How to start a business in the UAE?
Starting a company, whether in the United Arab Emirates or anywhere in the world, is an important decision. It involves research, planning, budgeting, and conceptualization, among other things. In the UAE, you will need to comply with the established regulations and acquire the correct business license for your business. For this reason, in the following lines, we will talk about how to start a business in the UAE.
In this article, you will find information about the process of starting a business in the United Arab Emirates, the advantages of choosing this country for your company formation, and also how we can help you start your business successfully.
- Who can start a business in the UAE?
- What legal structures does the UAE allow?
- How to start a business in the UAE?
- Benefits of the formation process of a business in the UAE
- How can we help you start a business in the UAE?
1. Who can start a business in the UAE?
Starting a business in the United Arab Emirates is quite easy; actually, anyone can do it. This is because the government of the country has offered different incentives to new and experienced entrepreneurs.
The first thing to know is that for most types of companies (apart from the sole proprietorship) you will need an Emirati partner to own 51% ownership of the company (if you decide to set up on the Mainland). After that, you will need to go through the process of registering and licensing your business. Keep in mind that in some cases you will have to meet the minimum capital requirements.
If you decide to establish your company in a free zone of the country, you will be able to enjoy the many advantages that this zone offers. For example, 0% corporate and personal taxes, exemption from export and import taxes and you will also be able to maintain 100% foreign ownership.
2. What legal structures does the UAE allow?
One of the first things to consider when starting a business is the type of company you want to form. As in any country, the United Arab Emirates has several legal corporate structures. Some of the most common are the following:
2.1 Sole proprietorship
The entrepreneur can maintain 100% ownership of this type of company. For this reason, the person can maintain full control over the profits and operations. Although all nationalities can create a sole proprietorship company, only GCC and UAE Nationals can have an industrial or commercial company.
2.2 Civil company
Professionals such as accountants, lawyers, and doctors can start a civil company in the country. For this type of business, an Emirati partner must own 51% of the shares of the company.
2.3 Limited Liability Company (LLC)
In a Limited Liability Company, there must be between two and fifty shareholders. As such, each one is liable only for their percentage of shares. In addition to this, the profits and losses are divided between all the shareholders depending on their holdings.
In this type of company, once again, 51% of shares must be owned by a UAE national. Furthermore, an LLC with more than seven partners must create a board with at least three shareholders.
2.4 Foreign Company Branch
A foreign company can establish a branch in the country. In this situation, the parent company has 100% ownership. However, all goods must be imported through a local trading firm.
2.5 Free Zone Company
Every company created in a free zone must have two to five stakeholders. While there are a lot of advantages of choosing a free zone for your business, you should know that these companies cannot trade directly with the UAE market. Therefore, there are different requirements to create a business there. For example, some legal entities do not require any minimum capital. However, some others require a minimum capital from AED 1,000 to AED 150,000.
2.6 Freelance work
Working under the freelance modality in the UAE is extremely easy. You must register your business in a free zone with an application form, bank reference, CV, and notarized Registry Identification Code Form. You can also apply for a visa.
3. How to start a business in the UAE?
The steps to create a business in the United Arab Emirates successfully are the following:
3.1 Select a business activity
When selecting the business activity for your company, you must take into account the practicality of the chosen activity in relation to the UAE market. Also, before opening a company in the country, make sure you do a thorough research on the profitability and the feasibility of the activity. Then you can decide when to start a business in the country.
3.2 Select the jurisdiction
The country’s market is divided into different economic zones: Free zone, Mainland, and Offshore. Each jurisdiction has its own regulations and rules about the business setup. They also cater to different business needs. Selecting the jurisdiction of your company will depend on the requirements and the nature of your business activity.
3.3 Finalize the legal form/company structure
Choosing the legal form for your company is one of the most important decisions when starting a business in the UAE. It sets the tone to manage the profits and losses and how you should organize your assets and resources. It is advisable that you decide on the legal form in the initial stages of planning, this will help provide a layout for your company.
You will not be able to apply for a license until you decide on the legal form. Some of the company structures under which you can register your business in the UAE are the following:
- GCC company branch
- Holding company
- Sole Establishment
- Limited Liability Company (LLC)
- Free zone company branch
- Local company branch
- Foreign Company Branch
3.4 Get approval for your business activity and the company name
The Department of Economic Development (DED) is the entity in charge of approving the trade name for your company before proceeding with the process of setting up your company in the UAE. Along with your company name, the DED must approve your selected business activity.
Once you receive the approvals, you will need to submit the documents to apply for a trade license and open your company.
3.5 Apply for a trade license
There are several types of licenses in the United Arab Emirates, the main four are the following:
You can apply for any of these licenses if you plan to start a business on the Mainland. If you decide to establish your company in a free zone, the licensing structure is different and depends directly on the business activity of your company.
