Starting a business in Dubai needs self-confidence, a unique idea, a measure of fearlessness, and a lot of research. You should take the investment, basic equipment, expert advice, and solid guidance into consideration before launching your company. If you have no idea how on Earth you can start your business in the UAE, this guide can help. Scroll down to learn about the complete process of setting up a business in Dubai, UAE.
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How to Start Business in Dubai – Factors to Consider
Some things should be kept in mind before conducting your business activities in Dubai. These factors are as follows:
The first thing that you should consider is the type of business license that you should get. You can get three major types of licenses from the DED (Department of Economic Development).
An industrial license is suitable for business people that want to start a manufacturing business that mechanically or manually convert raw or semi-formed material and natural resources into final products. This license type covers various manufacturing business activities including:
- Paper manufacturing
- Textiles manufacturing
- Metal manufacturing
A commercial license is best for those who want to do the business of purchasing and selling goods or conduct some other relevant trading activities. It covers the following businesses:
- Real estate
- Tourism and travel
- General stores
- Importing & exporting goods
- Selling electronic products
- Commercial brokerage services
- Selling of construction material
- Rent-a-car services
The third and final type of license is issued to entrepreneurs based on their expertise and skills. Craftsmen, service providers, or artisans are granted a professional license in Dubai to do business activities. The major benefit of this license is that it gives you 100% foreign ownership. Its only condition is that you should have a local person as your service agent. It covers the various businesses including:
- Medical services
- Beauty salons
- Repair services
While establishing a business in any of the free zones, there is no requirement for a local sponsor. As mentioned earlier, If you incorporate in a free zone such as DMCC, there is no need for a UAE nationality holder as a sponsor or partner to set up a company with 100% foreign ownership.
Economic Zone: Free Zones vs Offshore
You have the option of setting up business in either Offshore or free zone. Both of the economic zones have their own traits and advantages. Choosing one solely depends on your needs.
The free zones give you the opportunity of getting 100% ownership of your company. The UAE government introduced the concept of free zones to gain the attention of foreigners to invest and expand their businesses in the UAE. 0% taxation and ownership benefits are offered to the business owners in this economic area.
At the moment, you have more than 45 active free zones in UAE where you can set up your business. Every free zone offers licenses to businesses within some categories around which a zone is designed.
Some of the currently operational free zones are as follows:
- Dubai Internet City (DIC)
- Dubai Multi Commodities Center (DMCC)
- Dubai International Financial Center (DIFC)
There are some limitations of running a business in a free zone. One of the noticeable limitations is that you cannot trade directly with the local markets of the UAE.
Offshore company owners can register their businesses in free zones as well to avail of numerous advantages. But there is a difference between offshore and free zone companies. The operations of the business differentiate one from another. Offshore companies cannot conduct business operations inside the UAE, they can only do business activities outside of the Emirates. Furthermore, there is no demand for depositing minimum capital before incorporation in the free zone.
Similar to free zone companies, offshore companies also have limitations. As an owner of the offshore company, you will have only 49% of foreign ownership. You also require a local sponsor.
Documents Required to Start Business in Dubai, UAE
Required documentation that you need to submit during the process of setting up your business in Dubai may include:
- Application form
- NOC from your local sponsor (for entrepreneurs)
- Copy of existing trade registration certificate or license (if you have an existing business, applicable only for local company)
- Colored passport copies of the director, manager, and shareholders of the company
- Certificate of reference from a bank of the company’s shareholder or audited financial reports of two years for the corporate entity
- Sign of the appointed director or manager for the new company and company’s shareholders
- Your business plan
Steps to Set Up Your Business in Dubai
Deciding Business Activity
The first step of opening your business is to choose a business activity. Profitability and feasibility research behind the business activity should be done prior to selecting a business. See the practicality with respect to the UAE markets before choosing a business activity.
We discussed two economic zones where you can establish your business, free zones and offshore. The mainland is another economic zone where you can start your business. These zones cover the whole UAE market. There are specific rules, regulations, benefits, limitations, and laws that are applied to the zones. Choosing an economic zone totally depends on the business requirements and your personal preferences.
Next up is to select the company structure or legal form of your business. The initial stages of business planning include the decision of choosing a company structure. Once you have chosen the legal form, you can then apply for the business license. The company structures that are allowed in Dubai are:
- GCC company branch
- Local company branch
- Foreign company branch
- Sole establishment
- Free zone company branch
- Holding company
- Limited liability company (LLC)
- Civil company
Registering Company Name
After that, you will get your unique company name approved by the Department of Economic Development (DED). Besides the company name, you also have to get approval for your business activity.
There are some restrictions implemented by the UAE government for company names. You have to keep these restrictions in mind while choosing a trading name. These restrictions are:
- Should not contain names or logos of any external bodies nor names of any religion, or governing authority
- Must not violate the public order of the country or the public morals
- Must not have been already registered
- Must be compatible with the needed type of legal status and activity
- Must be followed by the business structure or legal form of the company
You can include your initials or surname if you want to include your name in the company name.
After registering your company name and business activity, you can apply for a trade license.
You can choose from the following trade licenses for the free zone, mainland, and offshore:
- Commercial license
- Professional license
- Industrial license
- Tourism license
Documents that you need to submit to get the license are:
- NOC for partners (if any)
- Memorandum of Association (MoA)
- Relevant government forms
- Unique trade name reservation certificate
- Initial approval certificate
- External approvals (if any)
- Trade license application
- Tenancy contract
- Ejari registration certificate
- Passport copies of partners
Alongside the trade license, you will also apply for company registration. At this step, you have to submit the required documents and get approvals from the authorities in order to register your company.
If you opt for mainland or offshore as an economic zone to set up your business, you will be required to find a local sponsor. Setting up a business in a free zone gets rid of the headache of searching for a local sponsor; you don’t have to find one.
Memorandum of Association
Drafting a Memorandum of Association (MoA) is a difficult task and involves a lot of complexities. We recommend you get in touch with us so we can assist you.
After dealing with MoA, the business owner must look to arrange a physical office space for operating their business activities. You can look for business centers, incubation centers, or shared workspaces.
Initial DED Approval
After submitting your application, you need to get no-objection approval from the DED. Without initial approval, you cannot conduct your business.
After submitting the application, getting approval, and paying the application fees, you are good to go.
Tips for Foreigners to Start Business in Dubai, UAE
The first thing that foreigners should do before starting a business in Dubai is to familiarize themselves with the local business practices and customs. They should also get to know about the conditions that are linked with the various types of business, their countries of tax residence, and nationalities.
If you need to work with a local sponsor, he will hold a 51% stake or ownership in your business. However, they are paid a pre-agreed fee for their services and are not involved in the decision-making of the business.
We recommend that you should look for a company setup consultant such as Riz and Mona Business Setup Consultancy who can help you throughout the process, guide you through each step, assist you in every possible way, and ultimately, smoothly establish your business in Dubai.
Start Your Business in Dubai With Riz and Mona
If you have decided to start your business in Dubai, you reach out to Riz and Mona for taking you through the complete process of setting up a company in the UAE. You can contact us anytime and we will handle your application.