Types of Business Entities in Bahrain

Bahrain is a country made up of an archipelago of 30 islands in the Arabian Gulf. The nation has always been a hub for important trade routes due to its strategic position in the Arabian Gulf. On its east lies, the Kingdom of Saudi and to its north lies Qatar. Thus, Bahrain benefits from the resulting synergy of being placed between the coasts of these two nations. Over the course of a decade, Bahrain turned its focus on controlling, adjusting and adapting to the changes in its economy and business environment to meet the equilibrium of supply-demand.

By 2019, setting up a business in Bahrain has become a much easier procedure, and the likeness of your business staying afloat in Bahrain's economy has also increased. Overall, Bahrain is constantly renovating itself to sustain more new business entities. The types of business entities prevalent in Bahrain are:

1. Bahrain Limited Liability Company (WLL)

A Limited Liability Company is a business entity in which the owners are legally responsible and liable for the company's debts only to the extent of the capital amount they invested. They combine the attributes of a corporation and a partnership or sole proprietorship. To establish a Limited Liability Company in Bahrain, the following perquisites are required to be collected:

  • A minimum paid capital of BDH 20,000
  • Two directors
  • Two shareholders of any nationalities
  • A minimum of 2 and a maximum of 50 partners

A Limited Liability Company can be 100% foreign owned in Bahrain. WLL is the best option opted by foreign investors and entrepreneurs who wish to do business in Bahrain. A WLL enables entrepreneurs to maximize profits and see an imposition of minimum international taxation.

2. Bahrain Free Zone Company (FZC)

Free Zone Company is business entities established in a free economic zone. An area in which companies are taxed lightly and leniently or thoroughly exempted to encourage economic activity. For foreign investors who wish to set up a company in a free trade zone first need to acquire a trade permit by appealing to the Trade Zone Authority before commencing any business activity. Free Zone Company also structure import and export companies despite the requirement of only an office in Bahrain. Free Zone Companies enjoy several benefits such as zero customs duties rebates from government and lesser taxes.

3. Bahrain Branch Office

A branch office stems from a company or an organization. Despite being physically disconnected from the central office, it is not a separate legal entity. In Bahrain, the Commercial Companies Law authorises the registration of a Bahraini branch by a foreign company. The subsidiary can be 100% foreign owned if their industry of operations is fully open to the formation of an LLC by foreign shareholders.

To register a branch, the following procedures must be undertaken:

  • The audited financial statements.
  • A Board Resolution affirming the opening of the branch.
  • Issuance of a power of attorney, in favor of the general manager.
  • Certificate of Incorporation and a Memorandum of Association.

Note that all the over-mentioned certificates, statements and letters must be legalized and translated into Arabic.

A branch office holds best in the fields of engineering and financial services.

4. Bahrain Shareholding Company (BSC)

A Shareholding Company is also known as a public joint stock company. A BSC is most suitable for those businesses which seek to undertake large scale projects, involving a substancial investment of funds and capital.

The requirements to establish a BSC are:

  • First, the minimum share capital of BHD 250,000 is required.
  • A minimum of 50 members.
  • Board of Directors consisting a minimum of 3 members.

A BSC is most suitable to those businesses who plan on offering their shares to the public by enlisting their company on the Bahrain Bourse (BHB), the securities exchange agency of Bahrain.

5. Bahrain Representative Office

In general terms, a Representative Office is a legal office established by an organization or a company to operate in countries where a branch office or subsidiary is not permitted. The Commercial Companies Law grants the establishment of Representative Offices in Bahrain. To register a Representative Office in Bahrain, it is necessary to appoint a local agent or distributor to represent the foreign company in within Bahrain.

It is of utmost importance that if you wish to set up a business in Bahrain, or anywhere in the world for that matter, you ought to select the right legal structure for the kind of business you offer. Selecting the correct business entity allows your business to operate smoothly and in the best possible way. Bahrain allows the establishment of various business entities to choose when it comes to setting up a business in the nation.

Business Setup Worldwide is a global consultancy company, and we specialize in providing the most exceptional business solutions to your business needs! If you are interested in setting up your business in Bahrain, contact us, we'd be happy to help!