How Much Share Capital Should a Saudi LLC Have? A Worked Example

A method, with illustrative SAR figures, for sizing share capital from real needs instead of copying a number, and what to check about minimums.

Share capital should be sized from what the company actually needs to operate until it is self-funding, then checked against any minimum set for your activity or legal form. Minimums have changed since the 2023 Companies Law and differ by activity, so confirm them with your adviser. The example below shows the working method with illustrative numbers.

The situation

A foreign software company is forming a single-person LLC in Riyadh to sell implementation services. The founder wants to decide how much of the funding to put in as capital and how much as a shareholder loan.

Assumptions (illustrative)

• Monthly operating costs once running: SAR 120,000, assumed.
• Months until revenue covers costs: 8, assumed.
• One-off setup and equipment spend: SAR 150,000, assumed.
• Revenue during the first 8 months: SAR 360,000 in total, assumed.
• Working capital buffer for late customer payments: 2 months of costs, assumed.
• Share of funding the founder wants as capital rather than loan: 60 per cent, assumed.

Step 1: Operating costs until break-even

SAR 120,000 multiplied by 8 equals SAR 960,000.

This is the spending the company must survive before it covers itself.

Step 2: Net operating gap

SAR 960,000 minus SAR 360,000 of revenue equals SAR 600,000.

Early revenue reduces the gap, but only if customers actually pay on time.

Step 3: Add setup spend and buffer

SAR 600,000 plus SAR 150,000 plus 2 multiplied by SAR 120,000, which is SAR 240,000, gives SAR 990,000.

The buffer covers slow payment, which is common with larger clients and public bodies.

Step 4: Split between capital and loan

SAR 990,000 multiplied by 60 per cent equals SAR 594,000 of capital, leaving SAR 396,000 as a shareholder loan.

Capital is permanent and visible to banks and clients; a loan can be repaid when the company has surplus cash.

Step 5: Round to a practical figure

SAR 594,000 rounded up to SAR 600,000 of capital, with the loan reduced to SAR 390,000 so the total stays at SAR 990,000.

A round figure simplifies the articles and the bank deposit.

Step 6: Check against the minimum

Compare SAR 600,000 with the current minimum for the activity and form, if any, confirmed by the adviser.

If a minimum is higher, capital rises to meet it; if there is none, the needs-based figure stands.

What changes the answer

• A longer path to break-even raises the funding need faster than any other input.
• Clients who pay in 90 days rather than 30 increase the buffer needed.
• Some banks and large clients look at capital as a sign of substance.
• Regulated activities may impose their own capital or guarantee conditions.
• A higher share of capital reduces flexibility to take cash back later.

What the numbers tell you

• Size capital from the cash plan, not from what another company registered.
• Keep part of the funding as a documented shareholder loan if flexibility matters.
• Confirm minimums for your activity at the time you file.
• Record how and when capital will be paid in, since banks and ZATCA will ask.
• Revisit capital when a large contract or tender changes the need.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

Domira works with foreign investors on the property side of entering Saudi Arabia: finding land or premises, due diligence, design, construction and asset management. For licensing, tax and legal steps, work with a licensed adviser; we coordinate with yours so the property decision fits the structure you choose.