Dubai is a mega city considered to be the meeting point of east and west. With the ease of doing business and acceptance of diversity, Dubai is a preferred international business destination.
The procedure of setting up a business depends on the area under which the business is set. In UAE, there are several free zones with different rights and rules of doing business.
Free zone: UAE offers many free zones where 100% foreign ownership is allowed, it is the preferred zone of foreign investments as they have the benefit of no tax and repatriation of profits. Along with affordable labor and large customer base.
Mainland company: these companies are located in the main city of Dubai. These are registered under the Dubai Economy. The foreign investment in these companies are capped at 49%.
Offshore company: it also means nonresident company. Apart from tax benefits, these companies have an advantage of licensing rights and opening of franchises which do not come under direct laws of UAE.
Apart from the location of the company formation, they are also classified according to the number of owners in a company.
Sole proprietor company: according to the name, this company’s ownership resides with a single person. He/she will be liable for both its profits, losses and debts. This kind of ownership is usually given to a UAE national or national of GCC. If any other nationality individual wants to open a sole proprietor company, then he will need a sponsor who is a UAE national.
General partnership: it requires two or more members as partners in the company formation. It is reserved only for UAE nationals. They will be responsible for the company’s obligations and debts according to their share. The company can dissolve if any of the partners leaves either by death, insanity or withdrawal. If the other members want to continue the company, then they must give formal consent, making it officially valid and registered in the commercial register of Dubai.
Limited Partnership: company is formed when one or more general partner joins hands with one or more limited partners. The limited partner in this company supplies only capital to it. they don’t have managerial rights and are not liable for the company’s debts and obligations. The general partners have unlimited liability. They will be responsible for its decisions and money owned. Limited liability partners should be UAE nationals according to corporate law because of financial commitments they are responsible for.
Limited liability Company: it is one of the most common types of companies registered in Dubai. With a Dubai national as a compulsory partner of 51%. They can be two to fifty people registered as partners. Their liability will be according to the number of shares they own. Though 51% shareholder should be an Emirati, the profits can be shared according to other ratios and registered accordingly with the department of economic development(DED) in Dubai. This type of companies is allowed imports and exports.
Joint venture: when a partnership is solicited between a local partner and a foreign party to run a business, it is known as a Joint venture. The 51% ownership will be with the local partner who will be liable for any company’s debts and dealing with local vendors. This kind of agreement is most suitable for projects based businesses. The foreign partner need not be registered with the DED. The license of the local partner will be enough to run the project in Dubai. Though there is a 51% share of the local partner, the profits and losses can be shared according to terms of the partners.
Private shareholding company: owned by at least three members and a capital of 2 million AED, a private shareholding company needs a business plan, feasibility study, auditors certificate, a due diligence survey, articles of association, a memorandum and preparation of founder’s agreement to get registered. It cannot trade stocks to the public. They are owned by few private owners.
Public shareholding company: it’s a public joint stock company. The majority of shares are vested with the public at a cap of 35% shares to be held by founding members. Minimum of 10 founding members are required to start a public shareholding company. Along with the majority of directors, chairman of this kind of companies should be UAE nationals. Most common domains to run as public shareholding companies are banks, insurance and other financial companies.
Professional company: this company’s operations depend on the intellectual abilities of the company’s owners. Some of the examples of professional companies are accounting services where the qualifications and expertise are required to serve its clients, a legal consultancy where lawyers are required, IT consultancy, management consultancy etc. Expatriates can own this type of company with a UAE national as their service agent. Though not a share in profits, a service agent may ask for a fixed annual payment for acting as their service agent.
Dubai gives three kinds of licenses to companies setting their base. They are commercial license, professional license and industrial license. To start any kind of company listed above, the main steps to obtain licenses are:
- Submission of referred name and application of registration with DED
- Notarization of a memorandum of association of the company with DED
- Obtaining a trade license from the chamber of commerce and industry.
- Application for establishment card from the ministry of labor.
- Registration of native workers both with the ministry of labor and general authority of pension and social security.
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