Types of Businesses

In the UAE, business are done broadly under 3 categories:

1. Establishment,

2. Limited Liability Company, and

3. Special Economic Zones (popularly know as Free Zones in UAE)

1. Establishment:

An Establishment, is nothing but a Sole Proprietary Firm Established by a UAE National in any Emirates / State in the UAE. A national opens a firm for if requested by an expatriate and charges him a fixed fee periodically (Monthly OR Yearly, as mutually agreed). The Firm/ Company is registered under the desired business activity. 

A business location is a must for any such Establishment and Rent/Tenancy Agreement is mandatory to be able to proceed any further. A virtual office for this kind of Firm / Company is generally unheard of. Based on the requirements, employment visas for the Establishment are approved from the Labour Ministry. A 'Managers' visa is issued to the investor. As the case may be a local national may or may not agree to open a bank account for such companies - to be operated by the investor. Expatriates generally use their personal bank accounts to carry on day to day business activities, or deal in cash.

This sort of firm is good for a small shops, though we have examples for extremely large enterprises functioning under this business setup.

2. Limited Liability Company:

A Limited Liability Company, (LLC) is the most common form business in UAE. A Limited Liability Company can be formed by a minimum of 2 and a maximum of 50 shareholders whose liability is limited to their shares in the businesses capital.

Most companies with foreign partners have opted for the Limited Liability Company, due to the fact that this is the only option that’ll give maximum legal ownership i.e. 49% to the expatriates for a local business. As it is mandatory to have a UAE national as a partner in the LLC (51% shareholding) prospective investor has the option to choose the one UAE national (sponsor) as a partner in the company.

LLC is flexible and differential profit sharing arrangements also possible. This permits the foreign investor a great edge as 51% legal equity is with local partner.

The licensing Authorities

• Dubai: Department of Economic Development
• Sharjah: Economic Development Department
• Abu Dhabi: Department of Economic Development
• Other Emirates: Municipality/ Chamber of Commerce

What are the benefits of UAE LLC?

• While foreign equity in the company does not exceed 49%, profit and losses can be shared at a ratio different from the share capital
• The most popular method of establishing a commercial company in UAE
• UAE LLC offers unrivalled access to the wider UAE economy
• No specific minimum capital requirements
• The investor becomes the partner in the company
• The investor gets the investor visa under which he/her enjoys the investor’s status in the Emirates along with his/her family
• The investor has the option to commence branches
• The investor can manage the business without the day-to-day interference from the local partner
• The assets and capital created will be in the name of the company and not in the name of the local national partner
• Few activities are restricted
• Easy to open global /local corporate bank accounts and avail credit facilities

Company incorporation which require special approvals and licenses

• Tourism activities
• Health Care activities
• Architectural and engineering consultancy
• Shipping , freight forwarding and logistics activities
• Companies in Dubai World Communities (Trakhees)
• Educational services

LLC incorporation services

HLB Hamt’s Consultants closely interact with clients to handle their LLC incorporation from starting point to finish line and assist with strategic ideas, work with their business plan;

• Getting approvals and clearances from various departments,
• Drafting Memorandum of Association and other necessary agreements
• Help to bring local equity
• Finding local partners
• Helping to open bank accounts
• Assisting to find proper office location
• Handle other documentation formalities.

The span of time to form a Limited Liability company will be approximately 1-2 weeks from the date of receipt of all required documents.

3. Free Zones are special economic zones set up with the objective of offering tax free, and free customs duty benefits to expatriate investors. Free Zones in Dubai and the UAE are governed pursuant to a special framework of rules and regulations applicable to concerned free zone. Free zones in Dubai are managed and operated by free zone authority. For instance, the Jebel Ali Free Zone Authority in Dubai is responsible to manage, operate and supervise the functioning of the Jebel Ali Free Zone, one of the largest sea port free zones in Dubai. A Free Zone Authority offers business licenses to foreign-owned businesses. Each Free Zone is designed around one or more business industry categories and only offers licenses (e.g. for a Free Zone Enterprise (FZE)), to companies within those categories. Most of the free zones in Dubai broadly offer trading, service, industrial, national industrial, and branch licenses to investors looking to set up their businesses.

A company set up in a Free Zone offers benefits to owners:

• 100% ownership( A single individual is required for setting up (no sponsor required))
• Tax exemption
• Owning properties is allowed (25 years lease options, warehouse facilities, availability of areas for production and assembling etc.)
• Fair renewal fees
• Confidentiality of your business is maintained
• Allowed to open bank account in Dubai
• No restriction for doing more than one activity
• Can wind up at your discretion

There are more than 20 Free Zones operating in Dubai.