The United Arab Emirates is widely known as a regional hub of foreign direct investment (FDI). Expatriate investors can setup a business in the UAE in many ways. Especially, international entrepreneurs want to start an LLC in the UAE to tap into the progressive market in 2024.
Entrepreneurs from around the world come to the UAE to grab the opportunities the market presents. Because, the United Arab Emirates has a consumer base of over 2 billion people. Dubai has grown into a big business center in the Middle East in a short span of time.
A popular way of legal business setup in the UAE is the formation of limited liability company (LLC).
It is not only the investment and facilities provided but also the laws made by the UAE government to regulate all matters in such a way that allowed freedom to people while still preserving the cultural values of the city.
With growth of business in Dubai, many new topics of discussion rose to popularity as well. It is common for this to happen because people are now interested in something new and in a city like Dubai, who doesn’t want to talk about what is best for business?
The government of the UAE created many business zones to attract businesses and it has been successful in doing so. For those business owners and entrepreneurs who were not aware of the laws of Dubai, business setup Dubai consultancies started providing their services. The core services of these consultancies include company incorporation for mainland, free zones and offshore jurisdictions.
So naturally, one of the topics for people to talk about is the comparison between a Limited Liability Company and a sole establishment. We will contribute to this discussion and make things clear.
Procedure to open an LLC in the UAE
What is the process to register an LLC in the UAE?
Foreign entrepreneurs have to follow this step-by-step process to start an LLC in the UAE.
- Decide business activity
- Choose your location
- Reserve your trade name
- Draft the MoA
- Get initial approval
- Prepare the LLC agreement
- Rent office space
- Submit application with documentation
- Pay fees to acquire license
- Open corporate bank account
- Register with the Chamber of Commerce (optional)
- Apply for visa (if necessary)
- Find local sponsor (optional)
- Ensure regulatory compliance and renewals
Now, we briefly discuss these steps to start an LLC in the UAE.
Decide business activity
Clearly plan the business activities your LLC is going to conduct. This is crucial as it determines the specific licenses and permits you need to operate legally. Also, it influences factors like company structure, office location, and revenue potential.
Choose your location
Select the Emirate and area where your LLC will operate. Remember, mainland and free zones in the UAE have different regulatory requirements. Business location selection depends on factors like business activity compatibility, accessibility, and cost.
Reserve your trade name
Choose a unique trade name for your LLC that is available for reservation. Check the availability of trading name through relevant UAE departments. Make sure your trade name complies with the naming regulations of the UAE authorities.
Draft the MoA
Prepare the Memorandum of Association (MoA) that outlines the ownership of your LLC. Also, this legal document will detail the company structure of your LLC in the UAE. Draft and notarize the MoA with other necessary details like shareholding information.
Get initial approval
Submit the necessary paperwork to the Department of Economic Development (DED) to establish the LLC. Otherwise, you have to file the obligatory documents to the free zone authority or other relevant regulatory body. Upon the successful review, you receive initial approval certificate from specific UAE government entities.
Prepare the LLC agreement
Draft the LLC agreement that details the management structure of the LLC in the UAE. Also, it notes down the profit distribution, and other operational aspects of the company. Notarize this document with signatures of all shareholders of the LLC.
Rent office space
You need a physical office address to register your LLC. So, lease a suitable office space that is appropriate for your LLC. Moreover, your workspace must fulfill the requirements set by the UAE authorities.
Submit application with documentation
Next, submit the application form with all necessary documents to the DED. Or you may have to file the application form with the free zone authority depending on your location. In some cases, you have to submit the application form with other specific regulatory body in the UAE.
Pay fee to acquire license
Submit the necessary licensing fees to the DED, free zone authority, or other regulatory department in the UAE. Upon approval, you will receive your trade or professional license. This license enables you to legally operate your LLC in Dubai or the broader UAE.
Open corporate bank account
Establishing a corporate bank account in the name of your LLC business is the next logical step. It helps an LLC in conducting business transactions in an efficient way. However, bear in mind that only UAE residents are eligible to opening a corporate bank account.
Register with the Chamber of Commerce (optional)
Registering your LLC with the local Chamber of Commerce and Industry is the optional step. Some business jurisdictions in the UAE require it, while others don’t. This step may vary depending on the emirate where you are establishing your LLC company.
Apply for visa (if necessary)
Foreign business owners of the LLC must have the UAE residency. Otherwise, they have to apply for the appropriate visas of the UAE. Similarly, they have to arrange visas for their expatriate workers or partners under the company’s sponsorship.
Find local sponsor (optional)
The past requirement of entrusting a local Emirati sponsor with 51% shares for LLC in mainland is not applicable now. However, some free zones in the UAE may still require LLC owners to optionally appoint local sponsors. Even, the LLC in the UAE onshore may appoint an Emirati sponsor to work as a local agent.
