Business Setup in Dubai - All countries allow only registered legal entities to perform a business activity within its territory. There are many types of business entities defined in the legal system of different countries. It can be a natural persons or an artificial juridical person. It is also called as legal forms of business.
The following factors to be considered while selecting the legal form of a business:
Type of business Business activities
Number of owners
Nationality of owners
Liability preference of owners
Nature of management etc.
What are the legal forms of business recognized by Dubai’s legal system?
The legal system of Dubai recognizes different legal forms for setting up a business. They include the following:
A sole proprietorship is a business completely owned by an individual. A proprietorship business has no legal identity separate from its owner. The ownership, control and management of the business is fully vested with the sole proprietor. The liability of the sole proprietor is unlimited. He is completely responsible for the debts and financial obligations of the business. Sole proprietorship business for carrying on professional activities can be owned by an individual of any nationality. If the sole proprietor is a foreign national (other than GCC national), appointing a UAE national as Local Service Agent is mandatory. Only a UAE or GCC national can become the sole proprietor of a business carrying on commercial or industrial activities.
A civil company is an association of two or more persons for carrying on professional activities. A civil company pursuing professional activities can be owned by professional partners of any nationality. If the partners are nationals of countries other than UAE or GCC, it is mandatory to appoint a UAE national as Local Service Agent. A foreign company carrying on the same professional activity can also be a partner in the civil company. This legal form is suitable for practicing professions of Doctors, Engineers, Lawyers, and Accountants etc.
Limited Liability Company
A Limited Liability Company (LLC) has the flexibility of partnership form of business and the advantage of limited liability concept of a corporate entity. An LLC can’t practice professional activities. It can pursue only commercial or industrial activities. The minimum number of partners required to form an LLC is two and the maximum number of partners allowed is fifty (50). The majority shareholder (minimum 51%) in an LLC should be a UAE national. That means, foreign nationals (GCC nationals are permitted to own 100%) can own maximum of 49% shares only. An LLC can’t invite public subscription for its shares or loans. An LLC is prohibited from issuing negotiable shares and stocks.
A partnership is an association of two or more persons for carrying on any business activity with an intention to make profit. All the partners are responsible for managing the business of the company unless the authority to manage is assigned to one or more partners. The liability of the partners are unlimited. In a situation where the business assets are insufficient to repay its debts and liabilities, the personal assets of the partners are also liable. The partners are jointly and severally liable for the debts and obligations of the firm. Only UAE nationals can form a partnership.
Simple Limited Partnership
A simple limited partnership is a partnership between two or more partners. There are two categories of partners in simple limited partnership – General partners and Limited partners. General partners are also called as joint partners. Limited partners are also called as partners in commendam. The liability of a general partner is unlimited whereas the liability of a partner in commendam is limited to the share in the share capital of the firm. The management and administrative powers are vested with the general partners. Only UAE nationals can become general partners. All nationals can become limited partners.
Private Share Holding Company
A private share holding company is also known as a private joint stock company. Three must be minimum three members to incorporate a private joint stock company. The liability of the members are limited. A private share holding company can’t carry on professional activities. It can pursue only commercial and industrial activities. The minimum capital required for a private share holding company is AED 2,000,000. It can’t offer its shares to the public. The majority shareholders (at least 51%) should be UAE nationals.
Public Share Holding Company
A public share holding company is also known as a public joint stock company. There must be minimum ten members to incorporate a public share holding company. The share capital of the company is divided into shares of equal value. The share of a public share holding company is transferable. The minimum capital required is AED 10,000,000. The promoters can hold only 45% shares and the balance 55% should be offered to the public. The majority shareholders (at least 51%) should be UAE nationals.
An existing business entity in Dubai, Other Emirates in UAE, Free Zones can setup a branch in Dubai mainland subject to the rules and regulations.
The Companies Law allows a foreign company to perform its main activity in UAE by opening a Branch or a Representative Office. The branch of a foreign company can freely engage in the activities for which it is licensed. The representative office of a foreign company can engage only in promotional activities of products and services offered by the parent company. The parent company will hold the 100% ownership of branch.
A Dubai based company can also open branches. The branch can engage in one or more activities included in parent company's license.
A company registered in other emirates of UAE can open branches in Dubai. The branch can engage in one or more of the activities included in parent company's license.
A company registered in another GCC country can open branches in Dubai for pursuing one or more of the activities included in parent company's license.
Even if the required activities are included in parent company's license, only DED approved activities under the same group will be allowed to include in branch license. Such a situation may emerge where the country of parent company follows different rules for combining or grouping activities.
Free Zone Companies are also permitted to open branch in Dubai mainland. Free Zone Company means a company existing in any of the UAE Free Zones. The branch can engage in Industrial, Commercial or Professional business as long as the activity of parent company is authorized in Dubai mainland.
Mr. Baiju Masoodu is a Free Zone Business Set-up Consultant. Our ‘corporate service firm’ can advise and assist you to set-up a business in Dubai and UAE Free Zones. For a free consultation & cost estimate, call me on: +971 50 214 1476 or mail me at: firstname.lastname@example.org