If you are considering doing business in the UAE, there are various commercial issues that need to be considered. For many investors and business people, the UAE is an attractive place to set up their business due to its liberal trade regimes, economic diversification, developed infrastructure and attractive tax policies. When entering a country, it is important for you to have knowledge of the various entities available, to allow you to make an informed decision of which type would be best suited to your interests.
A sole proprietorship can be established by any individual, but not by a company. A Local Service Agent (LSA) is required for a foreign person (any national of a country outside the UAE) who wishes to establish a sole proprietorship. Industrial or commercial sole proprietorships can only be owned by UAE nationals. Therefore, foreign nationals are only eligible to set up a professional type of sole proprietorship.
A joint partnership can generally be formed between foreign persons and UAE nationals. The management of the partnership must be with at least one natural person (not a company), and this person may or may not be a partner. Only the actual names of the partners are permitted to be included in the name. A partnership interest may be transferred with the approval of the partners or in accordance with the conditions determined in the partnership agreement.
A LLC is the most common type of entity for foreign persons in Dubai, and can be formed by a minimum of 2 persons and have a maximum of 50 persons. The Minimum capital requirement in the UAE differs in each Emirate, the minimum in Dubai is AED 300,000 ($81,688). In an LLC a minority shareholder is able to exercise control, if the powers have been vested to that shareholder through the memorandum and articles of association.
Due to the various steps it takes approximately 8 – 12 weeks for a LLC to be incorporated. It is important to ensure you have all supporting documents, and they are fully legalized in order to prevent any delay of the time period.
A branch office is seen as an extension of the foreign parent company. In the UAE, free zone companies are allowed to set up branches in the wider area of the Emirate. However, branch offices are required to obtain a proper license from the Department of Economic development and thereafter the approval of from the Ministry of Economy.
It takes approximately 8 – 12 weeks to set up a branch office. Branch offices are wholly owned by their parent companies and there is no legal requirement for UAE nationals to hold an equity interest in the primary business of the branch.
There is a limitation on the types of businesses that are able to set up branch offices in the UAE. Generally, service providers and contractors are able to register their branch offices. The company wishing to set up the branch office, is also required to appoint a sponsor, which is a national service agent in the UAE. The sponsor is responsible for all administrative dealings with the government departments in the UAE. The sponsor is usually remunerated on an annual basis and can be adjusted based on the contribution he makes to the branch.
A representative office is quite similar to a branch, however, the most important distinction is that a representative office is not able to undertake any activities that generate an income. It can be set up for research, feasibility study or another similar purpose.
It is important to choose the correct type of entity that suits the size of your business, as well as the nature of your activity. Certain free trade zones in Dubai only permit certain activities; therefore, it is important to consider the type of business based on your intended location.
The filing of the incorporation paperwork is highly important and one of the most burdensome steps. Once the type of entity has been selected, the paperwork is required to be completed and must be submitted, along with the copies of the shareholder’s passports. Dependent on the scope of activity, the type of entity chosen or in which zone it is located, additional paperwork may be required.
Once the paperwork has been submitted and processed successfully, the business license will be received. Thereafter, a corporate bank account can be opened and the applicant can apply for their visa to be processed.
Entering the UAE and doing business in Dubai may seem like a daunting task, but with the right partner, a task that can be remarkably simplified. INS Global is a leading Professional Employer Organization, which specializes in company incorporation as well as other areas of human resources. If you are thinking of setting up an entity in Dubai, you may want to consider visiting our PEO page for an alternative solution.
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