Entrepreneurs have their own choices while starting a business. There are several types of business structures and any of them may befit investors according to their liking and investment. One such structure that is adopted by large number of entrepreneurs nowadays due to its potential benefits and few risks involved is LLC. In order to understand this important business structure, we need a compact guide to LLC Company formation.
What is LLC stand for?
LLC stands for Limited Liability Company. As the name suggests, Limited Liability Company is a type of company structure where members of the company are not personally liable for any loss. Instead, the company is liable according to its capital share. This type of company structure has few features of a corporation and others like that of a partnership. We can say that LLC is in between a corporation and a partnership company and provides advantages of both these entities.
LLC is a relatively newer concept that has been in use since 1977. It gained popularity in recent decades. The main reason behind recent popularity of LLC business structure among entrepreneurs is that it is addressing various concerns of entrepreneurs along with providing several benefits that are either unique or also available in different types of business structures.
Why to set up an LLC
An important question is why one should choose LLC instead of several other business structures that also exist. The reason is the availability of large number of benefits in LLC that are not present in other entities. There are several LLC advantages for company owners.
Following are important benefits that an entrepreneur can gain after establishing an LLC.
- The most evident and important feature of LLC is the protection from personal liability to members of this specific company. In case of debt or any court ruling, the company is only required to pay according to its share capital. It saves members of the company to pay from their personal assets like home, car etc
- As compared to most of other business structures, there is less paper work required for formation of an LLC. This reduction in paperwork is mainly due to less strict requirements to follow (no need to hold annual meetings and file annual reports). This makes LLC not only easier to form but also can easily remain in good legal standings
- An important advantage of an LLC that distinguishes it from major company structures is the freedom to employ number of shareholders in a LLC. An LLC can have unlimited number of shareholders (some countries may limit number of shareholders but even then they are more than other business entities) that can benefit in growth of business. As compared to S corporations, LLC also has no restriction in choosing corporations as shareholders
- LLCs have another important advantage regarding taxation. These companies are free to choose tax status of any business structure (S corporation, C corporation, proprietorship or partnership) according to their own requirement and liking. These companies can also avoid double taxation. They are known as the best entity for tax purpose as compared to other business entities
- LLC can also have one or more owners. In case of multiple owners, an LLC has the flexibility to distribute profits among owners appropriately. This allocation of profit could be on the basis of equality, ownership percentage or any other ratio
Nothing is perfect and there are few shortcomings and limitations in LLCs as well. E.g. an LLC terminates when a member departs, it requires keeping careful personal records to take advantage of limited liability etc. But these corporations provide several exclusive advantages that can easily undermine their potential deficiencies. These companies are specially important and beneficiary for small businesses as they are more prone to additional liabilities and double taxation.
LLC Formation in Dubai
LLC is basically a company type developed in USA. But it is now extensively used in other business centers as well. We are well aware about the business opportunities available in Dubai for all types of business entities. LLCs are one of those entities that are getting much fame in Dubai consistently. An important reason is the support of government for entrepreneurs to open LLC in Dubai.
In fact, Dubai LLC company formation is the most common type of company in Dubai. Such companies are mainly established in Dubai mainland (starting trading companies in Dubai free zone also have same structure as that of LLC). In this case, 51% shares of LLC are reserved for local sponsor while foreign owner will get 49% shares of the company (profits can be distributed differently).
Advantages of LLC in Dubai
- Minimum 2 and maximum 50 shareholders are allowed
- One can obtain unlimited number of visas without any restriction
- Real estate ownership is allowed
- LLC can conduct any commercial or industrial activity
- All types of business activities are allowed apart from investment, banking and insurance
- Establishing an LLC allows company owners to take advantage of the whole UAE market. These companies can directly trade with the entire UAE market
- You can easily open global/corporate bank accounts on the basis of LLC
How to set up LLC in Dubai
All these advantages can be attained by entrepreneurs after following the procedure designed for LLC formation in Dubai. LLC is an important type of business structure and the process is lengthy and comprehensive. Investors interested in LLC set up in Dubai have to contact various departments and submit number of documents for this purpose.
Following are important steps that are required to carry out the whole procedure. It will help you get an idea about how to create an LLC in Dubai.
- Choose a suitable and unique name and the type of activities that the LLC will be involved in
- Choose an appropriate location that suits you according to type of your business. Company operations have to be carried out through a physical/virtual office or warehouse
- Make agreement with a local sponsor who will own 51% shares of your LLC (profits may be distributed differently)
- Collect all required documents and submit them to the Department of Economic Development (DED) along with completely filled application
- Approval from other relevant authorities is also required in case your business will conduct specific activities
- Obtain trade license, MOA (Memorandum of Association), share certificates, tenancy agreement, certificate of incorporation, labor cards, visas and other legal documents from relevant authorities
Documents required for LLC in Dubai
There are several documents that must be submitted in DED and other authorities according to the type of LLC to be formed in Dubai. All these documents must be attested and notarized from applicant’s home country and UAE consulate. The notarization process takes sufficient time and it should be done soon after taking decision about setting up company in Dubai. After receiving complete documents, different departments usually take few weeks to complete the whole procedure.
Following are important documents that are required for setting up an LLC in Dubai. All these documents must be submitted in their respective departments.
- Duly filled registration application form
- Passport copies of all shareholders and managers of company
- Passport copy of sponsor
- NOC from sponsor (if manager or partner has residence visa in UAE)
- Memorandum of Association (MOA) (duly attested from public notary)
- Registration of Trade Name and initial approval from DED
- Location plan and tenancy contract attested by Dubai Municipality’s Planning Department and Civil Defense Department
- Bank reference letter for each shareholder
Why Riz & Mona
Riz & Mona Consultancy has been in the Dubai market for past several years. We are well known for product registration, visa services and formation of all types of companies in Dubai and UAE. We are specialist in LLC formation in Dubai. Due to our experience, we can assure you in handling all your official and legal matters successfully and conveniently.
Handing over the job of LLC company formation in Dubai to us will provide you mental satisfaction and quick approval from all government departments. For this purpose, you can contact us via our WhatsApp # 971-56-9971225 or email address [email protected]