When you are thinking of expansion of business and setting up your office in the Middle East, UAE is the location which comes to your mind. Now after careful selection of site, it becomes necessary to make sure that no regulations are skipped, and the local requirement is met. Well, the procedures are relatively simple and require planning and strategy to enter a market. Since time is a crucial aspect, understanding and then making amendments to your business for business set up becomes a time-consuming affair, with possibilities of reconsideration and changes in documentation. Hence the need for business setup consultation arises.
Benefits of Starting a Company in the UAE
UAE provides a variety of incentives and benefits for establishing your business. Some of these are:
- 100% foreign ownership in allowed (depending on area)
- 100% repatriation of capital and profits.
- Negligible corporate and personal income tax.
- Limited restrictions on hiring workforce
- Shared services and synergies with other companies
- No bureaucratic Red Tapes
- State of the art infrastructure.
UAE offers unique tax planning opportunities to international businesses, has an impressive network of double tax treaties, no withholding tax on dividends and interest paid and no levy on capital gains.
The country also offers excellent services, infrastructure, and business network that each year thousands of businesses are established in this region. It is a booming place for startup businesses, manufacturing, and hospitality and services sector.
Types of Business Entities Allowed in the UAE
1.Establishment or Sole Proprietorship
This type of business entity is owned by an individual who makes all the decisions of the business and bears both profits and losses. Establishment in the UAE that does not extend to any commercial business is exempt from the Commercial Companies Law (CCL) but is required to be licensed by the Department of Economic Development (DED).
2.General Partnership Company
A General Partnership Company in the UAE is owned by 2 or more partners who bear unlimited liability. In simple words, they are responsible for the debts and liabilities of the company. This type of business entity can be established by the UAE nationals only.
3.Limited Partnership Company
A limited partnership company in the UAE is also known by the name Partnership in Commendams. This type of legal entity consists of at least one general partner and one limited partner. The GP’s liability is liable to the extent of their personal assets in the company whereas LP’s liabilities extend only to their share in the partnership’s capital.
4.Joint Stock Company
This is one of the most sought-after company structures by the foreign nationals who want to enter the UAE markets in the form of company incorporation. Here, under the Commercial Companies Law foreigners cannot own more than 49 percent of a limited liability in the U.A.E.
5.Public Joint Stock Company
It is a business form whose capital is divided into negotiable shares of equal value and a partner therein is liable only to the extent of his share capital investment in the company. A PJSC in the UAE must have at least 10 founding members, except in cases where government is involved.
6.Private Joint Stock Company
Unlike Public JSC, a Private JSC in the UAE must have founding members not less than three of which 51% shares must belong to the UAE national. Here, the shares of Private JSC can be offered to public.
7.Limited Liability Company
An LLC in the UAE is one where the liability of the partner is limited to the extent of shares invested in the company. This type of business entity can be formed by minimum of 2 shareholders and maximum of 50 shareholders.
There are also different ways a company formation can be setup in UAE; this also depends on the business model. Companies looking to trade and operate in UAE are required to register as a company, branch office, or place of business. It is also necessary to determine what activities will be carried out because companies need a license based on the work or operation to the activity in the particular area.
Business Jurisdictions in the UAE
1.Free Zone Registration
UAE has more than 40 Free Zones and offers 100% ownership of the business, unlike the mainland companies. They also provide 100% import and export tax exemption, 100% capital repatriation of capital and profits. When you own a free zone company, you can only do business in the free zone. A free zone also provides the facility of office space or warehouse. The types of companies available within free zones differ, but the basic types available are:
- Branch office and Representative Office- Companies of foreign origin may establish branched or representative offices to carry out business activities. However the companies are not allowed to manufacture or sell goods locally.
- Subsidiary (for example, companies with suffix DMCC, JLT, FZ-LLC, FZE, FZCO)
When you set up a UAE offshore company business operation is not allowed in the UAE. However, UAE as a base is utilized to do business in the rest of the world. An offshore company can be set up in Dubai. But in most cases, it is better to set up an offshore company in RAK with a registered office in Dubai.
