LLC Company Formation in Dubai: A Simplified Guide
If you are looking for a lucrative and hassle-free way to start a business in Dubai, you might want to consider forming a Limited Liability Company (LLC). Therefore, it is quite important to know how to begin with your LLC company formation in Dubai. Also, how to start it and what will you require.
In this article, we will explain what an LLC is, how to set one up, and what benefits it can bring to your business. An LLC is one of the most popular and preferred types of business entities in the UAE, offering many advantages for entrepreneurs and investors. However, there is more about it.
What is an LLC?
An LLC is a legal entity that has its own identity, assets, and liabilities, separate from its owners or shareholders. It can have one or more shareholders, who can be individuals or corporate entities. They are only liable for the company’s debts up to the extent of their share capital. An LLC company in Dubai can also have one or more managers. However, they can be shareholders or non-shareholders. They are responsible for daily operations of the company.
Starting your LLC company formation in Dubai is relatively simple and involves the following steps:
- Choose a trade name for your company and reserve it with the Department of Economic Development (DED).
- Choose a local sponsor or partner, who must be a UAE national or a company wholly owned by UAE nationals. You can opt for a corporate nominee service. In this case the local sponsor acts as a silent partner. Therefore, they do not interfere with your business ideas in Dubai.
- Draft and sign a Memorandum of Association (MOA) with your local sponsor or partner. Which outlines the company’s objectives, activities, share capital, profit distribution, management structure, and other terms and conditions.
- Apply for initial approval from the DED.
- Obtain any external approvals from relevant authorities if your business activity requires them, such as from the Ministry of Health, the Dubai Municipality, or the Central Bank.
- Rent or buy an office space for your company and obtain a tenancy contract or title deed.
- Apply for a final trade license from the DED. Which will issue your license after inspecting your office space and collecting the fees.
- Register your company with the Ministry of Labour and the General Authority for Pension and Social Security.
- Open a business bank account for your company.
- Apply for visas for yourself and your employees.
Benefits of Forming an LLC in Dubai
An LLC company formation in Dubai or LLC company setup Dubai can offer you many benefits, such as:
- Limited liability protection
As an LLC company Dubai shareholder, you are only liable for the company’s debts up to the extent of your share capital. This means that your personal assets are protected from any claims or lawsuits against the company. Therefore, being a shareholder of a limited liability company in UAE will be extremely beneficial for you as resident and, if applies, possible tax payer.
- Flexible profit distribution
As an LLC shareholder, you can agree with your local sponsor or partner on how to distribute the profits of the company. Inclusively, regardless of the shareholding ratio. This means that you can receive more than 49% of the profits if you negotiate well with your local sponsor or partner.
- No minimum capital requirement
Unlike some other types of business entities in Dubai, an LLC does not have a minimum capital requirement. Furthermore, you can start your business with any amount of money that suits your needs and budget.
- Access to local markets
As an LLC shareholder, you can trade directly with the local market without any restrictions or intermediaries, which means that you can reach more customers and expand your business opportunities.
- Favorable tax environment
As an LLC shareholder, you can enjoy a tax-free environment in Dubai, as there are no corporate taxes, income taxes, or withholding taxes on your profits or dividends.
However, remember you can also establish a branch of a company you already own elsewhere.
Comprehensive Guide to LLC Company Formation
As mentioned previously, LLC is a legal entity that consists of two or more shareholders. These shareholders are only liable for the debts of the company up to the extent of their share capital. An LLC can engage in any type of commercial activity, except for banking, insurance, and investment. An LLC can also benefit from the tax-free environment and the free trade zones in Dubai. Additionally, another option could be contacting business setup consultants. However, there are other steps you must follow to create your company. Such as:
Choosing a Commercial Activity
First step of LLC company formation in Dubai is to decide what kind of commercial activity you want to conduct. There are more than 2,000 activities that are classified into different categories, such as industrial, professional, commercial, and tourism. However, you need to choose an activity that matches your business goals and expertise.
Furtherly, you also need to check if your chosen activity requires any special approvals or licenses from the relevant authorities. For example, if you want to open a restaurant, you need to obtain a food safety certificate from Dubai’s Municipality.
Choosing a Name for Your Business and Ownership
The next step is to choose a name for your LLC that reflects your business activity and identity. The name should not be similar to any existing business in Dubai or the UAE. The name should also not contain any offensive or religious words or phrases. You can check the availability of your desired name on the website of the DED.
Another important decision you need to make is the ownership structure of your LLC. According to the UAE Commercial Companies Law, an LLC must have at least two and not more than 50 shareholders, who can be individuals or corporate entities. The shareholders can be UAE nationals or foreigners, but at least 51% of the share capital must be owned by UAE nationals or companies wholly owned by UAE nationals. This means that foreigners can only own up to 49% of an LLC in Dubai. Unless they obtain an exemption from the DED or set up their business in one of the free zones in Dubai. In those areas 100% foreign ownership is possible.
LLC company formation in Dubai requires you to be creative with your name and your activity.
