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5 Common Challenges Entrepreneurs Face in UAE

January 2, 2018

5 Common Challenges Entrepreneurs Face in UAE

Challenges

If you have worked or lived in UAE, then you would be amazed seeing the accelerated development of the region.  UAE is always in the limelight in the print and electronic media for its groundbreaking developments, new startups, reforming foreign investment policies and corporate framework. Despite all the guarded gossips about the slow economic growth of the region that crop up after few years, UAE is constantly surpassing the expectations of the existing and anticipated investors and entrepreneurs with its next level evolution, development, and growth.

Although being an entrepreneurial nirvana, several budding entrepreneurs find a few factors really challenging. If you want to take a plunge into the ocean of entrepreneurship, then you must understand the fact that it has its own share of challenges that you must understand and encounter. But trust us, they all can be overcome through effective planning and brainstorming. We have listed all the five major challenges that entrepreneurs are usually found being grouchy about.

1. Company Ownership

Forming a Limited Liability Company (LLC) or an onshore company in UAE obligates to have a local partnership with a UAE National. Additionally, norms also demonstrate that investor can only have an ownership of 49% whereas 51% stakes are upheld by the local National. Although some of the entrepreneurs agreed to these criteria, some find it tedious to rely on and trust someone new to this extent. Nevertheless, you can have 100% exclusive ownership in free zone, or by setting up a LLC outside the free zone under commercial or industrial, but still, you need to have a local partner.

2. Obligation of a Local Business Partner

As mentioned above, the obligation of having a local national partner is supposedly the biggest hurdle hat come across the way of budding entrepreneurs. As a matter of fact, there are only three ways of forming a company in UAE, which includes: Setting up Business in UAE Free Zone, Acquiring Professional Service License or by forming a LLC. However, what intimidates the potential entrepreneur is that all the three methods call for a local partnership in one or another way. For instance, if you are opting for a Professional Service License (PSL) or wanted to form a LLC, then you need to have a local partnership to enjoy 100% foreign ownership and capital repatriation. The same rule is applicable to free zone, as you cannot deal with the local UAE market without a service agent or distributor. In case of free zones and PSL you can have the local sponsor or partners as the sleeping partners, but it does not go along with LLC.

3. Possible VAT Application

To date, we all are relishing the tax-free landscapes of UAE, which offers matchless pro-business benefits to the corporate world, and probably this is the biggest reason that tuned UAE into the ideal destination for new entrepreneurs to kick-start their business without any tax burdens. But possibly this will not be the case anymore. As, with the announcement of VAT application from January 1st 2018, has put all the anticipated and existing investors and entrepreneurs in confusion about their business model, bookkeeping, auditing and compliance criteria that they will be bound to meet. Stringent legal and compliance framework has already created uncertainties within the market.

4. Revenue Management

Revenue management is crucial in UAE. And not only in UAE but in business, because along with the plethora of opportunities comes along various risk factors too. According to the Association of Chartered Certified Accountants of Dubai, over 82% of the new ventures fail due to poor cash flow and funds management. While setting up your business in UAE, you can avail the opportunity to get the loan from various financial institutions and banks, but make sure that your initial capital requirements and business setup are effectively managed and implemented.

5. Cultural & Communication Difficulties

Last, but not the least is the challenge concerning the culture and communication that is required to be addressed considering Islamic values. Business communication is required to be specifically different for men and women and the formal directness and approach is also limited. Emirati culture serves as the heart and soul of business and daily life in UAE and thus intercultural difference sometimes encumbers. Otherwise, Emirati people are very welcoming and congenial.

How Can Business Setup Consultant Help?

BSC is a leading consultancy firm in UAE with a reputation for assisting various clients in setting up their businesses across the region. If you are also intimidated by any of the above challenges and want to start up your business in UAE, then talk to our experts who are just a call away for service.

Please take out a minute to contact us directly through +971 4 4301245 or by sending us an email at info@businessetup.com. You can also leave a message by using the comment section below.

Author
Henri Hazougi

Henri was born and raised in Lebanon and studied at University of Saint Joseph. He is an avid fan of extreme sports and RC car racing. He is fluent in French and Arabic, he has traveled extensively throughout the region and Europe for both for leisure and business.

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