What Legal Procedure Are Required for start-up business in UAE
To start your business in United Arab Emirates you are require to follow legal procedure. Below are the types of business you can start by law in United Arab Emirates. According to United Arab Emirates Law, Foreign companies or groups willing to establish their presence in UAE have as many as five options.
- A permanent establishment
- Start up a branch office
- Start up a civil company (only in Dubai and Sharjah)
- Commercial agency agreement
- Start a free zone company
United Arab Emirates commercial companies Law requires that every company in UAE must have one or more UAE national as partner and hold up to 51% of company’s shares, however there are few exemption such as companies and businesses established in free zone/special economic zones and companies undertake activities such as oil industry, gas and electricity production etc. are exempted from 51% rule.
You can setup permanent establishment by following seven types:
General partnership can only be done between two or more UAE nationals.
In this type of partnership, there are at least two partners involved. One is active partner who is fully liable and to partnership obligations and other is silent partner who does not manages the companies’ day to day tasks.
Joint Participation (Ventures):
This type of establishment is between two or more individuals who share profit a loss.
Public Joint Stock Companies:
This type of establishment has its share publically traded in stock market.
Private Joint Stock Companies:
This entity requires a minimum of three founding members and their shares are not publically traded.
Limited Liability Companies:
This type of entity requires a minimum of two and maximum of 50 partners whose liabilities are defined to the limit of share one holds.
Partnerships Limited with Shares:
This type of partnership is usually between two UAE national who are jointly liable to extent of their personal assets.
A branch in United Arab Emirates has the same legal identity as its parent company and it usually perform business under its parent company name. Branch office is fully permitted to enter into contracts and perform activities listed in the license issued by emirates it resides.
Civil company can only be established in Dubai and Sharjah at the moment. Civil companies do not engage in trading business and are owned and run by professionals.
Commercial agency agreement
Foreign companies can enter into a commercial agency agreement between a UAE agent who is responsible for selling, distributing of goods and services inside the United Arab Emirates on stipend or commission. Agent must be a UAE national or a in case if agent is a company it must be fully owned by UAE national and agent must have been registered with ministry of economy.
As per Law, government of United Arab Emirates allows foreign expats to run their business in the country with free zones. A free zone company is fully owned by the investor and has number of benefits including tax optimization, full foreign ownership etc. Free zone companies are only allowed to perform their activities inside the free zone and is only allowed the activities which the license was obtained.
There are different types of licenses issued in a Free Zone which are:
- General Trading License
• Trading License
• Industrial License
• Service License
• National Industrial License