Study all legal options before launching a business project
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An entrepreneur needs to understand the laws governing different types of businesses before starting his venture.
Different rules and regulations govern different types of companies according to the nature and size of the business.
The first step, therefore, is to identify one’s project as micro, small, medium or large. In each case, Saudi authorities have different sets of regulations to protect both consumers and the business.
To cater to the needs of the micro-project, the online platform Marouf is available.
It allows small vendors and customers to sell, buy and communicate with each other all in one place.
The service was introduced in 2016 and has since amassed over 20,000 registered sellers offering a wide variety of products including electronics, cosmetics and even homemade food.
Vendors registered with Marouf are authorized by the Ministry of Commerce, which ensures the protection of consumers’ rights and the intellectual and financial rights of merchants. There are strict rules and regulations to monitor and prevent commercial fraud.
When it comes to launching small projects, an entrepreneur must know his legal rights and liabilities as a businessman.
Sole proprietorship, or an establishment as it is called in Saudi Arabia, is different from a company and is subject to different rules governing its business.
An establishment, or a number of entities working under that establishment, is the sole property of an individual. An establishment shall have a legal personality of its own. However, it does not have a financial responsibility independent of its owner. The legal owner is responsible for all the rights and obligations and is the guarantor of all the rights of the establishment’s creditors.
Such establishments are subject to commercial registry law, not corporate law.
A company has different rules governing its legal personality and financial liability.
If an entrepreneur decides to launch his own company, he again has to decide on the type of company, such as a joint-liability, limited-partnership, joint-venture, joint-stock, limited-liability or one-person company.
For example, if the company is a joint-liability company, it should be aware of the personal liability of partners in all their funds and the joint liability of the company’s debts and obligations.
In a limited-partnership company, for example, two teams of partners are involved.
One team includes at least a joint partner and is responsible for the company’s debts and obligations; the other should include at least a limited partner who is not responsible for the company’s debts and obligations except within the limits of his share in the company’s capital.
This form of company is best suited for projects that include a main support partner and financier.
The option of a joint-stock company is very advanced for beginners and it is suitable only for big projects.
There is also the option of a one-person company, whose capital is fully owned by a single individual, whether natural or legal.
All these issues should be studied in detail before launching any project to suit one’s needs and plans.
• Dimah Talal Alsharif is a Saudi lawyer and legal consultant. Twitter: @dimah_alsharif
