We often get clients from all walks of life, who want to try their hand at starting a business in the UAE and realizing their dream of becoming their own boss. Recently, a client of ours came with an unusual query. The question that piqued our interest was, “Is it not better to set up an entirely new business instead of renewing one’s existing business license? as it is cheaper to do that?”– and upon inquiry, it was revealed that this an effective market strategy that is being used by shady business setup consultants to lure in unsuspecting customers. They do not care about the customer’s best interests; they just want to line their pockets.
If you’d like to know why holding on to your current trade license is a good idea, then keep reading:
1. Credibility with banks, money lenders and authorities
The first and most immediate necessity for business after its initial setup process is complete is opening a corporate bank account. A recent survey showed that most entrepreneurs deem banking to be the most challenging task. And they are not wrong with increasing compliance conditions set by the Central Bank and the local banks themselves becoming increasingly strict with their account opening procedures. Those businesses that successfully jump through these hoops earn the trust of the regulatory authorities, money lenders, and banks. They feel more comfortable dealing with such companies that have a proven track record.
Bear in mind that in the eyes of the bank, a new license means a new company.
Do not think even for a minute that you can switch your corporate bank account from your current license to a new license. This just can not be done as it is a UAE Central Bank policy and is a condition that all banks operating in the UAE must comply with. If your business setup consultants are telling you otherwise, they clearly do not have your best interest at heart.
Dhiraj Kunwar, Managing Director of RAKBANK, stated that: The Central Bank has asked all the banks to adhere to the KYC guidelines, and the account holder must give their updated legal documents to them.
That means that, if the account holder changes the legal entity, jurisdiction, or business activity, and a new trade license is issued as a result of that, then a new account must be established. And the corporate bank account of an expired or surrendered trade license should be closed unless other orders are explicitly given.
2. Market reputation and stability
Imagine if every time you dealt with a business, they kept changing their trade name and trade license – how would you feel while doing your business dealings with them? Say you had to give them an advance? Would you feel confident in handing over large sums of money to them? Not very confident, we’re sure.
A license that has been renewed annually shows the stability of the business and attains the confidence of your vendors and clients as they see your business as a responsible and reliable entity for fulfilling their demands and their money.
Jumping jurisdiction, be it from Singapore to Mauritius to Dubai Mainland or other Free Zone starts alarm bells ringing within regulatory authorities. The worst-case scenario is your business landing on their blacklist, which is the last place you want it to be.
3. A mismatch between trade license duration and visa duration
The business owners operating in Dubai need to remember the rule that a business trade license needs to be renewed yearly, and a visa needs to be renewed once every two or three years. Therefore, keep a close eye on their expiration dates to avoid any unpleasantness.
If your company formation experts pressure you into setting up a new company instead of renewing your trade license, then we suggest that you do not do that. Do a little math in your head, and you will realize that by applying for a new license, you are spending almost 50 to 80 percent more than if you had just had stayed with your existing trade license.
4. Encourages business growth
If you want to grow your business as a serious business owner, you already know that you will need hefty sums of money to scale up.
Whether you raise money from banks, use private investment, or including other business partners in the mix or are opting for a merger with a bigger company, they all want to invest in an organization that has a long-standing presence. Needless to say, if you are perceived as someone who jumps ships rather than maintaining a consistent track record by renewing your existing license, it’s quite unlikely that you would secure the trust that a bank or an investor is seeking in their future investment.
Read More: How to Renew a Trade License in Dubai?
5. Save time and lessen your exposure to ever- changing regulations
Sometimes, some businesses undergo a long and tedious process to obtain a trade license in particular business activity. The last thing they would want is to be misguided by some so-called experts in starting a new business and undergoing all the wearisome and exasperating process all over again. Moreover, there is no guarantee that they will get the license for their required business activity, which would throw a spanner in the works.
By renewing your existing trade license, you can save the most valuable assets of all time by not having to get initial approvals and also letting yourself to concentrate on managing your business.
6. Uninformed cancellation prices
What these shady business setup consultants forget to tell you is that the costs connected with the cancellation of your commercial license and visas when coupled with the expense of a new license, will probably far exceed the charges of merely renewing your license. Hence, forget about this whole set up of a new company is better than renewing the existing trade license and stick to the ordinary course of action.
By now, you must know the value of your existing license is far more than you ever imagined. You know how much time, effort, and investment goes into starting a business. Therefore, you should think twice before acting on any incorrect information which would risk the future of your business.
Lastly, We would like to advise you to beware of false information that you might get from unreliable sources. Adhere to this rule of thumb at all times. If something sounds too good to be true, it probably was not true, to begin with!
KWS Middle East is the best in the business setup business and has over a decade of experience. We have helped many companies, both local and foreign, in the establishment: our business consultants, our well-versed in business incorporation procedures.
Contact us and book your commitment-free call with our team today!