Business

How to Start a Business in Bahrain?

How to Start a Business in Bahrain - Enterslice

Bahrain is a great location for entrepreneurs and business owners owing to its business-friendly climate and the tactical location at the centre of the GCC. The government of Bahrain has passed various incentives to motivate and encourage entrepreneurs to start a business in Bahrain. If you start a business in Bahrain, you will be provided with several benefits, such as 100% ownership, access to a talented global workforce and exemptions from paying any corporate or personal income tax. These benefits are one of the key factors attracting entrepreneurs and business owners to start a business in Bahrain. This blog provides an overview of the process, benefits and types of Bahrain business setup.

Types of Bahrain Business Setup

If you want to start a business in Bahrain, you need to decide on the types of business setup you want to establish. There are various kinds of business setups listed below for your understanding:

Limited Liability Company:

The first type is a limited liability company in Bahrain. An LLC is a company where the liability of its owners or members is limited, and their personal assets are protected from the debts and liabilities of the company. If you want to start a business in Bahrain that deals in insurance, brokerage or banking activities, then you can’t opt for an LLC in Bahrain and will have to choose any other type of business entity depending on the needs and requirements of your business.

Partnership Company:

Another option is to set up a partnership company in Bahrain. A partnership is a type of business setup with 2 or more partners, and there is no concept of limiting the liability of the partners. The partners have a specified share of the business as per the agreement, and they are liable for the debts and liabilities of the business as per their share. This is a different entity from an LLC and doesn’t protect your personal assets in case the business’s debts are repaid.

Sole proprietorship:

If you want to run a business alone without sharing the profits with anyone, the best option is to start a sole proprietorship business in Bahrain. There is no concept of limited liability of the owner in this type of business. The owner of the sole proprietor business is fully responsible for the liabilities and debts of the business, even to the extent of personal assets. It implies that in case of repayment of debts, there can be a situation where your personal assets can be sold to repay those debts. 

Branch Office:

The Bahrain company laws also provide an option to set up a branch of your foreign company in their territory.

Representative Office:

If a foreign company doesn’t want to engage in any commercial activities in Bahrain and only wants to create some business contacts and promote its services and products, it can set up a representative office instead of a branch office in Bahrain.

Single-Person Company:

A new form of company that has gained a lot of popularity in recent times in Bahrain is a single-person company. It is a limited liability company with only one individual as its member. It is the most preferred type of business entity for small entrepreneurs and business owners.

Public Shareholding Company:

You also have an option to set up a public shareholding company in Bahrain. It is nothing but a joint stock company where the shareholders can buy, sell, and transfer their shares. It should have at least 2 shareholders, and their liability is limited to the extent of capital invested by them in the company.

Closed Shareholding Company:

The last type of business entity that you can set up in Bahrain is a closed shareholding company. It also should have at least 2 shareholders, but unlike a public shareholding company, it can’t offer its shares for subscription to the public.

Benefits of a Bahrain Business Setup

Before you start a business in Bahrain, you should know about the advantages and perks of setting up a business in this Kingdom. Various benefits of a Bahrain business setup are mentioned below for your understanding:

The first and most important benefit of a Bahrain business setup is the tax exemptions in the kingdom. If you start a business in Bahrain, you are exempt from paying all kinds of taxes, i.e., personal income tax, corporate income tax, stamp duty and capital gains tax.

Another aspect that attracts entrepreneurs and business owners to start a business in Bahrain is the business-friendly climate of the kingdom. The government of Bahrain has implemented various lenient policies and regulations that attract foreign entrepreneurs and business owners to set up businesses in their territory. It has made business-friendly policies to boost foreign direct investment in the kingdom.

The tactical location of Bahrain is one of the key advantages entrepreneurs and business owners consider for the Bahrain business setup. If you start a business in Bahrain, you will get an easy entrance into the markets of the Gulf Cooperation Council (GCC). It is a big advantage for a foreign business owner and entrepreneur to step foot in the world’s rapidly growing economies.

Another important advantage of a Bahrain business setup is the ease of business in the kingdom. The government of Bahrain has passed various incentives to encourage entrepreneurs to start a business in Bahrain without facing any hurdles from the bureaucrats.