Getting Ready for Documents and a Trade License
Once you have decided on your business activity, name, and ownership for LLC company formation in Dubai, you need to prepare the necessary documents and apply for a trade license from the DED. A legal document that authorizes you to conduct your chosen activity in Dubai. The kind of trade license you require will depend on your activity. There are four main types of trade licenses: commercial, professional, industrial, and tourism.
To apply for a trade license, you need to submit the following documents:
- A completed application form
- Copy of your passport and visa (for foreign shareholders)
- A copy of your Emirates ID (for UAE national shareholders)
- Copy of the memorandum and articles of association of your LLC
- A copy of the lease agreement or title deed of your business premises
- Letter from your sponsor or local service agent (if applicable)
- A no-objection certificate from your current employer (if applicable)
- Any other documents required by the DED or other authorities for your specific activity
Furthermore, The DED will review your application and issue your trade license within a few days, depending on the complexity of your business activity and the completeness of your documents. You will also need to pay some fees for the trade license and other related services.
Personal and Business Documentation
After obtaining your trade license, you need to complete some other formalities to start operating your LLC company in Dubai. These include:
- Registering your LLC with the Ministry of Economy
- Opening a bank account for your LLC
- Registering with the Federal Tax Authority and obtaining a tax registration number
- Registering with the Dubai Chamber of Commerce and Industry
- Obtaining any other permits or approvals required by your business activity
- Hiring employees and obtaining their visas and labor cards
- Obtaining health insurance for yourself and your employees
However, once you have gathered all this information you have to cover some different factors. More specifically, everything regarding your LCC license cost in Dubai.
Costs Associated with the Formation of an LLC
The cost of an LLC company formation in Dubai may vary depending on several factors. Such as the nature and size of your business, the number of shareholders and the location of your office. Also, the type of license you need. That is why you need to make sure which LLC license cost in Dubai you will cover.
Common costs that you can expect to pay
- Initial approval fee
You pay this fee to the DED to get an initial approval for your business name and activity. Moreover, it ranges from AED 100 to AED 500, depending on the type of activity.
- Trade name reservation fee
This is one you pay it to reserve your trade name for 60 days. The fee ranges from AED 200 to AED 2,000, depending on the type of name.
- Trade license fee
This is a fee you pay to obtain your trade license from the DED. Allowing you to operate your business legally. It commonly ranges from AED 3,000 to AED 15,000.
- Local sponsor fee
This is a fee that you pay to a local sponsor. This guarantor is a UAE national who owns at least 51% of your LLC. They act as your legal representative and provides you with assistance in dealing with government authorities. The fee depends on the agreement between you and the sponsor. However, it usually ranges from AED 10,000 to AED 50,000 per year.
- MOA fee
MOA is a document that outlines the rules and regulations of your LLC. This fee depends on the capital and number of shareholders of your LLC. However, it usually ranges from AED 2,000 to AED 10,000.
- Office rent
This is a fee that you pay to rent an office space for your LLC. The office must be located in a designated area where your business activity is allowed. The rent depends on the size and location of your office. Nonetheless, it usually ranges from AED 20,000 to AED 100,000 per year.
Moreover, after following all these steps, you can finally cover the Dubai LLC company registration cost.
Important Paperwork for Establishing an LLC in Dubai
The paperwork for establishing an LLC in Dubai involves several documents that you need to prepare and submit to various authorities. Some of the main documents are:
- Application form
This is a form that you fill out online or offline to apply for your initial approval and trade license from the DED. You need to provide information such as your trade name, business activity, shareholders’ details, capital amount, etc.
- Passport copies
These are copies of your passport and those of your shareholders and manager.
- No objection certificate (NOC)
This is a letter that you obtain from your current employer or sponsor if you are already working or residing in Dubai.
- Local sponsor agreement
This is a contract that you sign with your local sponsor, stating the terms and conditions of your partnership.
This is a document that you draft with the help of a lawyer or a typing center, stating the rules and regulations of your LLC.
- Trade license
This is a document that you obtain from the DED after submitting your application form, passport copies, NOC and fees. The trade license states your trade name, business activity, license number and expiry date. You need to display this document in your office and renew it annually.
- Establishment card
You obtain this card from the Ministry of Labour after registering your LLC with them. The establishment card states your company name, registration number and expiry date. You need this card to apply for visas for yourself and your employees.
This is a document that you obtain from the General Directorate of Residency and Foreigners Affairs (GDRFA) after applying for it with your documents. The visa allows you to live and work in Dubai legally. However, you need to renew your visa every two or three years.
Conclusively, LLC company formation in Dubai is a simple and beneficial way to start a business in one of the most prosperous cities in the globe An LLC can provide you with limited benefits, such as
- Liability protection
- Flexible profit distribution
- No minimum capital requirement
- Access to local markets
- A favorable tax environment.
Furthermore, for your LLC company formation in Dubai, you need to cover some details. For example, choosing a trade name, find a local partner, draft and sign an MOA, etc. However, if you need any assistance or guidance for your LLC company formation in Dubai, you can contact us today in our website and we will be pleased to lend you a hand.