How to Setup Your Business in Dubai

16 Nov How to Setup Your Business in Dubai

How to Do Business Setup in Dubai

This article will go through some of the most important steps you should know about how to set up business in Dubai.

Dubai is an attractive business sector for many international companies as well as local entrepreneurs. It offers great opportunities for foreign investors, tax-free. So if you are thinking of a business set up in Dubai , then there are a couple of points you will need to consider.

Local Partnership or 100% Owned Business Startup

If you are thinking of starting a business within the city and outside the free zone then you are likely to enter into a partnership agreement with a local sponsor. A United Arab Emirates (UAE) national will be the majority stakeholder of the company at 51%. The advantage of having a local business license is location advantage based on your budget. Make sure to enter a written legal agreement with the local partner outlining the exact details of how much you will pay, the responsibilities of both parties, and exit contingencies.

Establishing your business in a free zone means you will be the sole business owner without having the need to have a local partner. All though you will own the business 100% you are likely to be at a disadvantage in terms of location, if that is important to your business. If you are planning to open a cafe or any other consumer-focused business then perhaps you should enter a local partnership, however, if you are opening an online business or a factory then a free zone business is an excellent option.

You must consider the type of business you will be running and all the procedures, and import/export activity that goes in into running your business. Do not go with the cheapest license or control decision, make sure the business will fit the model.

Understanding the Legal Structures

When setting up a business in Dubai, one of the critical decisions entrepreneurs face is selecting the appropriate legal structure. The choice of legal entity can significantly impact various aspects of the business, including ownership, liability, taxation, and operational requirements. Dubai offers a range of legal structures to cater to diverse business needs and objectives.

Dubai Mainland Company

Mainland companies are entities incorporated and operating within the geographical boundaries of the UAE, subject to the country’s federal laws and regulations. These companies can conduct business activities throughout the UAE, as well as in the free zones, provided they obtain the necessary approvals.

Benefits:

• Unrestricted business activities (subject to licensing)
• Greater credibility and brand recognition
• Eligibility for government contracts and tenders

Considerations:

• Requires a minimum of 51% local ownership (often achieved through a Local Service Agent or LSA).
• Corporate tax implications may apply in the future (currently under discussion).
• More stringent regulatory environment.

The most common types of mainland companies are:

• Sole Proprietorship: Owned by a single natural person, suitable for small businesses.
• Civil Company: Partnership between 2 to 25 individuals or companies.
• Limited Liability Company (LLC): Allows for multiple shareholders with limited liability.
• Public Joint Stock Company (PJSC): Publicly traded company with shares offered to the public.

Dubai FreeZone Company

Free zones are designated geographical areas within the UAE that offer unique business incentives and regulatory frameworks. Companies established in free zones enjoy several benefits, including 100% foreign ownership, full repatriation of capital and profits, and exemption from certain taxes.

Benefits:

• 100% foreign ownership allowed
• Simplified free zone company formation and company registration procedures
• Tax-free environment (corporate and income tax) for a specific period (depending on the Free Zone)
• Repatriation of capital and profits

Considerations:

• Restricted business activities (limited to operations within the Free Zone)
• May require additional permits for trading within the mainland
• Annual fees associated with Free Zone licenses

Some of the popular free zones in Dubai include:

• Dubai Multi Commodities Centre (DMCC)
• Dubai International Financial Centre (DIFC)
• Dubai Silicon Oasis (DSO)
• Dubai Design District (D3)

Dubai Offshore Company

Offshore companies are legal entities incorporated outside the UAE, typically in jurisdictions with favorable tax regimes. These companies are not permitted to conduct business activities within the UAE but can leverage the country’s strategic location and infrastructure for international operations.

Popular offshore jurisdictions for UAE businesses include:

• Jebel Ali Free Zone (JAFZA)
• Ras Al Khaimah International Corporate Centre (RAK ICC)
• Ajman Offshore

Choosing the Right Structure

The optimal legal structure for your Dubai business depends on several factors, including your target market, business activities, ownership goals, and tax considerations. Here are some key questions to ask yourself:

• Do you require access to the entire UAE market, or will your business operate solely within a Free Zone?
• Is 100% foreign ownership a priority for your company?
• What level of regulatory compliance are you comfortable with?
• What are your long-term growth aspirations for the business?

