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Company Formation in Dubai

Dubai- the business hub in the MENA region

Doing business in Dubai is the perfect choice once you decide to expand or relocate your business to the UAE. As one of the seven Emirates in the safest and fastest-growing country in the region, Dubai is a vibrant, modern and welcoming city, with a high proportion of Expats among its populace. its geographical location and business-friendly environment render it the most preferred Emirate for multinational companies and SME’s to expand and set up businesses. As a strategically located connecting point between Eastern and Western parts of the world, Dubai is the trading hub in the MENA region.

Mainland Company Formation

By establishing a Mainland company, also called as an onshore company, you will be able to freely operate throughout the Emirate with no territorial restrictions,; however having an Emirati partner or agent, individual or corporate, holding at least 51% of the total equity is mandatory to operate inside Dubai and other Emirates in UAE.

Exceptions to this rule include:

  • Business activities that permit 100% Foreign Ownership
  • Businesses located in Free Zones
  • Partnerships between UAE National and GCC companies
  • A mainland company is a legal entity registered under the Dubai Economic Department (DED) and governed by the UAE commercial company – Federal Law No.2 of 2015 – the New Commercial Company Law, (NCCL). Depending on the nature of the business activity, you may need to obtain external approvals from other local or federal authorities.

    Mainland Company Setup and Categories in Dubai

    The Department of Economic Development (DED), is the issuing authority for all operating trade licenses in the mainland of Dubai, outside the free zones. These companies are often known as a “local company”.

    Local companies must have a trade license under any one of the categories below:
    Professional license – Issued for service provider companies such as training, management consultancy, etc. Full or partially ownership approval is dependent on the activity requirements. Certain business activities are allowed 49% of foreign ownership, while others have full ownership. In this case, the role of the Local Service Agent (individual or corporate) is limited to the scope of administrative purposes only.

    Industrial license – specific for manufacturing enterprises and industrial companies. Valid for a definite period, the industrial trade license obligates the company to have a leased or owned physical warehouse inside the country and related manufacturing facilities.

    Commercial license – Adequate for businesses involving trading or retail activities ( buying and selling of goods, import and export activities, real estate services, logistics, travel & tourism, auto vehicle rental business, etc). A maximum of 10 business activities per license are allowed.

    Types of Mainland Company Formations

    Following are the types of Mainland Companies formed and recognized in

    • Sole Establishment Dubai:A business owned by an individual, not a company.
    • Limited Liability Company Dubai: an adaptable type of enterprise that mixes elements of partnership and corporate structures
    • Branch of Foreign Company Dubai: can carry out professional activities additional to some commercial and industrial activities. It requires a Local Service Agent (LSA), who can be a UAE National or a company owned by at least one UAE Nationals. A separate registration with ministry of economy is required.
    • Representative Office: Rather than a business structure, it is more of a business activity that a branch can conduct. It requires a Local Service Agent (LSA), who can be a UAE National or a company owned by at least one UAE Nationals. A separate registration with ministry of economy is required
    • Civil Company: a business partnership for professionals such as doctors, lawyers, engineers and accountants.

    Suitable option: mainland versus free zone

    Prior to taking a decision, here is the pertinent question for any business owner: What is the difference between mainland and free zone companies? What are the pros and cons while deciding on a suitable business structure in UAE?
    The bellow table seeks to shed light on the appropriate legal form of business you would be looking for:

    Mainland Company Formation Free Zone Company Formation

    Business Activities:

    The geographical area of doing business on mainland license is unlimited. You will be free to do business in local, neighboring countries of the Arabian Gulf (GCC) and international markets, including free zones, with commercial or professional licenses, and applicable for most business activities, except those that require external approvals from local or federal government bodies.

    Business activities are limited to the ones permissible and registered within the same free zone. A local agent, individual or company, is mandatory to engage in any business out of the Free Zone, inside or outside the UAE.

    Clients

    When engaging with government classified clients, you should refer to the mainland’s jurisdiction

    Within UAE, you will be able to deal directly with clients registered among the same free zone.

    Clients:

    When engaging with government classified clients, you should refer to the mainland’s jurisdiction

    Within UAE, you will be able to deal directly with clients registered among the same free zone

    Visa requirements:

    You will be eligible for an E-quota (electronic quota), issued by Ministry of Human Resources and Emiratization, showing your visa entitlement. This can be increased if needed, and is subject to the discretion of the deciding authority.

    Number of visas depend on the office space, owned or leased in the free zone. Smart office packages offer up to 6 visas, depending on the license and the free zone. A physical office or warehouse has to be leased out of the free zone to avail more visas.

    License Costs:

    You will require an office space of a minimum 200 sq ft, to be owned or leased on annual basis, through “Ejari”- a Certificate issued from the land department that makes your annual tenancy contract, legal and presentable to Department of Economic Development (DED) for the issuance of your mainland license. This would increase your business cost commensurately.

    You will be saving on initial costs of registration as license fees are lower, besides no physical office is required. Free zone authorities allow the licensees to use flexi desks/smart offices, or common business center desks for limited hours per week.

    Ownership:

    According to your business activity, you may require a UAE national agent (individual or company) called Local sponsor who acquires 51% of the company shares. The remaining 49% would be the equity that you would be allowed to hold.

    Full ownership of your company.

    Neither free zone nor mainland setups are ‘better’ than one another; it simply comes down to what fits best for your business..

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