Why Choose the UAE for Business Setup?
Before diving into the process, let’s explore why the UAE is an ideal location for business:
- Tax Benefits: The UAE generally being a tax-free environment, has no corporate or personal income tax for businesses in free zones. However, a 9% corporate tax has been introduced for mainland companies earning more than AED 375,000 annually (applicable from June 2023).
- Strategic Location: Positioned at the crossroads of Europe, Africa, and Asia, the UAE provides access to over 3 billion consumers.
- Diverse Economy: While oil has been a backbone of the UAE’s economy, the government is now investing heavily in diversifying industries like finance, technology, and tourism.
Types of Business Structures in the UAE
- Mainland Companies These companies are licensed by the Department of Economic Development (DED) in the respective emirate. Mainland businesses can trade across the UAE and internationally, but require a UAE national to hold at least 51% ownership in most sectors.
- Free Zone Companies Free zones allow 100% foreign ownership, offer tax exemptions, and have simplified processes. However, businesses operating within free zones can only conduct trade within the UAE through local distributors or directly with foreign clients.
- Offshore Companies Offshore businesses are mainly set up for international business operations and are not allowed to conduct business within the UAE.
Steps for Setting Up a Business in the UAE
We have put together a detailed step-by-step guide to starting a business in the UAE:
- Choose Your Business Activity The first step to setting up a business in the UAE is selecting the type of business activity. The country allows multiple business ventures, ranging from consultancy firms and manufacturing units to retail outlets and service providers.The chosen business activity determines the licenses required and the appropriate jurisdiction for registration. You read more about licensing in the UAE on our blog page.
- Select the Right JurisdictionBusinesses in the UAE can be set up under one of three jurisdictions: Mainland, Free Zone, or Offshore. Each has its own set of rules, regulations, and incentives. Selecting the right jurisdiction is crucial for your business operations:
- Mainland: Ideal for those who want to trade within the UAE and globally.
- Free Zone: Perfect for businesses that need tax-free operations and full foreign ownership.
- Offshore: Suitable for international businesses not requiring a physical presence in the UAE.
- Determine the Legal Structure A business needs to choose the appropriate legal structure required to function in the UAE, as it impacts ownership, operations, and legal obligations. The most common legal structures include:
- Sole Proprietorship
- Limited Liability Company (LLC)
- Civil Company (for professional services)
- Free Zone Establishment (FZE) and Free Zone Company (FZC)
- Register the Trade Name A trade name is a business’s legal identity. The UAE government has strict regulations regarding trade names to ensure they comply with legal and cultural standards. Your trade name should be unique, not violate public order or morals, and clearly reflect the business activity. You can check for name availability through the DED or the respective free zone authority’s portal.
- Apply for Initial Approval Before moving forward with the formal registration process, you need to secure initial approval from the relevant authority to ensure that the business activities you wish to conduct are permissible and align with the UAE’s regulations. For mainland businesses, this would be through the DED; for free zone entities, through the relevant free zone authority.
- Draft a Memorandum of Association (MOA) A Memorandum of Association or MOA, outlines the business structure, ownership percentages, and roles of each shareholder. This document is a critical part of forming an LLC and must be notarized. If setting up in a free zone, an MOA may not always be required, depending on the business type.
- Choose Office Space After officially registering your business, you need to lease an office space in the UAE. Both mainland and free zone authorities offer flexible office solutions ranging from shared workspaces to full-scale commercial offices. A tenancy contract must be submitted to complete the registration process.
- Mainland: You must lease office space in the emirate where the business is registered.
- Free Zone: Many free zones offer co-working spaces or virtual offices to meet business needs at lower costs.
- Obtain Licenses Once the paperwork is in order, you can apply for a business license. The type of license depends on the activity you’re engaged in:
- Commercial License: For general trading and retail businesses.
- Industrial License: For manufacturing and production entities.
- Professional License: For consultancy and service providers.
- Open a Business Bank Account The next step after registering your business and obtaining your trade license is to open a corporate bank account. The UAE has strict banking regulations, so you will need to submit documents such as the business license, MOA, and passport copies of shareholders to open an account.
- Apply for Visas Finally, you need to apply for visas for yourself, business partners, employees, and dependents. The number of visas you can apply for will depend on the size of your office space and the nature of your business. For free zone companies, the visa process is streamlined and can be completed through the respective free zone’s portal.
