For Indian Investors, there are mainly two popular locations in Dubai for establishing and doing businesses which are Free Zone and Mainland. We have discussed in details about difference between these two types in detail in another article (link: Offshore Company in Dubai).
Now we understand type of legal forms that can be registered by Indians in Mainland location to run their business in Dubai:
- Sole proprietorship Sole proprietorship is owned by a one person only. It can have only one shareholder and he is the person who is solely responsible for the business and profits or liabilities arisen thereon. Expatriates can form sole proprietorship only for practicing professional services, such as management, medical, engineering and IT consultancies or similar services. Commercial or industrial type sole proprietorship are not allowed. Foreign professionals will retain 100% foreign ownership in the business. The UAE government has waived the paid-up capital requirements. Also, Foreign entrepreneurs who wish to open their establishments in Dubai will no longer require a local sponsor that was mandatory earlier. The company can legally practice professional services anywhere in the UAE and can rent/buy office premises in any location because the DED does not generally recognize virtual offices.
- Civil Works Company A civil works company is a partnership between two or more individuals to provide professional services. Such as doctors, lawyers, engineers, accountants, and consultants. For a civil company formation in Dubai, the owners of the company can be professional partners of any nationality. However, if the owner is a national of a country other than the UAE or GCC, then a Local Service Agent(LSA) is needed in support of the license for registration of any legal form in UAE. For all professional licenses registered in mainland, the law requires that a Local Service Agent be appointed to represent your company to the authorities. A service agent will support Expatriates with the Department of Immigration, Department of Economic Development, and with the Ministry of Labour. LSAs do not hold a stake in your business but charge a fixed annual fee. Corporate shareholders cannot hold shares in a Civil Company in Dubai or a civil company license in Dubai. It includes 100% ownership, and access to the local market, but does involve unlimited liability. there is no requirement to provide paid upfront share capital when establishing a new civil company, total start-up costs are exceptionally low. Civil company formation in the UAE is particularly popular with larger organisations as it allows business owners to apply for multiple visas but for more visas, the more office space is also required. Civil company is tailored exclusively for professionals. However, if liquidation happens, you as the owner of the civil company have to suffer a major loss as an individual instead of company. This is to be considered in mind forming Civil Company.
- Limited Liability Company The limited liability company (LLC) is the most widely used form of company by foreign investors looking to conduct Industrial or commercial activities in Dubai. No professional or consultancy activities can be conducted by this form of the company except banking, insurance or investment. the minimum number of partners for the limited liability company is 2 and the maximum number is 50 Therefore, each shareholder’s responsibility is only limited to their share as is their profit and loss. An LLC is a private company and its shares cannot be offered to the public. Shareholders of an LLC benefit from limited liability status. With a limited liability company(LLC) you are not liable personally for any debts of the company with Free repatriation of profits. Protection of the double tax treaties signed by UAE with countries worldwide will be an added benefit. Limited Liability Company formation in Dubai is hassle-free and allows Indian entrepreneurs to have 100% ownership. There are no minimum share capital requirements for setting up LLC company in Dubai, but DED makes the final call on whether the capital pledged by the shareholders is adequate for the projects they plan. Entrepreneurs can acquire any number of visas without any limitations. Through the LLC, you can access the local markets of Dubai. Trade name should be related to the activity while forming a company in UAE.
There is also other type of entities but Sole proprietorship, limited liability company and civil works company are most popular among Indians. following are some other legal forms in Mainland for expats:
- representative office Representative office is not a complete structure business and it’s only Permit that allows a branch of a foreign company can conduct their Business-related matters in UAE mainly It has the authorization to promote and market the parent company’s business but cannot engage in business operations. Such branches must have a local service agent (LSA).
- branch of a foreign company A company registered abroad can have a branch in Dubai which will be its Dubai headquarters and under the business jurisdiction of Dubai and UAE. No import of goods is allowed by the branch and this should be done through a local trading firm. The branch is under 100 percent ownership of the parent company. UAE nationals are mandatory to act as Local Agent only. This agent can be an individual or a company. But it should be noted that the agent must be a UAE national or, in the case of a company, run by UAE nationals
- branch of a free zone company If you have a company whose main license was issued in a UAE free zone, you can obtain a branch license from DED to expand your operations to mainland Dubai. you need approval from the Ministry of Economy and have a local service agent.
Type of Legal Forms in Freeland Zone:
Free zone establishment or FZE FZE will be sole shareholder company. Prior written approval from the freezones is must for share transfer. The rules and regulations are equivalent to its MoA or Articles of Association. The FZE entity should have at least two directors and a secretary. Individual can jointly manage the offices of director and secretary. It’s similar to the Free zone Company with a single shareholder.
Free zone LLC
Free Zone Company usually operates within the free zone boundaries. The company has two or more shareholders and popularly known as limited liability entity. Free zone companies in UAE should submit their audited financial statements to the UAE free zone authority. They should submit the documents every three months from the end of the fiscal year. The entity should have at least two directors and a secretary. The offices of director and secretary can be jointly held by an individual person. Some of the features of Free Zone Company include,
- 100% ownership in the company by foreign subscribers
- Obtain license for operating business in the Emirates
- Obtaining resident visa for employees and owners
- no requirement for a local sponsor allowed for FZ LLC
- Customs and tax exemptions
- Report requirements
Branch Office Branch office in a UAE free zone, is a dedicated outlet of a company. It doesn’t constitute as a separate legal entity. Branch office serves as a means to expand their business across different countries. Establish your company presence in new regions and enhance prospects of sales or revenue. UAE free zone formation branch office is incorporated with the help of Local service agent through the ministry of commerce and economics.
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