Another advantage for an entrepreneur who wants to start a business in Bahrain is the country’s excellent infrastructure. The Kingdom of Bahrain offers world-class infrastructural facilities, including advanced office space and warehouses (if required for your business). You can conduct business operations more effectively with inventive technology and advanced digital communication systems.

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Steps to Start a Business in Bahrain

If you want to start a business in Bahrain, then the initial step is to select a business activity that you want to conduct through your business.

The second step that you need to follow to start a business in Bahrain is choosing a business structure for your business. You need to finalise a structure for your business depending on your needs and strategy. Various business structures are operating in Bahrain, such as a sole proprietorship, a partnership business, a branch office of a foreign company, a limited liability company (LLC), a single-person company, a representative office, a public shareholding company, a closed shareholding company, etc. For example, if you want to run a business single-handedly on your own, then you should go for a sole proprietorship business, but if you want to have a partner with you in running the business who will share the profits and losses equally with you, then you can opt for a partnership business. If you are a foreign company that wants to expand your business by entering the territory of Bahrain, then you should start a branch office in Bahrain. The most preferred among all the business structures is a limited liability company (LLC), as it limits the owners’ liability and protects their personal assets from the debts and liabilities of the company. This is not the case for sole proprietorship and partnership businesses where the liability of the owner or partners is unlimited, and the repayment of debts of a company can extend to the personal assets of the owner or partner.

After finalising the business structure, you should select a name for your business. Your business name should be unique and connect to your target consumers. You need to follow the guidelines provided by the Ministry of Industry and Commerce while selecting a name for your business. You are allowed to provide four names at a single time.

Following the name selection, you should draft the Memorandum of association for your business. MOA is an important document for your business and contains vital information like the business structure, registered office, liability of shareholders, etc.

The next step is to apply for a commercial registration certificate. To obtain the CR certificate, you need to submit all the required information and documents to the Ministry of Industry, Commerce and Tourism via the online portal named Sijilat. After receiving the approval from the Ministry, the commercial registration certificate will be provided to you.  

After receiving your CR certificate, some businesses are required to apply for local licenses and permits with the appropriate authorities based on the type of business activity.

Now that you have obtained the license and registration certificate to start a business in Bahrain, you should look for a location to set up an office for your business. You have to find a suitable location for leasing your office space as you will be conducting your business operations from the office.  

After leasing your office space, you should look for a local bank to open a bank account for your business to receive and make payments, along with the office space you need to start hiring employees for your Bahrain business setup. Bahrain provides you with access to a highly skilled workforce.

Conclusion

Bahrain is a great location for foreign entrepreneurs and business owners to set up a business, thanks to its business-friendly environment and strategic location at the centre of the Gulf Cooperation Council, which provides you with an easy entrance into the GCC markets. Setting up a business in Bahrain is a complex procedure involving various steps, i.e., selecting a business activity, choosing a structure for your business like an LLC, sole proprietorship, partnership, a branch of a foreign company, public shareholding company and a closed shareholding company. Then, select a trade name for your business that adheres to the Ministry of Industry, Commerce, and Trade guidelines. After the name, draft a memorandum of the association, including important information like the liability of shareholders, business structure and registered office. Submitting the required documentation to the MOICT through the online portal Silajat is also an important step for obtaining the commercial registration certificate for the business. After getting all the licenses, permits, and CR certificates, you should then look to lease an office space, hire employees, and open a business bank account at a local bank. The Kingdom of Bahrain offers excellent infrastructural facilities for your office spaces and warehouses and cutting-edge technology, including digital communication systems. The government has also launched several incentives to encourage entrepreneurs to start a business in Bahrain without facing any bureaucratic hurdles. And with exemptions on paying the corporate and personal income tax, Bahrain has become one of the best places to set up a business.

FAQs

  1. Why should I start a business in Bahrain?

    Bahrain is a magnificent destination for entrepreneurs and business owners due to its strategic location and business-friendly policies. The Bahrain government has introduced various tax exemptions and also provides 100% ownership to foreign entrepreneurs, making it one of the most preferred locations for foreign entrepreneurs. The icing on the cake is its tactical location, i.e., at the centre of the Gulf Cooperation Council. The government of Bahrain has also passed various incentives to encourage and motivate entrepreneurs and business owners to start a business in Bahrain.

