The United Arab Emirates (UAE), a federation of the seven emirates of Dubai, Abu Dhabi, Sharjah, Ras al-Khaimah, Ajman, Fujairah, and Umm al-Quwain, is one of the biggest business hubs in the world, with its most populous city Dubai, emerging as a preferred destination for entrepreneurs, investors and tourists alike and company formation in Dubai growing expeditiously in recent years. All this has been possible due to the market-friendly economic policies of the UAE government.
As a business powerhouse with ample investment opportunities and world-class facilities, UAE fosters diverse business activities within its specialized jurisdictions and facilitates different legal forms to help companies establish, grow and prosper as listed below.
As the name suggests, a sole proprietorship is an entity that is owned 100% by an individual, who has control over all its operations and holds 100% shares to any profits. Its owner will also be liable in case of any debts or financial duties.
In case of professional-type sole partnerships, an individual of any nationality can own it, while commercial or industrial sole proprietorships can only be owned by UAE and GCC nationals and must be 100% owned. If the owner is not a UAE national, a Local Service Agent (LSA) is appointed to open a sole proprietorship. Unlike local sponsors, LSAs do not hold any stake in the company and are also not involved in the day-to-day running of the business or any decision making. Their role is confined to administrative tasks such as licences, visas and permit applications, for which they are paid a set fee. Your LSA must be either a UAE national or a corporate entity entirely owned by UAE nationals. Setting up a sole establishment in the UAE is as easy as establishing any other type of business. Simply select your licence type and business activity and apply directly to the Department of Economic Development.
Civil company formation in the UAE is the only company setup option tailored exclusively for professionals. Simply owning a civil company in the UAE showcases that you are highly skilled and qualified in your chosen field. And this is before even considering the numerous other benefits such as 100% foreign ownership coupled with full access to the local market.
This option is available to qualified professionals in specialist sectors – such as doctors, accountants, lawyers, consultants, and engineers. In this case, foreign entrepreneurs have 100% ownership and access to the local market, and unlimited liability. As the company can have partners owning 100% shares, the activities allowed for the civil company can only be from professional businesses.
This option places no restrictions on the nationality of the owners; however, an engineering civil company must include an Emirati National owning a minimum of 51% shares who must also be an engineer qualified in the same type of business activity. If a foreign company invests as a partner in a civil company, it must be from the same type of business activity. Like in the case of a sole proprietorship, an LSA is required for the company incorporation process if the owner is a foreign national.
Limited Liability Company
An LLC is one of the most popular forms of company registration in the UAE, where a minimum of two or a maximum of 50 shareholders can invest and become liable only to the extent of their shares individually, with the profit and loss divided equally between parties.
If you are an expat planning on LLC company formation in Dubai, UAE, then a local agent is mandatory. Some 51 % of the business will be owned by the sponsor; hence, choosing the right partner is crucial. Local agents usually act as sleeping partners and won’t be involved in the running of your business. They help you deal with ministries and the government for various paperwork.
Company formation consultants in Dubai state that what makes the LLC unique and one of the most preferred business types is the flexibility it provides. An LLC company can trade anywhere in the UAE and the GCC. An LLC is versatile and provisions for mutual profit sharing are also feasible. It gives the international investor an edge as a local partner has 51 per cent legal equity. Aside from professional businesses and the banking sector, LLCs can conduct any commercial or industrial business activity in the jurisdiction.
Private Shareholding Company
A Private Shareholding Firm, also known as Private Joint-Stock Company, is formed through a minimum partnership of AED 2,000,000 from at least three investors. A minimum of 51% shares must be owned by a UAE National or 100% by GCC National.
Such legal structures are compatible with all sorts of commercial and industrial activities, besides professional businesses. However, unlike a Public Shareholding Company, a Private Shareholding Company cannot invite the public to subscribe to its shares.
A Private Joint-Stock company requires an appointed manager to oversee operations and financial affairs. The venture can be converted to a public company after a minimum time period of two years, subject to certain conditions, however, the stocks of the business cannot be opened for the public.
Public Shareholding Company
A Public Shareholding Company also referred to as a Public Joint-Stock Company, is a company where the business capital is divided into equal shares and their respective number of shares limits each shareholder’s liability. During the company incorporation process, the trade name must not be from any partnering investor, except if the name is a patent of a shareholder. This also means applying “Public Shareholding Company” in its trade name and corporate identity.
Such a company in Dubai is required to have at least ten founding members, and its management should be vested in a board of directors consisting of 3 to 15 persons whose term of office may not exceed three years. The law stipulates that banking, insurance, or other financial companies should be run as public shareholding companies. However, foreign banks, insurance, and commercial company formation in Dubai can be done by opening a branch or representative office.
As a useful means to expand and grow business reach across countries, branch offices, dedicated outlets of the company, serve as operational vessels to establish the company presence in new regions and enhance the prospects of sale and revenue. Though physically apart, a branch office does not constitute as a separate legal entity.
A branch office is incorporated by filing an application with the help of an LSA through the Ministry of Economy and Commerce. An approval is then secured from the respective authority after a permit letter is issued regarding the business activity from the Ministry of Economy and Commerce. The local Economic Department then registers the branch office, after which a business license will be handed over to the company.
Types of Branch Offices
Foreign Company Branch
A Foreign Branch Office in the UAE is a registered company that can be 100% foreign-owned, provided an LSA is appointed. The foreign branch office is an extension of the foreign parent company and must obtain a trade licence for the same activities its parent company carries out.
The ownership belongs to the parent company and the foreign branch should be licensed with the same name and activities.
UAE Company Branch
A UAE company branch is a nothing but an extension of a UAE–based company that is seeking to expand by establishing a branch within the UAE. This branch should undertake one or more than one activity as stipulated in the main company license. Companies with multiple branches in the UAE can carry out different business activities provided it is in compliance with the main company license.
Free zone Company Branch
As the name states, a free zone company branch originates from the UAE’s free zone jurisdiction aimed at branching out operations to other zones. A free zone company branch office can be opened in the mainland after acquiring a relevant license from DED, provided that the owner has an Emirati shareholder. Top company formation consultants in Dubai suggest that companies that do not have a local shareholder can seek approval from the Ministry of Economy and use the services of an LSA.
GCC Company Branch
A branch of a GCC-based company can undertake one or more than one activity, as legislated in the main company license. Companies with multiple branches can register for different business activities as stipulated in their main company license.
Free zone Company
Also known as free trade zones, these are economic areas where goods and services can be traded, usually at preferential tax and customs rates. They were originally rolled out to boost international business in the region by offering benefits such as 100% foreign company ownership. There are currently 45 free zones across the UAE.
A free zone company is a multi-shareholder legal structure comprising two to five stakeholders.
How Zenesis can help in this regard If you’ve decided to set up a company in Dubai, ensure the process is a smooth one by hiring company formation consultants in Dubai. With its vast experience, bespoke solutions and legal knowhow, Zenesis Corporation, in particular, can help provide complete company formation services in Dubai as well as administration and management services in all major jurisdictions around the world.