Location and Procedure for Business Setup in Dubai 

Location is very important in order to succeed in a business. In the location, your cost is not only the rent but also the distance, suitability for the product, and trade requirements of the business. If you are entering a free zone business agreement then you must be aware of the fact that different free zones have different start-up procedures and fees.

Visa Eligibility

Every business runs on people, and in order to hire those people you will need to provide visas’ for them. Visas are provided for all businesses however the numbers of visas issued out vary. If you entered a local partnership then you and your partner will need to work together to get the visas. The sponsor will need to apply for visas.

Steps to Set Up Your Business in Dubai UAE

Transforming your business vision into reality in Dubai requires careful planning and a thorough understanding of the legal landscape. This guide outlines the key steps to setting up your business in Dubai, equipping you for a smooth and successful launch.

Research and Planning:

1. Market Analysis:  Dubai boasts a diverse and dynamic market. Conducting thorough market research is crucial to identify your target audience, analyze competitor offerings, and assess the overall feasibility of your business idea.
2. Business Plan Development:  A well-crafted business plan serves as a roadmap for your venture’s success. This document should outline your business concept, market analysis, financial projections, marketing strategy, and operational plan.

Choose a Business Activity:

1. Understanding Permissible Activities:  The Department of Economic Development (DED) regulates business activities in Dubai. Familiarize yourself with the list of permissible activities for Dubai Mainland and Dubai Free Zone companies to ensure your chosen activity is compliant.
2. Obtaining Necessary Licenses and Permits:  Depending on your chosen activity and location (Mainland or Free Zone), you will need to acquire specific licenses (commercial license / professional license etc)  and permits from the relevant authorities. Business setup consultants can help navigate this process.

Select a Company Name and Legal Structure:

1. Guidelines for Choosing a Company Name:  For a company setup, choosing the right name is important. Your company name should be unique, relevant to your business, and comply with UAE naming conventions. Avoid using offensive language or restricted terms.
2. Registering Your Business Entity:  Dubai offers various legal structures. Mainland companies require a local Service Agent (LSA) for a minimum 51% local ownership. Free Zones allow 100% foreign ownership. Consulting a legal professional can help you select the most suitable structure.

Arrange for Office Space and Sponsorship:

1. Options for Office Space:  Dubai offers a range of office space options, from co-working spaces and serviced offices to traditional office rentals in commercial buildings. Consider factors like location, size, and facilities when making your decision.
2. Understanding Sponsorship Requirements:  For Mainland companies requiring an LSA, the LSA acts as your sponsor. Free Zones often handle sponsorship for their businesses. Understanding sponsorship regulations is crucial.

Apply for Visas and Work Permits:

1. Types of Visas Available:  Dubai offers various visas, including foreign investor visa, employment visa, and tourist visa with the option to convert to residency. The type of visa required depends on your role in the company.
2. Process for Obtaining Visas and Work Permits:  The visa application process involves submitting documentation to the relevant authorities and securing medical clearances. Business or company setup consultants can assist with navigating the visa application process.

Open a Corporate Bank Account:

1. Criteria for Opening a Bank Account:  To open a corporate bank account, you will need to submit required documents, such as your business license, trade license, and passport copies for authorized signatories.
2. Choosing the Right Banking Partner:  Dubai has a robust banking sector. Research different banks and compare their services, fees, and minimum balance requirements to select the best fit for your business needs.

Hire Business Consultant

It is often easier to hire a business setup consultant to do the paperwork for you. Consultants are an attractive option if you are new to Dubai or the UAE and not familiar with the way things work around here. Hire a consultant that has been operating in UAE for more than five years. Consultants with years of experience often know people within the offices that will push the paperwork as a priority. You also eliminate long waiting lines and collection and re-submissions of documents. (See our PRO Services in Dubai )

When doing research and picking out locations don’t make decisions based on paper. Always visit the physical location and go through all the motions of the business by building yourself an activity map. See if everything will work, is there enough parking space, outlets, and garbage services? Conduct a full checklist, after all, you are investing your hard-earned money and time into the business, so do it right!