LLC structure in the Free Zone UAE
The LLC structure in the Free Zone UAE allows investors and business owners to conduct their companies more easily. This LLC structure is suitable for small businesses, medium companies, and large organizations, offering various benefits and helping them establish expansion and growth in the UAE.
In this article, you will discover all the pros of the LLC structure in the Free Zone. In addition, you will access the detailed list of requirements and demands that you must comply with to establish a company with the LLC structure in any of the UAE’s free zones.
You will also learn:
What does LLC mean?
What is an LLC structure in the Free Zone?
Benefits of LLC structure in company formation in Free Zone
What type of licenses can you apply for with an LLC structure?
Why form a company with the LLC structure in the Free Zone?
Key steps to open an LLC in a Free Zone
How can we help you find out which LLC structure in the free zone fits your company?
1. What does LLC mean?
Companies must adapt a legal structure to develop their framework according to their objectives and goals. The Limited Liability Company or LLC is the most suitable legal structure for a new business setup in the UAE. Small and medium enterprises can choose this structure due to limited liabilities by the shares in the company. This allows organizations to form partnerships as equal members, being taxed in the same way.
LLC companies must partner with local sponsors for a fifty-one percent share, while foreign investors can hold forty-nine percent shares of the company in the UAE. However, foreign investors can take over full control of the business operations while partnering with a silent local sponsor.
On the other hand, the LLC structure in the Free Zone offers foreign business owners fewer limitations. For example, there are no restraints on the company’s location to operate. Likewise, foreign business owners have no restrictions on the number of real estate properties they can purchase or the possible visas to opt for. Lastly, LLC owners are exempted from customs tax and minimum capital stock.
2. What is an LLC structure in the Free Zone?
Company formation in the UAE has its own rules and characteristics, and Free Zones are not exempt from these rules. Free zones allow foreign investors to establish their companies with specific free zone regulations and an LLC structure. Free zones are governed by specific authorities that operate the regulatory framework for the companies, and they need to follow the guidelines of these regulations to benefit from the LLC structures.
There are two types of LLC structures in free zones;
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Firstly, there is the Free Zone Establishment Limited Liability Company (FZE LLC), which allows for only one shareholder. However, the Free Zone Company Limited Liability Company (FZCO LLC) allows business owners to form a group of several shareholders.
For example, an LLC structure in the Free Zone is recommended for entrepreneurs and investors who wish to work in the local market without worrying about debts or liabilities. Similarly, there are 45 Free Zones with LLC structures for companies. Choosing one of them will depend on the activities, number of visas, workforce, and the facility you want to use above all.
2.1 What are the differences between establishing an LLC in the Free Trade Zone or the Mainland?
In the same vein, the LLC structure in the Free Zone is slightly different from that of the mainland in terms of creating and regulating organizations. Commonly, business owners choose to set up their enterprises in the Mainland due to some differences between company formation in the Mainland and the Free Zones.
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To clarify, there are 4 small details that you should be aware of before establishing your LLC structure company in Free Zone. Among them are:
- Business conducting activities: Free zones can only operate within the Free Zone or outside the UAE. However, they may use a local distributor to distribute or trade with the company’s goods within the UAE jurisdictions.
- 100% ownership: Free Zone LLC structure business owners can enjoy 100% ownership without resorting to a local agent.
- Local authorizations and permits: Mainland LLCs need permits from local authorities to operate, such as DED, MOL, DHA, or HAAD. Nevertheless, Free Zone LLCs are usually exempt from this rule.
- Rented space: Mainland companies must present a rental contract to establish in the UAE. However, this rule is not mandatory. LLC owners can set up in the Free Zone without using physical space.
However, there are main similarities in the LLC structure in the Free Zone and the Mainland which is that both areas offer protection for the investor (or group of investors) from the liabilities duties.
3. Benefits of LLC structure in company formation in Free Zone
Now that you know some of the main differences between the Mainland LLCs and the companies established in Free Zones with the LLC structure, it is time to learn the list of benefits. Let’s observe:
- The shareholder is protected from liabilities, debts, or any setbacks
- 100% company ownership without resorting to a local partner
- Full repatriation of assets, capital, and profits
- Exemption from personal, corporate, and income taxes
- Access to easy, fast, and cost-effective recruitment options and a prepared workforce.