3.6 Register your company
The registration and licensing process of a company are simultaneous. However, the entire documentation and approval process goes through several stages. At this point, you will need to obtain all approvals from the appropriate government entities as requested by the DED. The required documents are different depending on the type of company and the activity.
3.7 Find a local agent (if required)
To start a business in some areas of the UAE you will need a local partner. This agent must be a UAE National only. Finding a trustworthy local agent can be a tiring process, especially for a new entrepreneur looking to start a business.
A business setup consultant, like Connect Zone, can connect you with companies that offer corporate sponsorship where you can obtain authorization to maintain 100% of the ownership.
3.8 External approvals
The Department of Economic Development may seek approval from other government and non-government agencies, depending on the business activity. For instance, some businesses may be asked to get approvals from specific banks, embassies, the municipality, etc.
3.9 Memorandum of association (MoA)
The Memorandum of Association is one of the most important documents when starting a company in the United Arab Emirates. Therefore, before drafting the MoA make sure you have professionals in the area to advise you. This document must be done in accordance with the regulations of the country.
3.10 Rent an office
Depending on the nature and needs of your company, you can opt for a shared workspace in a business center or an office unit. Office space can also determine the number of visas you can apply to the Department of Economic Development.
3.11 Tenancy contract or Ejari
When you start a business in the UAE, you might need an Ejari. The tenancy contract is the agreement between you and the real estate agency whose shared workspace or office unit you intend to rent. Ejari is an online system managed by the Real Estate Regulatory Agency (RERA). This system ensures transparency and fairness between both parties involved in the tenancy.
You must submit the tenancy contract and a few more documents to activate your Ejari account. This system is of the utmost importance since you need it to renew visas for your employees and family members.
3.12 Initial approval
Before obtaining your license to start operating in the UAE, you must obtain initial approval from the DED. This approval indicates that the government of the country does not object to you starting a business in the UAE. If you do not get this approval, you cannot continue with the application process.
3.13 Collect the trade license
To obtain your trade license, you must submit the following documents:
- Trade license application
- Initial approval certificate
- Tenancy contract
- Relevant government forms
- Ejari registration certificate
- No Objection Certificates for partners (if any)
- Passport copies of partners
- External approvals (if any)
- Other requirements by the Department of Economic Development (if any)
- Trade name reservation certificate
All these documents must be delivered to the DED along with the necessary government fees.
4. Benefits of the formation process of a business in the UAE
4.1 Business hub
Location-wise there is no other country more attractive than the United Arab Emirates to do business. It is one of the most profitable business hubs in the Middle East and in the world. Due to its geographical location, trade with Africa, Europe, Asia and the East coast of America grows every day.
The ease of accessibility to such huge markets offers you an excellent opportunity to start your business and trade internationally.
4.2 Zero-tax policy
The UAE offers hassle-free business opportunities thanks to the total exemption from all taxes including income, custom, personal and corporate tax. Also, you will be able to enjoy complete export and import tax exemption, zero currency restrictions, and full repatriation of profits and capital, which can benefit your business to grow faster.
The only tax that some companies must pay is 5% value-added tax. It was created in 2018 and is valid only for certain business activities. To keep your business profits without giving any income or business tax to the Emirates government, you must establish your company in a free zone. This will also allow you to give extra liquidity to your company and improve profitability.
4.3 Flourishing economy
The UAE is one of the countries with one of the fastest-growing economies in the world. With an outstanding per capita income and a remarkable annual trade surplus, this country is one of the best economies in the Middle East. The companies established here enjoy highly stable financial situations and financially favorable conditions.
In addition to this, investments in the United Arab Emirates have increased rapidly in recent years. This investment of foreign capital has further strengthened the country’s economy. Thanks to the business-friendly conditions and strong economy, hundreds of companies, conglomerates, and booming startups have moved their facilities to this country to expand internationally.
5. How can we help you start a business in the UAE?
With more than twenty years of experience and more than a thousand satisfied clients, Connect Zone is the right business setup agency to accompany you in the process of forming your company. Our professionals are trained to carry out all kinds of legal and administrative procedures that your company may need.
When forming a company in the UAE, you must comply with the rules and regulations of the UAE. We will take care of fulfilling each one of them. Additionally, we can help you get an office space in one of the best business centers in the country. Our PRO services for your company can do many things for your advantage, and we can as well facilitate the application process for your visa.
Do you want to know more about Connect Zone and the process to start a business in the UAE? You can easily contact us at +971 43 316 688. Send an email at contact@connectzone.ae with all your questions and our team will quickly reach out to you.
Lastly, if you are interested in finding out about new job offers for you, The Talent Point is the platform for you. You can send your CV to many companies, organizations and agencies on thetalentpoint.com. Another way to do so is by sending an email with your resume to contact@thetalentpoint.com.
