It has never been a better time to start a business in Dubai. The government here is open to foreign investment, there’s a vibrant business community, and as a base it’s the ideal bridge between East and West.
But before you rush into anything, it’s important that you understand the lay of the land. There are certain considerations to be made before you can set up your business in Dubai.
In this article I will give you an insight into what you need to know before you take the leap.
Do Your Research
As I’m sure you would with any new venture, it’s important that you thoroughly research the ins and outs of setting up a business in the UAE. Just like most anywhere else in the world, there are different options available when structuring your new business, so be sure to choose carefully.
It’s also important that you familiarise yourself with the region. You must know your business sector and potential competitors inside out, come armed with a viable business plan, and understand the current market conditions.
Investment is key and lining this up before you arrive is certainly recommended. Trying to do this locally when you lack a proven track record in the region can be tricky, though the strength of your business plan and overall experience in the sector will often dictate your success in drumming up local support.
Starting a business is a complex and financially risky process, meaning that local knowledge is crucial. Beyond that, having a support network you can trust is incredibly beneficial. An experienced lawyer should be consulted when attempting to overcome any difficulties in registering your new business in Dubai, while having an accountant you can rely on will help identify any early cash flow concerns.
Location, Location, Location
This is where things can appear a little bit complicated, but don’t worry, I will explain in more detail.
When I talk about location, it isn’t as simple as choosing where you’d like to open your office or shop, rather it’s about licensing jurisdiction.
You have several options open to you, including onshore licensing and starting a company in one of a number of free zones, which are usually segmented into particular industries.
Onshore licensing involves being licensed in the Department of Economic Development, and is perhaps most suitable for commercial enterprises involved in trading, manufacturing, or logistics.
You should note that there are some local laws that must be adhered to when setting up, which we’ll touch upon shortly.
Launching a free zone company in Dubai allows you to base your operation in one of the many themed zones, such as Dubai Media City, Dubai Internet City, or Dubai Design District, assuming that your business falls into one of those categories.
Each free zone is managed by an authority, which is responsible for the operation, management and supervision of the zone.
Some licensing authorities are quite flexible in how you operate your business, however others will limit the scope of your activities. If you plan to expand or evolve your business in the future, be sure you’re operating in a licensed zone or authority that will allow that to happen.
Local Laws & Customs
Now, as you would expect when setting up a business in a new country, there will be some local laws and customs that you’ll need to familiarise yourself with rather quickly.
The law here requires you to have a local partner (who should be a UAE National) who holds a majority stake in your business (although this is currently under review). This partner will own a minimum of 51% of your company and must work out of a physical office space. Your business may be subject to further regulations from the government, depending on the industry in which you are operating.
The alternative to finding a local partner when licensing onshore is to apply for a professional license, which can be granted for certain business activities such as consulting. You must, however, appoint a Local Service Agent who will provide government registration services for a fixed annual fee. The Local Service Agent will not have any shares or involvement in running the business. It should be noted that this type of licensing also requires a physical office space.
When you operate within a free zone you don’t have to concern yourself with finding a local partner or sponsor, as you can setup your business and enjoy 100% ownership.
Upon registering the business, you must be able to prove to the Ministry of Commerce that you have money to invest in your new venture. This sum varies between the states, but it is typically between $10,000 and $50,000, and is seen as a guarantee against any liabilities you may incur.
Setting Up Free zone Companies in Dubai
When setting up a company in one of Dubai’s free zones, please bear in mind that each zone has its own different set up procedures and fees.
In general, you should follow these steps:
Step One: Decide how you wish to structure your company.
Eligible company types include Limited Liability Companies (LLCs), either as a newly formed business or as a subsidiary of a local or foreign company, or an additional branch of a local or foreign company.
Step Two: Submit your business plan and agree on business activities to gain a license
Your business will be issued a license based upon its business activity. This license will be specific to your chosen activities, however you can also apply for multiple licenses should you wish to broaden the scope of your business.
Step Three: Submit legal documents
You must submit all legal documents both English and Arabic. Some of these documents should be notarized, with the information including details about individual business partners and the proportion of shares each will hold.
Step Four: Open your business bank account
Once an application is approved in the free zone, a business bank account must be opened with money deposited.
Step Five: Obtain your business license
Once you have confirmed that your business has secured premises within the free zone in which you wish to operate, you can pay the necessary fees and collect your license to trade.
Only once you have gone through these steps will you be in a position to launch your new business in Dubai
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