businesses engaged in transactions with related parties must ensure that their prices comply with the arm's length principle and maintain appropriate documentation to support their transfer pricing policies.

6. Double Taxation Agreements (DTAs)

Saudi Arabia has signed DTAs with several countries to prevent double taxation and promote international trade. While there is no specific DTA between the US and Saudi Arabia, understanding potential tax credits and exemptions in both jurisdictions is beneficial for minimizing tax liabilities.

7. Tax Residency Status

The tax residency status of a US business in Saudi Arabia affects its tax obligations. A business is generally considered a resident if it has a significant presence or conducts most of its management and operations within Saudi Arabia. Non-residents are taxed only on their Saudi-sourced income.

8. Compliance and Reporting

US businesses must adhere to local compliance requirements, including maintaining proper financial records, filing accurate tax returns, and meeting deadlines. Failing to comply can result in penalties and legal consequences.

In summary, running a US business in Saudi Arabia requires careful consideration of tax obligations. It is advisable to consult with tax professionals experienced in Saudi regulations to ensure compliance and optimize tax strategies for your business.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country