Business Setup in Dubai - Ten Significant Steps.

Business Setup in Dubai Mainland - Setting up own business in Dubai is a dream of many prospective entrepreneurs across all nations. Every country has its own laws, rules, regulations and procedures to monitor business activities in their economy. It is advisable for entrepreneurs to develop a basic understanding about those business laws and procedures. Investors always give due weightage to the business friendly regulations and environment existing in a country or province while making an investment decision. Dubai is consistently striving to ensure a business friendly environment through administrative reforms and initiatives.

You may be an entrepreneur or investor or prospective entrepreneur or prospective investor or a professional planning to setup own business in Dubai. Irrespective of the category to which you belong, an understanding about the procedures involved to setup a business in Dubai will help in fine-tuning your plan.

In this write-up, I intend to give a basic idea about the ten steps for setting up a business in Dubai mainland. Business setup in free zone and offshore jurisdictions are excluded from the scope of this write-up.

Ten Basic Steps to Setup your Business in Dubai Mainland

Step 1. Select Business Activity

Selecting the right activity is the most important step to setup a business in Dubai. There are more than 2000 activities approved by the Department of Economic Development, Dubai. The selected business activity has great significance in deciding the legal form and ownership pattern of your business.

Step 2. Select a Legal Form

Only a registered business entity is allowed to perform a business activity as per the rules and regulations existing in the country. There are many types of business entities defined in the legal system of various countries. It can be entities like natural persons or artificial juridical persons. It is also called as legal form of business. The Legal system of Dubai recognizes different legal forms of business.

Following are the common legal forms of business in Dubai:

Sole Proprietorship

Civil Company

Limited Liability Company

Partnership Company

Simple Limited Partnership

Private Share Holding Company

Public Share Holding Company

Branches

All legal forms are not open to all business activities. Some activities can be carried out only in specified legal forms. So, at first decide the business activity. Then identify the legal forms open to that activity. Select the most suitable legal form for the proposed business.

Step 3. Find a Local Partner or Local Service Agent

UAE Nationals can have 100% ownership in all legal forms of business. Foreign investors are not allowed to have 100% ownership except in specified professional activities. Where 100% ownership is not allowed for expatriate investors, a UAE National should be the majority (at least 51%) share holder. The expatriate investor can own up to a maximum of 49% shares.

Where 100% ownership is permitted for expatriate investors, they should appoint a UAE National as a Local Service Agent (LSA). Usually an LSA is appointed for a fixed remuneration as specified in the LSA agreement.

So, it is inevitable for expatriate investors to find a suitable UAE National as local partner or local service agent as the case may be. For some activities, if you want to include a UAE National as partner, he must possess the specified qualification. The major considerations while selecting a local partner is his reliability, dependability, qualification, reputation, ability and networking skills.

Step 4. Select a Trade Name

Selecting an appropriate trade name is one of the most important steps in setting up a business in Dubai.

Trade name means the name used by a business to identify or distinguish itself from others. A trade name helps customers, general public, regulators and other stake holders to distinctly identify your business. Most of the transactions related to a company are processed through trade name.

Once a trade name is selected, it should be reserved in the name of one of the partners of the proposed business. When choosing a name for the proposed business or company, you should follow the general trade name guidelines.

Step 5. Apply for Initial Approval

Initial approval means Department of Economic Development (DED)'s approval for the business activity (activities) selected by you.

By issuing an initial approval certificate, DED is indicating that it has no objection for you starting a business in Dubai with the selected activity.

It also means that you can proceed to the next legal steps to obtain license for your proposed business in Dubai.

The initial approval certificate and application form are essential for obtaining your license.

Step 6. Draft Memorandum of Association or LSA Agreement (Where E- Memorandum is not applicable)

Memorandum of Association is the basic document of the company. It is also known as the constitution of the company. It sets the framework of operation of the company and governs the relationship between partners or shareholders.

Depending upon the legal form of business, the partners are required to draft and sign a Memorandum of Association. If 100% owners or partners are expatriates (in the case of permissible activities and legal forms) a Local Service Agent agreement need to be drafted and signed.

A Memorandum of Association or LSA agreement is a legal document which may require the service of a consultant to draft it. It is prepared both in Arabic and English. It should be attested by a registered legal translator. The legal translator’s stamp and sign should be affixed on the document.

Step 7. Court Notarization of Memorandum of Association or LSA Agreement (Where E- Memorandum is not applicable)

Once the drafted Memorandum of Association or Local Service Agent agreement is finalized, you can proceed to Dubai Court for getting the document attested by Notary Public. All the partners or owners including the local partner / local service agent should be present in the court for notarization.

Step 8. Establish Business Location

It is mandatory to have a physical office or address for registering your business in Dubai. The documentary support of physical address approved by relevant authorities must be submitted to DED for getting your license. The office space can be either owned or leased by you.

Step 9. Get Licensing Approvals from other departments in applicable cases

There are certain business activities which are controlled by other government departments or authorities. If your activity falls under that category, you need to approach the concerned department or authority to get prior approval for starting the proposed business.

The documents required to be submitted for obtaining prior approval depends on the business activity. After receiving prior approval for starting business, you can proceed to DED for obtaining license.

If the business activity is directly controlled by DED, you do not require any activity-specific prior approval for obtaining license.

Step 10. Collect Business License

If you have successfully complete the previous steps, proceed to DED for submitting all documents. The official at DED counter will check the system to ensure that all previous steps and related documentation are completed and properly updated in the DED system.

If satisfied, he will issue a 'Payment Voucher' which is DED's detailed invoice for issuing the business license that you have applied for.

Once the payment is made, you can obtain your business license and start doing business in Dubai.

Mr. Baiju Masoodu is a Free Zone Business Setup 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: baijumasoodu@gmail.com

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