Ruled by federal laws and regulations, the most common types of businesses within the onshore jurisdiction for corporate clients are:
- Representative office
- Branch office
- Limited Liability Company (LLC)
- Sole Establishment
Steps to Start Your Company in the UAE
Setting up a business in the UAE will not take more than a week if all things are sorted properly. And before you consider diving deep, you need be aware of the following steps.
1.Chose a Business Structure
The type of business structure you choose will further determine the license required for the business. However, before you choose the type, research more into what is acceptable according to the government in the UAE and what is not.
2.Ownership of the Business
Here, you must know two main things. Firstly, if you are a foreign national and want to have 100% foreign ownership of your company, then you can do so by opting for a license and location in one of the many free zones of the UAE. There are nearly 45 free zones in the UAE you can choose from. But, if you want to operate locally, then you need to appoint a local sponsor who will have 51% of the shares in the business.
3.Select a Name for the Business
This is a very important legal procedure. You can check the trade names on the official website of DED. It should not be identical to the name of existing company in the UAE.
Under this step you need to obtain kind of a “no objection” from the Department of Economic Development. Once you get the initial approval, you can resume your company setup process.
5.Prepare your documents/agreements
Based on the legal form of your business, you might need to create and sign a Memorandum of Association (MOA) or a Local Service Agent (LSA) / Corporate Agent agreement with a local support (UAE national).
6.Select the Premises
Once you get all your legal procedures and forms ready, the next step is to select the premises. Free zone authorities in the UAE can help you find one depending on your requirements. Once you finalize your physical address, more than half of the process will be completed.
7.Submit your Documents and Get the License
Before coming to the last step of the journey of registration of your business, make sure your type of business does not require any additional approvals. Once everything is done, you just have to submit all the documents and process all the payments. You have to pay for your trade license within 30 days of receiving a payment voucher. In case of non payment for six months, the transaction is automatically cancelled.
From all the above steps, it is quite clear that the best thing to do ahead for opening your business is to research, research, and research. Overall, however, the UAE is proving an increasingly enticing place to set up a business.
Few More Things to Know About Business Setup in the UAE
Office Space Requirements
The United Arab Emirates has always been a real estate-driven economy, and it is a law that a company license is always linked to the size of the office space as stated in the official local tenancy contract. Hence a business set-up in the UAE is always a combination of license, legal entity, and facility.
Free zones offer flexible desk solutions to provide companies with affordable options for office space. The conditions of minimum office space differ from one jurisdiction to another. Local statutory rules will often require companies to appoint officers such as a manager, directors and a company secretary.
While choosing a free zone jurisdiction, it is mandatory to decide the type of activity and industry of the business that is being set up. Each free zone specializes in a certain industry and business activity.
Almost all business licenses in the onshore jurisdiction are available in any sector, but the licenses are linked to the permitted type of entities. Some business activities are reserved for LLC, and some are for the branch of foreign entities.
A company license from the onshore jurisdiction can be used to operate in the whole UAE. However, the situation is different for a Free zone company, as a business license from a free zone jurisdiction allows the company to operate only within the free zone and outside the UAE.
As explained above that while setting up your business in UAE, a variety of documents and legal actions are required in compliance with the local government. The network, the people and the location are some of the major reasons to move your business to UAE. Hence to smoothly establish the same, we at Business Setup Worldwide Consultants provide excellent consulting services for your business. The team has a dearth of experience in setting up various businesses in UAE. Hence to know further about business setup management or UAE business setup, contact us today.
What are the different types of business legislation in the UAE?
How long does it take to incorporate a company in the UAE?
5-6 working days.
Is it mandatory to have a local sponsor for the business setup in the UAE?
Only for the mainland, though it is not mandatory anymore.
How many business activities are there in the UAE?