Establishment of a Company in Dubai: Privileges for a Foreigner and Other Important Points

11:38 am  |  15.03.2021
Establishment of a Company in Dubai

Night lights of Dubai

If you want to start a company in Dubai, you have to consider a few essential points. In addition to Dubai, the United Arab Emirates (UAE) has six other emirates that have their own process for setting up a company. While there are federal laws that apply across the country, each emirate also has individual and additional laws and regulations when it comes to setting up a business. 

Establishing a company in Dubai can therefore look different than establishing a company in Abu Dhabi or Sharjah. In addition, you have different options for registering a company in each emirate, so offshore or onshore companies are possible in the free trade zone, as well as a company with a local sponsor or agent (but not in the free trade zone). This applies to company formations in the entire Emirates.

Entrepreneurial Activity & Other Aspects

There is another relevant aspect when setting up a company in Dubai, namely determining the exact service or activity of the company to be set up. In addition, you have to note that if you set up a company in another emirate you cannot simply move into an office for the company in Dubai. For this a subsidiary has to be founded in Dubai, this not only costs valuable time but also money. Therefore, you should decide in advance whether you would prefer to set up a company in Dubai or another emirate. 

Anyone considering starting a company in the U.A.E. thinks, immediately imagine Dubai as a company location, because Dubai is probably the most popular and attractive emirate at the moment, but the other options should not be ignored, because the other emirates also have their charms and advantages for starting a company. Oftentimes, starting a business in another emirate turns out to be a cheaper option that also offers more effective options. 

If you are planning to set up a company in the Emirates, you do not necessarily have to set up your company in Dubai.

Modern Dubai is a great place to grow your business

What Happens When a Company is Founded in the United States? Should Be Observed!

When founding a company in Dubai or another emirate, as in other countries, problems can of course arise. In order to avoid this, you should know in advance what can go wrong and how you can avoid difficulties from the start. It is therefore important to determine the right form of society for a company, and the search for a local sponsor may also be necessary, but this does not apply to company formation in a free trade zone. You should find out in good time which documents are required for registering the company and which authorities are responsible. 

Depending on your professional qualifications, it may be necessary to have certain licenses approved, without which it is not possible to set up a company. In addition, it is imperative to open a bank account.

This does not seem to pose any particular difficulty as opening a bank account should generally be a straightforward process, but it can be difficult and long in Dubai. It is therefore important to find out in advance which documents are required to open a bank account in Dubai. 

There are also different supervisory authorities that offer the appropriate authorizations for business activities that require such a permit, e.g. for a travel agency. Authorizations from various ministries may be required depending on the extent of the company’s service. So you need a lot of preparation and time to start a company in Dubai.

When founding a company in Dubai, however, the search for a local sponsor is crucial, because it should be a suitable sponsor, and finding one is not that easy. You should therefore not choose just any sponsor, because this choice can have a lasting impact on the future of the company. It should be a sponsor you can trust and get in touch with at any time. If you want to set up a company in Dubai, you have to pay attention to numerous things and should therefore be well informed and get adequate advice. 

The Royal Finance Yard offers a complete all-around service with regard to setting up a company, opening an account as well as relocation including permanent residence visas. The service is aimed at privileged clients around the world (private as well as companies). A free initial consultation can be requested via the website, in which experienced experts personally address the individual situation of each client and work with them to find an optimal solution concept.

Where Do I Start a Business in the UAE?

There are a number of advantages for foreign investors to do business in Dubai

There are 7 different emirates in the UAE, which are part of transnational federal legislation in many areas, but have very different market conditions and often also different local legal requirements.

When deciding which emirate is right for your company, there are two important considerations – market demand (target customer location) and legal requirements. Each emirate has different regulatory requirements, entry costs, and trade licenses, as well as setup fees.

The markets in the two largest emirates, Abu Dhabi and Dubai are also very different in certain industries and it is important to research the pros and cons of each location for your type of business. PRO Partner Group can help start-ups at this stage.

What is the Best Legal Form to Start a Business in the UAE?

There are three legal forms for foreign companies in the UAE:

  • an institution / sole proprietorship (owned by one person).
  • a limited liability company (owned by two or more people or companies).
  • a branch of a foreign company (100% owned by a foreign company).

The rules, regulations, and fees vary widely and depend on the type and character of your business.

There are several authorities in Abu Dhabi and Dubai that issue licenses to new businesses. You need to make sure which legal form is appropriate and then investigate which agency will grant the business license (and other licenses required). A company like PRO Partner Group can help you get the right information to prepare the right facility with the right activities.

Do Foreign Investors Need a Local Sponsor?

If you choose to start your business in a free zone then a separate local sponsor/partner is not required – the free zone itself effectively becomes your local sponsor and all government and property-related matters must be handled through it. If you want to set up an Onshore GmbH (or a branch or one-person company), you must have an Emirati citizen or a 100% Emirati company as a partner or sponsor in order to register the company.

Under UAE law, with a GmbH structure, 51% of the shares must be owned by your local Emirati partner or UAE corporate partner, but this does not mean that the same proportion of profits must be distributed to these shareholders. An agreement with your local partner may allow the majority of the profits and control of management to remain with the foreign party, which owns 49%.

If you choose to register the company as a one-person company, which by definition is a one-person company, then a foreign person can own 100% of it but must be a UAE citizen (or a UAE company) as a service provider (a so-called “National Service Agent (NSA)”) for the facility.

A foreign subsidiary can also be 100% owned by a foreign company, with a UAE citizen (or a UAE company) serving as the National Service Agent (NSA).

In both cases, the individual or company has 100% liability for the establishment or establishment and must demonstrate qualifications and experience in the relevant field. The sponsoring requirements and regulatory requirements differ depending on the license type and legal form – for example, a branch cannot usually trade-in products.

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