With a diverse population, flourishing economy and a business environment that offers numerous benefits for new business startups; Dubai has become a top investment destination for investors looking to setup their business in Middle East region. Many multinational companies have setup their regional base in Dubai and cater the needs of high growth markets of Asia, Africa and Middle East.
Dubai is the second largest emirate and commercial capital of UAE. In the past four decades, the city has put considerable efforts to diversify its economy. Now many critical sectors such as construction, real-estate, manufacturing, trade, financial services, logistics, tourism and retail contribute largely towards Dubai economy.
If you are looking to establish new business in Dubai, we have formulated a general guide which will explain you about different company formation types in Dubai and what are general procedures for their incorporation.
Options for Dubai Company Formation
There are various types of business setups in Dubai. The choice for your company formation depends upon your business activity and business goals. Broadly speaking, in order to establish new business, entrepreneur is required to setup a formal legal presence within Dubai through any of the following means,
- Local business setup in Dubai
- Open a branch or representative office in Dubai
- Formation of free zone company in Dubai
Dubai Company Formation Type: Local Business Setup in Dubai
You can form a local business setup in Dubai under UAE Civil Code or Companies law.
Dubai Business Setup under UAE Civil Code
Following companies can be formed in Dubai under UAE Civil Code,
- Professional Services Company
- Speculative Venture Partnership
- Mudaraba (an Islamic Shariah compliant agreement)
Although these business setups are called companies, they do not have legal status of a company. Only companies registered under Companies law are recognized legally.
The most common form used by a foreign investor amongst these is the formation of professional services company. The significant benefit of this is that investor can own the business completely. But the presence of a national agent is mandatory who will receive a fixed fee and sponsor company for its license activities and accompany for interaction with government authorities.
The disadvantage of this company formation type is that it is not a separate legal entity. Investor is also liable for his personal assets.
Business Setup under Companies Law
Following companies may be formed under Companies Law,
- Limited Liability Company Popularly Known As Dubai LLC
- Public Joint Stock Company
- Private Joint Stock Company
- Private Unlimited Company
- Partnership Limited with Shares
- Limited Partnership
- General Partnership
Amongst these, the most popular form of company formation is Dubai LLC. KWSME provides its services for LLC formation in Dubai. In order to setup LLC in Dubai, you are required to appoint a local sponsor who will have 51% of shares in your company.
Dubai Company Formation Type: Open a Branch or Representative Office In Dubai
Foreign companies can open their branch or representative offices in Dubai. They can be completely owned by foreign investors. In order to engage in commercial business, appointment of local sponsor is required who will own 51% of shares. In terms of activities, branch office can only perform activities of its parent company and representative office is further restricted to marketing operations only.
Dubai Company Formation Type: Free Zone Company
An alternative to mainland business setup is formation of free zone company in Dubai. This is particularly useful if you want to carry out your business with countries other than UAE. There are more than 40 free zones in UAE which provide benefits like complete foreign ownership, complete repatriation of profits, exemption from personal and corporate tax, easy and quick setup process and many more.
The limitation of Dubai free zone is that the company can conduct its business within its relevant free zone and can only perform those activities specified in the license. If a free zone company wants to trade in local market, it will have to acquire services from local distributor who must be UAE National.
Licensing Requirements
All companies require a license in order to operate legally in Dubai and they should be registered with Dubai Chamber of Commerce and Industry. There are usually three kinds of licenses,
- Commercial license – for all kind of trading activities
- Professional license – for professional services, artists, craftsmen
- Industrial license – for all kind of industrial and manufacturing activities
Dubai Company Formation Process
New business setup in Dubai requires completion of following steps which are mandatory in order to get legal authorization of conducting your business within Dubai.
- Determine your type of business and the activities which it will perform.
- Select an appropriate legal structure for your business.
- Fulfill the requirements for new business registration which involves documentation procedures and approvals from relevant government authorities.
- Decide a trade name for your business. Rules for trade name are mentioned in department of economic development (DED) website.
- Apply for initial approval and registration of trade name to relevant authority.
- After receiving initial approval, select work premises with consent from the Planning Department of the Dubai Municipality.
- Get a signboard permit which will display your trade name from relevant authority.
If you are looking to start new business in Dubai, contact us at KWSME. We are among st the best consultant company in Dubai who facilitate new company formation in Dubai and UAE. Although setting up new business in Dubai is not a difficult task, it can be quite challenging for a foreign entrepreneur due to lack of knowledge of business laws and customs here. We therefore provide our expertise in this area and ensure that new business ventures are established successfully along with saving your time and resources. Check our company formation services for more information.
