Business Setup

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 of the safest and fast-growing country in the region, Dubai boasts a vibrant, modern and welcoming city, with its geographical location and the business-friendly environment, it is the most preferred Emirate for multinational companies and SME’s to expand and set up businesses. A connecting point between East and West, halfway between London and Singapore, Dubai is the trading hub in the MENA region.

Mainland Company Formation

Via a Mainland company, also called as an onshore company, you’ll 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
Except in the following cases:

Business activities that permit 100% Foreign Ownership
Businesses located in Free Zones
Partnerships between GCC companies and UAE National
Business activities that permit 100% Local Ownership

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 authority.

Mainland Company Setup and Categories in Dubai

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

Here are the different License categories:

Professional license- Issued for services providers companies such as training, management consultancy, etc. Full or partially ownership is depending on the activity requirements. Certain 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 administration 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 manufacturing facilities.

Commercial license- Adequate for businesses involving trading or retail activities ( buying and selling of goods, Import and export activities, Real estate service, Logistics, Travel & tourism, Auto vehicle rental business, etc. A maximum of 10 activities per license is allowed.

Types of Mainland Company Formations recognized in Dubai

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. Separate registration with the ministry of economy is required.

Representative Office– It isn’t a business structure in its own right but it’s 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. Separate registration with the ministry of economy is required

Civil Company– is a business partnership for professionals such as doctors, lawyers, engineers, and accountants.

Types of Mainland Company Formations

Following are the types of Mainland Companies formed and recognized in

  • Sole Establishment Dubai
  • Limited Liability Company Dubai
  • Branch of Foreign Company Dubai
  • Representative Office
  • Civil Company

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 the 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’ll 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 governments.

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

It is considered more recognized as a corporate vehicle to do business in neighboring countries of the Arabian Gulf (GCC)

A Free Zone company can only carry out its business within the Free Zone. To engage in any business out of the Free Zone, the company would have to engage a local agent.

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’ll be eligible for an E-quota (electronic quota), issued by Ministry of Labor, showing your visas entitlement, that can be increased if needed, not limited to the office space being owned or leased in the mainland

Number of visas depend on the office space, owned or leased in the free zone. Smart office package 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 of more visas

License Costs:

You’ll 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 is what makes this option costly

You’ll 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, 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. You’ll get the remaining 49%

You’ll have full ownership of your company
Neither free zone nor mainland setups are ‘better’ than one another; it simply comes down to what the best is fit for your business

Kindly note that the aforementioned is generic and every business has its own set of operational leeway and restrictions. For more tailor-made information and support, please feel free to contact us.

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