Starting a company in the United Arab Emirates can be a thrilling experience. This can be exhilarating and challenging at the same time. For foreign businesses and individuals looking to establish a company, the UAE offers a wide range of opportunities and choices. While possessing an excellent business climate, tax incentives, and proper laws and regulations, we come across businesses and individuals that are experiencing challenges that might have been eliminated in the first place if they had diligently founded their organization or, perhaps better, if they had sought proper legal advice.
List of Mistakes that Entrepreneurs Tend to Make
Here are some typical errors that new business owners make that can easily be prevented.
Mistake No. 1 – Having the Wrong Structure and License
The United Arab Emirates is highly accessible to trade and industry, and there are many forums for pursuing new concepts. Setting up a business and acquiring a license is the first and most exciting phase of getting a concept to life. Any commercial practice requires a license from the appropriate regulatory authority.
Entrepreneurs looking to start a new company in the UAE have a variety of incorporation opportunities. If you choose to run a company, have the correct license first. Choosing the wrong arrangement or doing the wrong approved operation (or not having one at all) can result in a variety of fines or, much worse, open shareholders to personal liability.
Mistake No. 2 – The Wrong Choice of Jurisdiction Within the UAE
One of the most frequent mistakes made while joining the local market is choosing the incorrect jurisdiction. Making the error of preferring a free economic zone in the UAE leads to issues with market execution. There are more than 50 largely autonomous jurisdictions in the UAE, each with its own range of features tailored to various industries. Because of the inconsistency of jurisdictions’ conditions for operating a service, the organization you use will not be willing to carry out your desires, and you may be unable to carry out previously scheduled commercial operations.
Mistake No. 3 – Improper Legal Agreements with Local Sponsor
When it comes to establishing a mainland corporation, it is essential to find a local UAE national supporter. The local sponsor in the UAE would own 51 percent of the company’s stock. The shareholding arrangement must be recorded in a lawful manner.
Any partnership clause, as well as other management and ownership words, must be written down. It will safeguard you in the event of a shareholder disagreement, as well as the smooth operation of the business. Prepare a notarized formal arrangement that includes all of the details on shareholding, joint obligations, and other business management terminology. To stop some more legal wrangling, full consensus on each other’s expectations must be registered in writing.
Mistake No. 4 – Relying Solely on Information Available on the Internet
The internet is brimming with knowledge regarding different kinds of businesses, the most accessible and cost-effective free zones, the quickest way to get started, and so on. Rather than spending time studying the vast quantities of publicly accessible data, which can also scare you, it is often better to obtain legal counsel from a professional who will guide you in the right path. The laws and regulations governing licenses are constantly evolving, and certain standards do not even apply to you.
Mistake No. 5 – Hasting Things Up
This is maybe the most common blunder made by many entrepreneurs. It is strongly advised that you take your company seriously, and the best way to do so is to pay close attention to every move. This ensures you can stop making snap judgments, which your advisors would probably advise you against. Still think it over before making a decision, but if you do, stay with it.
Mistake No. 6 – Not Registering Your Intellectual Property
Intellectual property, especially in the current economy, is probably one of the most valuable intangible assets a company can have. The value of IP comes from the future economic benefit it can bring its owner and its ability to exclude competitors from a particular market.
Entrepreneurs are so focused on product development that they forget about registering their intellectual property leaving it out there, unclaimed, for competitors to usurp with ease. A popular mistake is where businesses hire web or application developers without any security that the business will own the product when complete.
Mistake No. 7 – Violation of Employment Agreements
When employed by a firm, an employee is not allowed to start a business in the UAE unless the employer has issued a No Objection Certificate (NOC). In addition, new companies in the UAE must adhere to the UAE’s labor laws. Employers are not permitted to hire individuals who have a Visit Visa at any time.
Mistake No. 8 – Not Planning for Worst-Case Scenarios
Risk factors in business cannot be prevented, but they may be reduced to an extent when purchasing insurance or entering into a well-documented legal arrangement. In the event of any unforeseen situations for the organization and business owner, planning for the worst-case scenarios will aid in risk reduction.
Mistake No. 9 – Not Including Appropriate Exit Clauses in Your Partnership Agreement
No one wants to consider the possibility that things would not go as expected when starting a new company. However, amidst all of the hype and possibilities that the future offers, it’s important that you think about your escape plan in case you need one. Business agreements come to an end for a variety of factors, most of which are amicable. Nonetheless, it’s critical to be prepared for all scenarios so that you don’t get caught in a position that costs you resources, time, and, eventually, your business.
Mistake No. 10 – Not Learning About Business Laws of the Country
This is an extremely critical thing to remember. You must read about business law whether you have lived in this country for a long time or are visiting for the first time. Knowing isn’t enough; the company must follow the laws and the regulations at all times. The best course of action is to contact a company law specialist, a solicitor, or both. They’ll hold you up to date with important legal requirements and provide guidance on how to deal with any legal issues that arise.
How to Avoid Making These Mistakes?
We acknowledge that managing a business is difficult. Navigating international procedures, rules, and policies, on the other hand, should not be a task you must tackle alone. We’re here to help you lighten your burden as your local affiliate by providing business ideas and services.
Riz and Mona Consultancy has a long and successful history of providing high-quality business formation and organizational services. We help our clients succeed at every level by supplying them with all of the resources they need to start and operate a company in the UAE. Contact us today to learn more about how we can assist you in your business plan.