Owning a business may be quite lucrative in Dubai because it is a place full of chances and opportunities. Many people, however, are unaware of Dubai’s corporate structures. Company formation in Dubai seems very difficult but it becomes easygoing when you have basic knowledge of Dubai’s business landscape.
Therefore, if you are one of those individuals seeking solutions, you have arrived at the appropriate location. In Dubai, starting a business and forming a company is difficult, laborious, and time-consuming.
There are many important things to think about, things to get permission for, and things to do. If you don’t, you’ll lose a lot of money and possibly even get in trouble with the law.
Before launching a business in Dubai, it’s important to get a solid road map. Additionally, getting sound counsel is always important for new business startups.
To support all types of businesses, we have developed a guide on how to open a business in Dubai.
Guide to Company Formation in Dubai
Company formation in Dubai can be a daunting task, but with proper guidance and advice, it becomes manageable. Let’s go through the step-by-step process of establishing a business in Dubai:
Step 1: Choose the Sector
Begin by deciding on the industry or sector in which you want to start your business. Dubai has specific regulations regarding the types of companies that can operate in particular locations. Various sectors include media, industry, banking, retail, healthcare, etc. For example, alcohol businesses can only be set up in free zones. Therefore, thorough research is crucial to identify the sector that aligns with your business goals.
Step 2: Select the Location
Dubai offers three main areas for setting up a business: free zone, mainland, and offshore. Each has its advantages and limitations. Carefully consider which location suits your business activity and strategy before proceeding.
Step 3: Name Your Company
Choosing an appropriate name for your company is essential. Ensure that the name is not offensive to the country’s culture or religion, as there is a strict prohibition for using foul language. If you use a foreign name or language, make sure it does not contradict UAE government values.
Step 4: Prepare the Necessary Paperwork
Once you have decided on the sector, location, and company name, it’s time to bring your business to life by preparing the required legal paperwork. Registering your company in the UAE involves completing an application and providing passport copies of shareholders. Mainland companies need to specify the capital in a document called the Memorandum of Association (MOA).
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Step 5: Submit Complete Paperwork
Submit all your paperwork, including a business plan outlining your company’s activities, accurately. If you set up your business in a free zone, you may require a Non-Objection Certificate (NOC) from your current sponsor, allowing you to establish another business in the UAE. The authorities will review your application and determine whether to approve your company registration.
Step 6: Obtain a Business License
If your paperwork is in order, the authorities will issue you a Certificate of Incorporation or a business license, enabling you to commence operations in the UAE. In case there is a rejection of your application, make the necessary adjustments and resubmit it.
Step 7: Open a Business Bank Account
After obtaining your business license, the next step is to open a separate bank account for your business. All Major banks in Dubai provide this service. Remember to keep your personal and business accounts distinct. You may also explore business loans or investments from the bank where you hold your business account.
Start Doing Business
Congratulations! You are now ready to conduct business in Dubai. Keep in mind that achieving success may take time and perseverance. Stay patient, persistent, and determined to realize your entrepreneurial ambitions in Dubai.
Key considerations during business setup in Dubai
Starting a business in Dubai involves carefully taking into account several crucial considerations. The following are the main concepts to think about:
Dubai’s Free Zone, also known as the Free Trade Zone, was the first of its kind in the UAE, aimed at promoting foreign trade and business setup. Its key attraction is the tax benefits it offers to business owners. Pros include 100% ownership, no income or corporate tax, and the ability to repatriate profits and capital freely. However, it has limited trade opportunities and business activities.
The Mainland is where Dubai Economic Department (DED) allows both foreign and local private businesses to operate. While setting up businesses on the Mainland is relatively straightforward, foreign investors can only hold up to 49% equity; the majority must be held by a UAE national. Mainland businesses enjoy tax exemptions and opportunities to connect with other emirates like Abu Dhabi and Sharjah.
An offshore business is a company registered in a country other than the owner’s residence to benefit from tax advantages and simple regulations. Offshore companies offer opportunities for global business expansion and confidentiality but they don’t get permission to conduct any business activities. Establishing an offshore business in Dubai can be costly.
