Guide on How to Start a Small Business in Bahrain

Bahrain is an island nation comprising a group of islands, situated between the Qatar peninsula and the north-eastern coast of Saudi Arabia. The government of Bahrain welcomes foreign investment with open arms in order to boost its economy. Consequently, the economic laws of the country have been considerably liberalized. Recently, Bahrain has passed laws liberalizing foreign property ownership and tightening its anti-money laundering laws. Moreover, the visa and immigration policies have been eased to suit business development in the nation.

Contemporary private firms, especially in Information and Communications Technology (ICT), Education, Tourism, Banking, Financial Services & Insurance (BFSI), Healthcare, and downstream industries, are burgeoning in Bahrain.

Bahrain is a development-oriented place providing a business-friendly atmosphere that is safe, cosmopolitan, and unsurpassed in the Arabian Gulf.

Why Invest in Bahrain?

Bahrain is an emerging country in the Middle East, poised to grow and develop exponentially. Here are a few advantages of investing in Bahrain:

• The customs duty in Bahrain is low, thus favoring exports
• The corporate policies in the nation are business-friendly
• The legal system is lucid and simple.
• A robust IP framework enables businesses to register IPs in Bahrain seamlessly. 
• The banking sector in Bahrain is developing at a rapid pace, leading to advanced banking facilities there
• There is a vast scope for business growth
• The people of Bahrain are convivial, and the culture is supportive of industrial growth
• Bahrain has an advanced infrastructure, well-equipped with amenities to make it simple for companies to be set up
• Bahrain is the major port hub in the Middle East, providing convenient access to all the Middle Eastern markets
• The entertainment and tourism industry in Bahrain is blossoming each passing year
• The quality of life and variety of food in Bahrain are tempting

Bahrain is now a key player in financial and banking services in the world. Its strategic location between the east and the west and its advanced digital telecommunications systems enable it to communicate with all financial and business centres during the day.

The licensing, regulation, and supervision of advisers who provide investment and other financial advice in or from Bahrain is also regulated. This protects investors from the possibility of negligence or fraud. and aligns with foreign investor requirements, such as the investor’s visa in Bahrain.

All You Need to Know for Starting a Business in Bahrain

• You must have considerable knowledge of the region
• The law requires that you have a local partner who holds the majority of the share capital of the company, and therefore controls the business
• Post your company registration in Bahrain, the Ministry of Commerce should ascertain that you have at least the minimum required capital to invest

It stands to reason that you consult a local business advisor from the outset. An experienced consultancy can guide you through the formalities of company incorporation and aid in achieving your corporate objectives, whether you are planning to form a start-up or a relatively larger firm. You may choose from among the following four legal entities for setting up a company in Bahrain :

1. Limited Liability Company

A Limited Liability Company (LLC) can have between 2 to 50 shareholders (with at least 1 shareholder being a Bahraini resident), and its shares are not open for trading on a bourse. In an LLC, its shareholders bear limited liability, i.e., they are liable for the debts or obligations of the company only to the extent of their respective share capital in it. An important point to note is that an LLC in Bahrain is not allowed to deal in banking, insurance, or brokerage activities.

2. Branch Office

A foreign corporation can start its branch office in Bahrain, provided that it is approved by the Minister of Commerce and Agriculture, and a local (Bahraini) sponsor is appointed for it. Such an office can engage in business activities involving invoicing, contract signing or trade.

3. Partnership

A partnership in Bahrain can fall into one of the following three categories:

• Partnership Limited by Shares: A Partnership Limited by Shares in Bahrain comprises at least one general partner and 10 shareholders. The general partners bear unlimited liability for the debts/obligations of the company. The limited partner has limited liability and is not permitted to participate in the business management.

• Limited Partnership: A Limited Partnership in Bahrain can be formed by at least one limited partner and one general partner. The limited partner bears limited liability for the company, but may not participate in the business management. The general partner is required to be a national resident. In a Limited Partnership, Bahraini investors must own a minimum of 51% capital. It is also known as a simple commandite company in Bahrain. 

• General Partnership: A General Partnership in Bahrain is one in which all the shareholders are jointly and severally liable for the debts/obligations of the company. Although foreign investors can participate in a general partnership, Bahraini individuals or corporate entities are required to own at least 51% of the business.

4. Sole Proprietorship

A sole proprietorship can be set up by a single business owner, who would bear unlimited liability for the business. The minimum capital required to start a sole proprietorship is 50,000 BD. It is worth mentioning that single-person companies in Bahrain are forbidden from trading in the Banking, Financial Services & Insurance (BFSI) industry.

5. Bahrain Shareholding Company

A Bahrain Shareholding Company (closed or public) is a requirement if the stakeholders are to engage in banking or insurance business.

• Public Shareholding Company: It is a legal entity separate from its owners. A PSC in Bahrain, also called a Joint Stock Company, consists of a number of promoters (more than 7) who subscribe therein by means of shares. Bahrain GCC and non-GCC citizens may subscribe to such shares.

• Closed Shareholding Company: It consists of 2 shareholders who subscribe to it by way of negotiable shares that are not offered to the public for subscription. Such shares in the Closed Shareholding Company may not be offered to the general public for a subscription – Bahraini, GCC, and non-GCC citizens may own such shares.

Steps to Start a Small Business in Bahrain

There are numerous business opportunities in Bahrain that you can invest in to reap high profits. To establish your business in Bahrain, there are several requirements that you must follow in order to operate the business. They are as follows.

1. Select a Legal Structure

One of the most important decisions while starting a business is choosing a legal structure. It will directly impact how your business will be managed, personal liabilities of the owner, etc. You can choose from the legal structures mentioned above.

2. Register a Company Name

The next step is to register your company name, which will stick with your business forever. The Ministry of Industry and Commerce (MOIC) has set up a few guidelines for choosing a business name. Make sure that you abide by those laws. An entrepreneur can propose four business names at a time.

3. Commercial Registration of the Company

The Commercial Registration papers are issued by the Bahrain Investment Centre. They will issue you the papers only when they do not find any fault in the application form filled out in the initial stage. The papers can be acquired after paying the necessary fees. Many investors operating near Bahrain Investment Wharf also complete their registrations through this centre.

4. Licensing and Approval

Licensing and Approval are needed when a company does not get the Commercial Registration papers right away. Hence, they have to follow this extra step to get their company registered in Bahrain.

5. Other Approvals

After your company is successfully registered, the next steps include opening a bank account, leasing an office space, hiring Bahraini employees, etc.

Setting up a business in Bahrain promises a huge earning potential, tax exemptions, state-of-the-art infrastructure, convenient facilities, liberalized public policies, and free trade barriers. Business Setup Worldwide helps entrepreneurs, businessmen, and corporations by providing company formation services in Bahrain while availing all the benefits a developing economic hub provides. Our experts take care of the entire banking, visa, legal, and licensing formalities, and allow you to go through with your company formation process without worrying about the bureaucratic red tape and legal formalities. If you are looking to start a small business in Bahrain, do contact us, even if it’s just for friendly advice.