Small businesses are key to the economic growth in Dubai and the wider region. It may seem that registration and licensing is complex and would need a lot of money to start up, but help is available. Pro Partner Group advise the consideration of three main areas when you’re looking to launch a small business in the UAE:
- Research carefully: you need a thorough understanding of the local area for any idea to work. Doing research into your area of business and working out whether your product is viable will help long term. Think about the competition in the UAE and think about spending some money up front on advertising and feasibility to gauge the strength of interest for your product or service.
- Find a solid local partner: the local partner will hold a 51% share in your business if you operate outside of the Free Zones. This potentially means they could control it. Local partners can be both companies or individuals and they don’t have to contribute financially to the start-up business. It is also important that the local partner provides you operational support for licencing and visas as the local partner or agent will be the main point of contact for government liaison.
- Proof of financial viabilit: When your small business is registered, you will have to prove that you have the financial wherewithal to support the business financially. If you’re new to the UAE and therefore don’t have a track record then you may well have to find your own financial back up rather than relying on local money.
UAE Federal Law and Commercial Companies Law dictates that there are seven broad categories for organising a business in the UAE. Requirements for shareholders, incorporation procedures and minimum capital levels therefore vary depending on the kind of business structure you want to use.
The most commonly used business structure for setting up small businesses in the UAE is the limited liability company (LLC). These can be started up by between two and 50 people whose liability is limited to the amount of their share investment in the company.
LLCs in the UAE require a local sponsor who will have a 51% (and therefore controlling) interest in the company. Foreign equity is limited to 49%. To set up in Dubai the minimum share capital is normally AED200,000 although this does not have to be deposited in a bank in order to obtain the Trade Licence.
Some key points on the formation steps::
- The name of the company must relate to the business and be approved by the Licensing Department of the Economic Development Department.
- You have to draw up a Memorandum of Association (a document that lays out and dictates the activities of the company). The memorandum has to be notarised by a Notary Public in a court in the UAE.
- You must apply to the Commercial register at the Department of Economic Development (DED).
- You must lease an office that is a minimum of 200 sqft in Dubai or 14 sqm in Abu Dhabi.
- When you have approval for entry then you will receive a licence from the DED and your company’s name will be officially entered onto the Commercial Register.
- At the same time the company will be registered with the Local Chamber of Commerce and Industry.
Opening up a Professional Licence or Establishment
If you want to start a business that carries out professional activities, then sole proprietorship and 100% ownership is allowed, but there is a limit on the number of employees and this licence cannot ‘trade’ in products for example. A Local Service Agent (LSA/NSA) who is also a UAE national or a UAE Company must assist in making sure you obtain licenses, labour cards and employee visas, but they don’t have any involvement directly in the business.
The UAE government has set up Free Zones to encourage foreign investment and companies that set up within these zones have a different legal structure. They are treated legally as if they are offshore companies and are best suited to a business that wants to use the UAE as a regional base for distribution or manufacturing but most of their turnover is outside the region.
Companies within Free Zones can operate within the zones and outside the UAE, and can purchase services and goods directly within the UAE but need a distributor or commercial representative in order to carry out business within the UAE.
Requirements for opening a company
If you’ve decided to open up a business in the UAE then you need to take into account the shareholding structure, the licensing requirements and the share capital requirements. As part of setting up your company, you will need to make sure you have covered employee needs as well, including resident visas.
Advice from Pro Partner Group can make the business set up process in the UAE much smoother for you and your employees and family. We can assist with all aspects of the set-up, including the extremely important aspect of visas and family sponsorship. There are various rules and regulations surrounding the levels of qualifications and job titles of employees to ensure you can adequately sponsor family members.
PRO Partner Group can also act as your secure Local Partner or Local Service Agent (LSA/NSA) as required, whilst we ensure you have full management control and effective ownership of your business, brand and intellectual property.
James Swallow is Director of Middle East based PRO Partner Group, which specialises in company formation and support services in Abu Dhabi, Dubai and the wider UAE.