Dubai is the hub of business in the UAE. In fact, the fame of the UAE as a business-friendly country is mainly due to the emirate of Dubai. For the past several decades, Dubai has been attracting foreign entrepreneurs for starting a company in Dubai is due to the numerous incentives and facilities it offers to all types of businesses.
The reason a variety of business setups is flourishing in Dubai is due to the opening of different types of companies in Dubai. UAE has been buzzing in the news recently with its latest milestone now ranking it among the most desired locations to work, invest and live. Since every business needs a unique structure to incorporate, UAE facilitates different legal forms to start a business in Dubai and helps companies establish, grow and prosper.
Establishing a business in the United Arab Emirates
When we look at how far Dubai has come in such a short span of time, it is easy to see why starting a business in Dubai is such an attractive prospect to many entrepreneurs.
In fact, Dubai’s Department of Economic Development (DED) reports a 13% year-on-year increase in new startups looking to do business in Dubai. Dubai’s growing economy presents many opportunities. The services, finance, trade, and real estate & properties are paying back profits. Furthermore, the city is one of the most cosmopolitan cities in the Middle East.
How many types of Business Entities are there in Dubai?
The following are the names and characteristics of different types of companies that can be established in Dubai:
1. Sole Proprietorship
A sole proprietorship is owned by a single individual who has control over all its operations and holds 100% shares to any profits. This business entity is the simplest form of corporate structure in the UAE and does not impose any special requirements other than having a residence permit in the case of a foreign citizen. Similarly, any debts or financial duties will be liable to its owner.
Although such legal forms are open to most business activities, some general rules must be obeyed before a sole proprietorship can proceed.
Features of Sole Proprietorship Business:
- An individual of any nationality can own a professional sole proprietorship.
- Only UAE and GCC nationals can own a sole proprietorship that is commercial or industrial which must be 100% owned.
- In case the owner is not a UAE national, an LSA or Local Service Agent is appointed for opening this type of company.
- The LSA is supposed to overlook license requirements and government-related matters for the business.
- A sole proprietorship has no minimum requirement for business capital.
2. Partnership Company
Under this type of business entity, the ownership is shared by two or more partners whose share profits and losses according to the decided ratio. There are two main types of partnerships. which are:
- General Partnership
- Limited Partnership
Features of a Partnership Business in UAE
- UAE nationals must be general partners in a simple limited partnership. Partners of other nationalities must be limited partners.
- There is no restriction on the share of ownership of general or limited partners.
- Limited partners should not intervene in the management or administrative issues of general partners. If they do so, they can become liable for all of the business obligations.
3. Limited Liability Company (LLC) in Dubai
Limited liability company in the UAE is the most preferred form of a business entity by individuals. The liability of the partners in an LLC is limited to the extent of their investment in the company. LLCs can conduct any commercial or industrial business activity in the jurisdiction.
What are the Features of an LLC company in the UAE?
- Professional or consultancy activities cannot be conducted by this form of the company except banking, insurance, or investment
- An LLC can conduct any industrial or commercial activity
- 51% ownership should be with the UAE national and the remaining 49% can be owner-owned
- LLC formation requires a UAE accredited auditor
- Minimum 2 and maximum 50 shareholders can invest in the company
4. Private Shareholding Company
This type of business is also called a Private Joint Shareholding Company in the UAE. It can be formed through a minimum partnership with at least 3 investors. Such legal structures are compatible with all sorts of commercial and industrial activities besides the professional business. A GCC national can own up to 100% of the shares.
Features of a Private Shareholding Company in the UAE
- An approval from the Ministry of Economy must be obtained to establish a private shareholding company.
- The company must appoint one manager
- A company can have more than one branch. Each may undertake one or all of the activities included in the main business license
- At least 51% of the shares must be owned by a UAE national
5. Public Shareholding Company
A public Share Holding Company is defined as a legal entity. A Public Shareholding Company is also called a Public Joint Stock Company (PJSC) in the UAE. During the company incorporation process, the trade name must not be from any partnering investors, except if the name is a patent of a shareholder or if the name is entitled to store belonging to the shareholder.
Features of a Public Shareholding Company in the UAE
- Partners can practice any industrial, commercial or professional business activities in accordance with DED business regulations
- The company must have a maximum of 5 appointed managers as per DED business regulations
- A Public Share Holding Company must have at least 5 founding members who are UAE Nationals, owning between 30% and 70% of the capital shares
- A company can have more than one branch. Each may undertake one or all of the activities included in the main business license.
6. Civil Company
Recognized professions such as a doctor, accountant, engineer, and lawyer can open a civil company in the UAE. The company can have partners owning 100% shares and the activities allowed for the civil company can be only from a professional business.
More specifically, such activities are narrated as physical or intellectual, practiced by one or more natural persons under a defined capital. To open a civil company some rules must be followed for successful incorporation.
Features of a Civil Company in the UAE
- If a foreign company invests as a partner in a civil company, it must be from the same type of business activity
- Like in the case of a sole proprietorship, an LSA is required for the company incorporation process if the owner is a foreign national.
- Partners from any nationality can start this business
- If the company is involved in engineering activities, one partner should be a UAE national who owns no less than 51% of the business.
7. Branch of a Foreign Company
In simple terms, a branch office is a dedicated outlet of a company. Though physically apart, the branch office does not constitute a separate legal entity. As a functional means to expand and grow business reach across countries, branch offices serve as an operational vessel to establish company presence in new regions and enhance prospects of sales and revenue.
- A branch office is incorporated by filing an application with the help of a local service agent through the Ministry of Economic and Commerce.
- Approval must be secured from the respective authority after a permit letter is issued regarding business activity from the Ministry of Economic and Commerce.
- The local Economic Department will register the branch office after which the business license will be handed to the company.
Conclusion
It all comes down to what type of business you want to start in Dubai. If you need help in choosing the right business structure, Contact us today- we at Danburite Corporate would be happy to assist you.