- Access to multiple facilities and workspace options
- Option to opt for a 3-year residency visa
- An extensive list of business activities
- Option to apply for different types of licenses
- Tax advantages by sharing it with a partnership member
- Raising profits from an investor group
4. What type of licenses can you apply for with an LLC structure?
At the moment of establishing an LLC structure in the Free Zone, business owners have the possibility to opt for a trade license regardless of the type of LLC structure their company has, which cannot be done in the mainland.
Therefore, obtaining one of the different licenses offered in the UAE, along with an LLC structure, will allow you to protect yourself from any setbacks in terms of liabilities. Among the licenses you can choose from are:
- Commercial License
- Industrial License
- Professional License
The license you can opt for will depend on your company’s activities and business plan. For instance, an FZ LLC structure can opt for a professional license if they are service providers.
5. Why form a company with the LLC structure in the Free Zone?
It is true that the UAE has become one of the largest and most prolific investment centers in the world. Consequently, the LLC structure in the Free zone allows foreign investors, entrepreneurs, and start-up owners to establish a business profitably without worrying about the repatriation of assets, customs duties, or high taxes.
Therefore, an LLC structure in the Free Zone is an opportunity for business owners to perform successfully in the UAE market. In addition, the formation of the company is much easier when you know the complete structure that the company will have. This will allow you to provide your services in the UAE smoothly and without risking large capital losses.
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Similarly, the LLC structure in the Free Zone allows the option of creating a partnership with local and more experienced entrepreneurs who can guide and assist you without hindering your participation within the company. That is to say, a local partner will help you with all the procedures, distribution, or selling of your products/services without you having to lose your ownership.
Finally, setting up a business in the UAE Free Zone is not an expensive option. The UAE has a pre-established economic model for company formation to attract expatriate investors. Typically, the cost of the LLC structure in the Free Zone is around AED 28,000. However, the final cost will depend on the nature of your business.
6. Key steps to open an LLC in a Free Zone
If you are thinking of opening a Limited Liability Company in one of the UAE Free Zones, there are a few steps to follow. In general terms, the steps are the same.
However, remember to study the guidelines and, above all, the company incorporation regulations of the Free Zone where you want to open your company. Here’s a short list of what you must do to establish your company:
- Research the business activities within the UAE and find out which ones fit your business plan and which ones fit your company.
- Choose a suitable type of legal entity for your company. You can choose between Free Zone Limited Liability Company (FZ LLC), Free Zone Company (FZ Co.), and Free Zone Establishment (FZE).
- Get an available trading name. Remember to follow the Free Zone guidelines according to enterprise naming.
- Decide in which of the Free Zones you would like to establish your business. It is also important to consider whether you would like to establish a physical office or if you opt for a Flexi-desk.
- Apply for a trading license. Remember that in Free Zone, you can apply for three types. These can be a professional, commercial, or industrial license.
- Gather the necessary documentation. Among some of the paperwork, you should have your business license, name approval, and initial approval. However, the list is long and may vary depending on the Free Zone.
- Get a local partner to help you with all the procedures, supply, and distribution of your products/services.
- Apply to the labor registry and get your labor cards. If necessary, you can apply for a 3-year residency visa for yourself and your partners.
6.1. How to get a residence visa with an LLC in Free Zone
Furthermore, by establishing an LLC structure in the Free Zone, you get the opportunity to apply for a 3-year residential visa in the Free Zone, where you establish your business. That is, you become eligible for an investor’s visa.
Likewise, you can apply for multiple visas for yourself, your family, and your employees according to the guidelines of each Free Zone. The conditions will depend on each Free Zone guidelines. Nevertheless, there are different ways the investor’s visa can help you establish your personal and professional life in the UAE.
7. How can we help you find out which LLC structure in the free zone fits your company?
LLC structure in the Free Zone, as you can see, is not just a way to delineate the internal structure of your business. It is an opportunity for growth within the UAE business world. Therefore, we want to help you in the process of incorporating the company in any of the Free Zones.
The Connect Zone team is ready to assist you before, during, and after the company incorporation process, ensuring a smooth and successful process. We offer services to help you find the best business center and local partner.
We are also prepared to offer different PRO service packages tailored to your needs. So you won’t have to worry about legalities or government issues during company formation.
Would you like to contact Connect Zone to know more about the LLC structure in the Free Zone? In case you have any questions, call us at +971 43 316 688. Moreover, you can email us at contact@connectzone.ae, and you will talk to one of our representatives who will answer your questions.
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