Some years back, everyone used to buy offline. Now, growing technology made it possible to shop online and drastically increase the share of online purchases. But even until several years back, to have an online shop one had to spend sufficient funds and even more time on their infrastructure development and then in the course of a year, the whole business setup process takes place. But it was like that until recently.
Today you have an unlimited number of opportunities in terms of an online trade. To use a labor power, to trade on amazon, to use souq.com to use your platform to construct online stores is a matter of days and have them immediately connected to various payment service providers.
You no longer spend that much time on creating infrastructure because it is already there for you and you just need to choose the one you are more comfortable with.
If you are planning to start an e-commerce business in Dubai, the following guideline will help you in acquiring online business license in Dubai.
Firstly, one should distinguish between two most common types of e commerce businesses.
Become a web platform, which brings together various buyers and sellers.
You can start a company where you will not hold any stock. Instead you will just operate IT infrastructure allowing website visitors to place orders online. Once the order is placed, you will be forwarding online requests to manufacturers which will be fully responsible for preparing goods for shipment, arranging shipment and shipping the product directly to the end customer.
Become an online shop with its own stock (goods are stored by your company in its own warehouse)
You can lease a warehouse where you will keep the stock at all times so that once the online order is received you can ship the products right away .
In other words, you can either provide infrastructure only, be an online platform for one or multiple trading companies or you can operate the online store completely on your own, be involved in all of the processes down the supply chain.
Steps To Obtain E Commerce License In The UAE:
1. Select legal form of business
Choose whether to setup an LLC, one-person company, branch of a parent company, representative office, etc. in Dubai. Most common are the LLCs and branch offices as they offer plenty of benefits.
2. DED or free zone?
The type of business setup and your budget determine which option you will go for.
- Web platform – A free zone company formation is sufficient as the company is not involved into storage and delivery of goods. Goods belong to the 3rd parties and you just provide a platform for communication between the buyers and the sellers
- E-trading – A local / mainland company formation is required, as your company will need to distribute / deliver goods which have been sold online.
For a startup in Dubai with no external funding, the cost of a local company setup as well as other operational costs will be high as you will lease warehouse as well.
At the same time option 1 with IT infrastructure is most commonly used today not only in the UAE but worldwide in general. On one hand it requires minimum investments as you can be setup in the free zone. You can also choose a UAE free zone in one of the northern emirates which will further decrease your investments. Moreover, this option is well perceived by free zones as you are not involved into trade yourself, there is no physical exchange of goods at any stage and you are not dealing with your buyers offline because they receive shipments directly from the manufacturer.
3. Select trade name for your business
As your business does not have physical existence, decide a name that people remember easily. You can use trade name as domain name so that people can easily find you online.
4. Apply for business license
The Department of Economic Development, DED issues e-commerce license. Mainland Company will require you to pay approx. AED 10,000 to DED for issuing of license. For a free zone company formation the license will have to be acquired from the relevant free zone authority. The type of license issued depends upon the nature of your online business.
If you decide to setup your company in a free zone you will most probably be requested to provide a business plan. The whole purpose of the business plan will be to ensure that you are not involved into trade yourself. There will be no physical good exchange at any stage and you will not be dealing with your buyers’ offline.
Additionally free zone authority may request you to specify all the suppliers or manufacturers you will work with and the exact process of buying the product on your website. So you must have everything at hand as you go to register your company in a free zone.
5. Get you initial approval
An Initial Approval Certificate is a NOC from DED to start your e-commerce business in Dubai. Its validity is 6 months, and cannot be renewed. You can apply for initial approval certificate at the same time while submitting your trade name approval application.
6. Prepare MOA and LSA agreement
Draft a Memorandum of Association (MOA) and Local Service Agent agreement with the sponsor and submit it to the DED. This step is required for mainland company. Companies setting up in free zones can skip this step.
7. Establish a business location
DED has made it compulsory for a company to have an office so as to consider it a legal entity. So you have to establish an office in Dubai.
8. Obtain final approvals
Once you have completed all the above steps; you will get a business license within 1-7 days. After that, open corporate bank account in Dubai in a bank which most suits your needs and you are good to go.
For professional assistance in e-commerce business setup in Dubai, contact us at KWS Middle East and get free consultation.