Set up an LLC in Bahrain in 2023-24
Thinking to set up an LLC in Bahrain can be an excellent option for both local and foreign entrepreneurs who are looking to start a business in the country. With its favourable tax laws, strong economic growth, and business-friendly environment, Bahrain is quickly becoming a hub for startups and established businesses alike.
It is located at the heart of the Gulf Cooperation Council (GCC) and provides easy access to markets in the region, making it an ideal location for companies looking to expand into the Middle East.
However, it is known for its business-friendly environment, with a supportive government and a robust infrastructure that makes it easy to conduct business. Eventually, the process to open a Limited Liability Company in Bahrain is relatively straightforward.
For LLC incorporation in Bahrain, it is essential to understand the vision, demand, and resources needed. It is also significant to perform a market study and create a business strategy.
This article provides a detailed process of LLC incorporation in Bahrain. We’ll get right on it, without any further ado.
Step-by-step process to set up an LLC in Bahrain
If you are looking to open a business in Bahrain, and are looking to set up an LLC, this section will discuss the procedure in a detailed manner.
The process to open a Limited Liability Company in Bahrain typically involves the following steps:
Step 1:- Choose a unique name for the company and obtain approval from the Ministry of Industry, Commerce, and Tourism (MOICT).
Step 2:- Prepare the Articles of Association (AoA), which includes details about the firm activities.
Step 3:- The AoA must be notarized by a notary public and then legalized by the Bahrain Chamber of Commerce and Industry (BCCI).
Step 4:- A minimum of 50% of the proposed share capital must be deposited in a local bank account.
Step 5:- Get a Business License from the MOICT to lawfully function in Bahrain.
Step 6:- Registration with the General Directorate of Nationality, Passports, and Residence (GDNPR).
Step 7:- Register for Taxation with the National Bureau for Revenue (NBR) for taxation purposes.
Step 8:- The company must open a corporate bank account with a local bank.
Numerous Documents Needed for LLC incorporation in Bahrain
Here is a list of documents typically required to open a Limited Liability Company in Bahrain:
- Memorandum and Articles of Association
- The document that certifies that the company has been enlisted with the Ministry of Industry, Commerce, and Tourism.
- Passport copies or National ID cards of the shareholders and directors.
- Address Proof, like utility bills or rental agreements confirming the address of the company’s registered office.
- Proof of payment of the required minimum share capital for the company.
- Trade Name Registration Certificate confirms that the proposed firm name has been authorized and enlisted.
- Appointment of the auditor of the company.
Eligibility Criteria for LLC Incorporation in Bahrain
To incorporate LLC in Bahrain, certain eligibility criteria must be met, which are discussed below:
- Shareholder: The shareholders of an LLC can be individuals or corporate entities and the least number of shareholders required is two, and the maximum is 50.
- Director: An LLC should possess a minimum of 1 director who is accountable for handling the firm affairs. The director could be a local or a non-resident of Bahrain.
- Share Capital: An LLC must have a minimum share capital of BD 20,000 for a General Partnership Company (GPC) and BD 50,000 for a Single Person Company (SPC).
- Office: The LLC located in Bahrain has to maintain an office in Bahrain and virtual office solutions are available and may prove beneficial.
- Taxation: Businesses operating in Bahrain are taxed only when they participate in the extraction of oil and refinement of gas, oil, and petroleum.
- Legal status: An LLC possess a legal status and should be enlisted with the Ministry of Industry, Commerce, and Tourism.
Types of Various LLC Incorporations in Bahrain
In Bahrain, there are two main types of Limited Liability Companies (LLCs) that entrepreneurs can incorporate:
Single Person Company (SPC)
An SPC is a limited liability company that can be owned and managed by a single person. It is a popular option for small business owners who want to start a business on their own or for those who have a small team of employees. The least fund needed for an SPC is BD 50,000.
General Partnership Company (GPC)
A GPC is a limited liability company that is owned by two or more partners. Each partner is responsible for the firm’s losses and duties to the level of their acquisition in the business. The least fund needed for a GPC is BD 20,000.
Both types of LLCs offer limited liability protection to their owners and provide a flexible and favourable business environment for entrepreneurs looking to start a business in Bahrain.
The type of LLC that is best suited for a particular business depends on various factors such as the number of owners, the amount of capital investment required, and the type of business activities to be carried out.
Taxation of Limited Liability Companies in Bahrain
Limited liability companies in Bahrain are subject to various taxes, including corporate income tax, value-added tax (VAT), and social insurance contributions.
Corporate Income Tax: LLCs are subject to a flat corporate income tax rate of 14% on their annual profits.
Value-Added Tax (VAT): Since January 1, 2019, Bahrain has implemented a 5% VAT on most goods and services, including those provided by LLCs.
Social Insurance Contributions: All employees in Bahrain, including those working for LLCs, are required to contribute to the social insurance system.
It is important for LLCs in Bahrain to comply with all tax regulations and to maintain accurate records of their financial transactions.
Initial Costs to Set up an LLC in Bahrain
The cost to open a limited liability company in Bahrain can vary depending on several factors, such as the size of the company, the nature of its activities, and the number of shareholders.
However, here are some of the typical costs associated with LLC incorporation in Bahrain:
- Company Registration Fee: The initial cost of registering an LLC in Bahrain is typically BD 350 (approximately USD 930).
- Minimum Capital Requirement: There is no specific minimum capital requirement for setting up an LLC in Bahrain, but the amount of capital invested must be proportional to the nature and scope of the business.
- Legal and Professional Fees: Engaging the services of a lawyer or legal firm is recommended to ensure compliance with local laws and regulations. The cost of legal and professional fees can vary depending on the complexity of the registration process.
- Office Rental and Other Costs: As per Bahrain’s commercial laws, every company must have a registered office. The cost of office rental can vary relying on the area and dimensions of the office.
Overall, the initial costs of setting up an LLC in Bahrain are moderate, making it an attractive location for entrepreneurs and investors looking to establish a presence in the Middle East.
Why set up an LLC in Bahrain?
There are several reasons why one might choose to open a Limited Liability Company in Bahrain, including:
The LLC structure allows for a flexible ownership structure, which can be attractive to businesses with multiple shareholders or those seeking to attract investors.
The LLC structure provides a separation between the personal assets of the shareholders and the company’s assets.
100% Foreign Ownership
LLCs only involved in businesses outside of Bahrain could be owned 100% by foreigners.
Least Share Capital
A least share capital of $2,660 is required for private LLCs.
After 58 years of being an independent British protectorate English remains their only official language.
Overall, opening a Limited Liability Company in Bahrain comes with benefits, including access to a growing market, favourable tax laws, and a business-friendly environment. With the proper planning and guidance, incorporating an LLC in Bahrain can be a great way to start a successful and profitable business in the region.
While the process to set up an LLC in Bahrain can be time-consuming and require various legal formalities, it can be completed with the help of a professional consultant or a legal service provider.
It is best to seek advice from business experts of Odint Consultancy to help you incorporate LLC in Bahrain.
Limited liability protection shields members’ personal assets from the business’s liabilities. LLCs are separate legal entities for their members.
The minimum time it takes to set up an LLC in Bahrain is around two to three weeks roughly.
An LLC works ideal for single owners and is a preferred vehicle for small businesses. In general, LLCs are much more versatile than Ltd in regards to structure. In particular, LLCs can operate with just one owner or a few members in the group.
The least amount of funds needed for capitalization of BDH 20000 for the formation of LLCs in Bahrain.
Bahrain permits 100% foreign ownership for new entities and also the creation of representative offices and branches for foreign corporations with no Bahraini sponsoring or local partner.