  2. What is the process for Bahrain business setup?

    The Kingdom of Bahrain offers a business-friendly environment to entrepreneurs and involves a complicated procedure to set up a business. First, you must select a business activity you need to conduct through your business. After selecting a business activity, you need to choose a structure for your business, i.e., whether you want to establish a sole proprietorship, a limited liability company, a partnership, a branch of a foreign company, a public shareholding company or a closed shareholding company. Now, you should choose a name for your business, adhering to the Ministry of Industry, Commerce and Trade guidelines. The next step is the preparation of the Memorandum of Association containing important details such as business structure, liability of shareholders, registered office, etc. After the MOA, you should apply for a commercial registration certificate by submitting all the required information and documents with the MOICT through the online portal Silijat. After receiving the approval from the Ministry, the commercial registration certificate will be provided to you. Following the receipt of your CR certificate, some businesses have to apply for local licenses and permits as per their selected business activity. After taking all the above steps, you need to find a local bank suitable for your business and open a business bank account to conduct business transactions. Lastly, hire employees for your business and get your business running.

  3. What is the cost of registering a business in Bahrain?

    The registration cost of a Bahrain business depends on the type of your business structure, i.e. the cost of registration is different for sole proprietorship, limited liability company, branch office, partnerships, etc. But generally, registration costs between BHD 1000 to BHD 5000.

  4. What are the benefits of a Bahrain business setup?

    If you are confused about whether you should start a business in Bahrain or not, we will clear your confusion. Bahrain offers tax exemptions to businesses, i.e., you are not required to pay any personal or corporate income tax, capital gains tax and stamp duty. This is the biggest motivation for business owners and entrepreneurs to start a business in Bahrain. Apart from the tax exemptions, it also has a business-friendly environment due to its lenient policies for foreign entrepreneurs. Bahrain also has a world-class infrastructure and cutting-edge technology that aids in the growth of your business. Additionally, it has a strategic location, making it a preferred location among foreign business owners to set up a business.

  5. How to obtain a commercial registration (CR) for a Bahrain business setup?

    To obtain a commercial registration certificate for your Bahrain business setup, you need to submit the required documents to the Ministry of Industry, Commerce and Trade through the online portal Silijat.

  6. What are the minimum and maximum shareholders in a Bahrain limited liability company?

    A limited liability company (LLC) in Bahrain can have a minimum of 2 and 50 shareholders.

  7. What are the different kinds of business structures you can opt to start a business in Bahrain?

    There are various types of business structures operating in Bahrain, such as a partnership business, a sole proprietorship, a branch for a foreign company, a single-person company, a representative office, a public shareholding company, a closed shareholding company and a limited liability company. You need to finalise the business structure per your business's requirements and strategies.

  8. What is the difference between a sole proprietorship, a partnership and an LLC in Bahrain?

    These three are totally different kinds of business structures for starting a business in Bahrain. As the name suggests, a sole proprietorship business has only a single owner with unlimited liability. A partnership business, on the other hand, has 2 or more partners who share the profits and losses among themselves equally, but they also have an unlimited liability. A limited liability company is the most preferred type of business structure among foreign entrepreneurs and business owners who want to start a business in Bahrain. An LLC limits the liability of its owners and members and safeguards their personal assets from the liability and debts of the company. You can choose the type of business structure for the Bahrain business setup as per your business plan and strategy.

  9. What are the documents required to register a company in Bahrain?

    For registering a company in Bahrain, you should have the documents: the registered address, the office’s lease agreement, the certificate of incorporation’s copy, the director’s passport copy (notarized) and the shareholder’s agreement.

  10. What is the difference between a public shareholding company and a closed shareholding company?

    The main difference between a public shareholding company and a closed shareholding company is that a PSC offers its shares to the public for subscription, but the CSC can't do so.

  11. Is obtaining a Commercial registration certificate necessary to start a business in Bahrain?

    Yes, obtaining a commercial registration certificate is necessary if you have to start a business in Bahrain. You can apply for a CR certificate through the MOICT through the online portal Silajat.

  12. What is the difference between a representative office and a branch office of a foreign company in Bahrain?

    A representative office is similar to a branch office of a foreign company, but it can't engage in commercial activities in Bahrain, and its role is limited to promoting products and services in Bahrain and establishing some local business contacts.

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