Ensure regulatory compliance and renewals
Make sure your LLC is properly compliant with all regulatory requirements. Likewise, keep financial compliance with FATF and other AML frameworks. Renew your professional or trade license (and other permits) annually.
Security of foreign investment in LLC
Are the investments of foreign owners of LLC secure in the UAE?
This is the most common concern for foreign entities regarding the extent to which partners in UAE Company may be subjected and whether UAE government protects the rights of partners in an LLC partnership. Article 246 of UAE Civil Code requires from partners to perform their duties according to contents of agreement fulfilling the manner of good faith. Article also specifies that “the agreement will not be limited to an obligation from contracting partner to perform which is mentioned in it, it should also embrace what is appurtenant to it by virtue of UAE law and nature of transaction.” UAE law secures partners in an LLC contract so that they perform their obligations in good faith.
Kinds of LLC companies
How many types of LLC companies are there?
These are some of the leading forms of LLC companies.
- General Partnership
- Joint Partnership
- Public Joint Stock Company
- Sole-proprietorship (Single-member LLC)
- Multi-member Limited Liability Company (Multi-member LLC)
- Domestic Limited Liability Company (Domestic LLC)
- Foreign Limited Liability Company (Foreign LLC)
- Professional Limited Liability Company (Professional LLC)
- Anonymous Limited Liability Company (Anonymous LLC)
- Nonprofit Limited Liability Company (Nonprofit LLC)
- Low-profit Limited Liability Company (L3C)
- Series Limited Liability Company (Series LLC)
Defining an LLC (Limited Liability Company)
What is a limited liability company (LLC)?
Limited liability company (LLC) is a hybrid business entity that is a combination of a corporation and a partnership/sole proprietorship. The minimum liablity of a corporation combine with the flow-through income/taxation of a partnership or sole proprietorship. So, the partners of an LLC hold liability to the extent of their shares in the capital of the company.
UAE law regulating LLC partnerships
Which law of the UAE regulates the LLC partnerships?
There are several laws of the UAE which govern LLC partnerships in Dubai. The article 218 of UAE Commercial Companies Law characterizes the LLC formation. However, the minimum liableness is not applicable for all companies under the LLC partnership.
Forming an LLC vs sole-proprietorship in the UAE
What is better among registering an LLC or sole establishment in the UAE?
Both formation of LLC and sole establishment are the right options in the UAE. Keep in mind plenty of things to get the best results while registering an LLC or sole-proprietorship in Dubai. The decision depends on the type of business you want to run, the scale of operations, and the economic conditions.
Benefits of setting up an LLC
Which are the benefits of starting an LLC?
Let’s look at some of the rewards of registering an LLC in Dubai and the UAE.
- This corporate structure allows you to access both local and international markets with ease
- Investors who are partners in an LLC hold limitation in liability against the assets of the company
- LLCs in Dubai can have their branches anywhere in the rest of the UAE
- This corporate structure allows the company to get loans on cheaper interest rates
- There is no minimum limit of investment for those who look to setup a LLC in Dubai
- Corporate bank account opening for an LLC is easy
- Incorporation of an LLC in Dubai gets you an investor visa without depositing a security fee
- LLC owners have no restriction on capital and profit repatriation
- Premium business services are available for LLC owners to use
- LLCs provide business owners exemption from personal and corporate tax
- Owners of LLCs can hold any number of offices or properties in the UAE
Advantages of starting a sole establishment
What are the advantages of setting up a sole establishment?
These are the incentives that opening a sole establishment in Dubai provides.
- The cost of setting up a sole establishment is lower than other types of business setups.
- You can register your sole establishment in a matter of hours if you have the complete set of required documents and you fulfill the criteria.
- Corporate bank account opening is easy and quick for a sole establishment as well.
- If you are the owner of a sole establishment in the UAE, you have the permission to sponsor your dependents when it comes to their visa applications.
Protection of owner rights under LLC partnership in UAE
Are the rights of owners safe under LLC partnership in the UAE?
Entering into a contract that safeguards your rights as a foreign investor, preparing a security contract that will shelter your investments and savings, appointing a partner who is inactive in the business operations in return for an annual compensation? You must be wondering whether it is possible or not? The answer is yes. With KWS ME business setup, you can have complete ownership of your business operations.
However, it must be kept in mind that the legalities regarding liability for both setups are different. You are exposed to the risk of more law suits if you are the owner of a sole establishment as this makes you completely responsible for all liabilities and debts owed.
Conclusion
Business consults provide strong investor rights and protection contracts that two witnesses from both parties sign and certify. We are the most reliable business partners in UAE. The key documents that specify your positions as partner, company formation contract, power of attorney etc. are carefully prepared and examined by KWS ME experienced professional consultants who will provide you complete security that you desire in an LLC partnership.
KWS Middle East can help you make the smart choice using its experience in guiding businesses towards success. The consultancy offers valuable advice and business solutions like mainland company formation, company registration and visa services. Other services include trademark registration and trade license services.