Legal Forms of company formation in Dubai
Depending on the goals and preferences of local and foreign business owners, Dubai offers a variety of legal business structures. Below are the most common options:
Limited Liability Company (LLC):
The LLC is the most popular business structure in the UAE and is recommended for companies focused on trading within the region. According to the UAE Commercial Companies Law (CCL), a UAE national must always own at least 51 percent of the shares in an LLC company.
A civil corporation allows for the professional’s entire ownership, making it ideal for specialists like doctors, lawyers, engineers, or accountants. However, a UAE national or local agent is typically required to be involved.
Branch / Representative Office:
A branch office shares the legal identity of its parent company and conducts the same business activities. Conversely, a representative office is limited to promoting its parent company’s activities.
In this form of business, a single individual owns and operates the enterprise. The owner bears full responsibility and liability for all the company’s debts.
Also known as a consortium, a joint venture is established through a partnership of at least two UAE nationals. However, only one partner’s name needs to be used as the business name.
In addition to the above, there are other legal forms of business setup in Dubai, including:
Limited and General Partnership Company:
Ownership is shared between two or more partners, who distribute profits and losses based on an agreed-upon ratio. There are general partnerships and limited partnerships, each with specific characteristics.
Private Shareholding Company:
This type of company requires a minimum of three investors and is suitable for various commercial and industrial activities (excluding professional businesses). GCC nationals can hold 100% of the shares in this type of company.
Public Shareholding Company (PJSC):
A Public Shareholding Company has specific incorporation requirements, and no investor can use its trade name unless patented or entitled to a shareholder’s property.
Branch of a Foreign Company:
Establishing a dedicated outlet in a different location while operating as a single entity enables expansion and increased sales and revenue. Despite not having the parent company’s legal status, the branch office uses its name and ownership while conducting business.
It’s important to note that each business structure has its requirements and implications. To ensure a seamless and informed business setup procedure in Dubai, it is therefore advised to obtain professional help.
Types of Business Licenses in Dubai, UAE
When setting up a new company in Dubai, it’s crucial to select the appropriate license for your business. In the UAE, there are three primary licensing categories for business setup, issued by the Department of Economic Development (DED).
Commercial License in Dubai:
Businesses engaged in buying, selling, trading commodities, products, or conducting any trade-related activities require a Commercial License. This license is suitable for enterprises involved in retail, wholesale, and general trading.
Industrial License in Dubai:
Industrial activities that involve the mechanical or manual transformation of natural resources and materials into finished products fall under the Industrial License category. This license covers manufacturing sectors such as paper, textiles, and metal manufacturing. Specific industrial activities may require additional approvals from relevant authorities.
Professional License in Dubai:
For companies providing professional services to clients, a Professional License is essential. Entrepreneurs and businessmen must demonstrate their professional skills to obtain this license, enabling them to offer services in fields like law, medicine, engineering, consultancy, and more.
In certain free zones like DMCC and others in the UAE, there is no requirement for a local sponsor to set up a business. Establishing a company in a free zone allows for 100% foreign ownership, eliminating the need for UAE nationals as sponsors or partners.
It’s essential to choose the right license that aligns with the nature of your business activities to ensure a smooth and compliant business setup process in Dubai.
Business management is necessary after Company Formation
Once your company formation in Dubai is completed, it continues to offer services, supported by its Free Zone ecosystem. This ongoing support includes assistance in obtaining corporate bank accounts and health insurance. Their professional partners focus on essential corporate competencies such as sales, customer service, communication, and legal requirements.
Your HR team, employees, and customers become important gradually after you complete your business setup in Dubai. To handle them, you need a one-stop solution that manages all your work in a short period with less effort. Get an ERP Solution for your business and see how it can transform your company’s growth.
Penieltech can help in this regard. They offer custom ERP solutions and also assist with auditing and accounting processes. Their experts handle every aspect, ensuring compliance with FTA laws and regulations. With their support, setting up and managing your business becomes hassle-free.