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Setting Up a Business in the UAE

February 19th, 2025 | 10X Consulting team

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10 min read

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Setting up a business in the UAE can be one of the smartest moves if you're looking for a tax-friendly, business-efficient environment. Sure, it sounds like a dream, but the process is no walk in the park unless you’re prepared. So, how do you go about it? Let’s get straight to the point without fluff or jargon - just the essential details.

Understanding a Shareholder’s Agreement

First off, why would anyone consider the UAE for their business?

  • Visa advantages for business owners and employees.
  • Low corporate tax, or none in certain areas.
  • High-end infrastructure - everything from roads to tech is top-notch.
  • A strategic geographical location connecting the East and West.
  • Access to a diverse and rapidly growing market.
  • Government support is solid, and businesses here have access to some of the latest technological advancements.
  • Full repatriation of profits, so you can take your earnings back home without hassle.

Let’s dig into how to actually set up your business in the UAE.

Step 1: Identify Your Location

There are three main choices when picking a business location:

  1. UAE Mainland
  2. UAE Free Zones
  3. UAE Offshore.

Each has its own benefits, but the setup process is similar across the board. Let’s focus on the first two for now.

UAE Mainland

Here, you have two ways to apply for a business license:

  • Online through the Basher platform: Basher is a unified government portal where you can set up your business in 15 minutes. Talk about speed!
  • In-person: You can also apply at government service centers, Tasheel offices, or legal services offices. Some even have “Customer Happiness Centres,” but let’s be real, bureaucracy is rarely a joyous experience.

Each has its own benefits, but the setup process is similar across the board. Let’s focus on the first two for now.

Step 2: Specify Your Business Nature

The UAE offers six main types of business licenses:

  • Occupational
  • Commercial
  • Tourism
  • Agricultural
  • Industrial
  • Professional

Pick the one that best suits your business activity because this license will dictate what you can and cannot do in the UAE.

Step 3: Choose a Legal Structure

Your company’s legal structure determines the rules you’ll follow, taxes you’ll pay, and how you’ll operate. In the UAE, you have a variety of options, from General Partnerships to Limited Liability Companies (LLCs), and even Foreign Company Branches. Choosing the right structure is crucial because each form has its own set of regulations.

Step 4: Register Your Trade Name

Picking a trade name seems easy, but there are some ground rules:

  • It must include the abbreviation of your company’s legal structure (e.g., “LLC”).
  • Avoid using offensive words or anything that refers to religion, rulers, or government bodies.
  • Make sure it’s not already taken by another company.

Once you’ve settled on a name, you’ll need to register it with the Department of Economic Development (DED) in the emirate where your business is based.

Step 5: Apply for Initial Approval

You’ll need to get an initial approval from the UAE government. Foreign investors also need clearance from the General Directorate of Residency and Foreigners’ Affairs before they can proceed.

Step 6: Draft Your Memorandum of Association (moa)

Depending on your legal structure, you might need to draft a Memorandum of Association (MOA) or a Local Service Agent (LSA) agreement. This document outlines the roles, responsibilities, and ownership shares in the company. It’s a mandatory step if you’re setting up as an LLC or joint stock company.

Step 7: Choose Your Physical Location

Yes, every business in the UAE needs a physical office, even if you’re mostly operating online. It needs to meet the requirements set by the local Department of Economic Development (DED). In some emirates, you’ll also need to register your lease agreement with Ejari, a mandatory system in Dubai for tenancy contracts.

Step 8: Apply for Additional Government Approvals

Depending on your business activity, you might need extra approvals from specific government bodies. For example, if you’re in the health sector, you’ll need approval from the local health department. Running a tourism company? You’ll need to deal with the Executive Council.

Step 9: Submit Required Documents

Once you’ve gotten your initial approval and collected all necessary documents, submit them to the relevant authorities. Some of the required documents include:

  • Copy of initial approval
  • Attested Memorandum of Association (if applicable)
  • Proof of office space (your lease agreement)
  • Any additional approvals from other government bodies (if needed).

Once you’ve settled on a name, you’ll need to register it with the Department of Economic Development (DED) in the emirate where your business is based.

Step 10: Pay Fees and Collect Your License

Once you’ve submitted everything, you’ll need to pay the fees to get your business license. Fees vary depending on the business activity and legal structure. After payment, you can collect your license either online or from one of the government service centers.

Step 11: Register Your Company With the Chamber of Commerce

This is the final step. You need to register your company with the Chamber of Commerce in the emirate where your business is based. Each emirate has its own chamber, such as the Dubai Chamber of Commerce or the Abu Dhabi Chamber of Commerce.

Freezone Vs. Mainland: Understanding Business Setup Options in UAE

When expanding your business to the UAE, it's essential to understand the different structures available for setting up a company. Two of the most popular options are Freezone and Mainland companies. Both structures offer unique benefits, but the right choice depends on your business goals, target market, and operational requirements.

Freezones in the Uae: Attracting Global Investors

Freezones, also known as free trade zones, are designated areas within the UAE that provide businesses with unique regulatory, tax, and operational advantages. These zones were established to attract foreign investment, enhance trade, and spur economic growth.

Key Benefits of Setting Up in a Freezone

1. 100% Foreign Ownership

One of the standout advantages of establishing a business in a UAE freezone is the provision for full foreign ownership. This means that international investors can retain complete control of their business without the need for a local partner.

2. Tax Benefits

Freezone companies benefit from tax exemptions on personal income, import/export duties, and the ability to repatriate 100% of profits and capital. Additionally, freezone companies generating less than AED 375,000 in annual revenue are exempt from corporate tax. Businesses above this threshold face a 9% corporate tax, although some qualifying activities within freezones may be eligible for a 0% corporate tax.

3. Strategic Location

Many freezones are strategically located near key seaports, airports, and logistics hubs. This positioning enhances supply chain efficiency, facilitates global trade, and reduces shipping costs.

4. Simplified Setup Process

Freezones offer a streamlined process for business setup, with minimal bureaucracy. This includes faster processing times for licenses and reduced paperwork, making it an attractive option for companies looking to start operations quickly.

Criteria for Selecting a Freezone

Choosing the right freezone is critical to the success of your business. Factors to consider include:

  • Business Activity: Some freezones specialize in specific sectors, such as technology, media, healthcare, or trade.
  • Location: Proximity to transport networks like seaports and airports can affect delivery times and shipping costs.
  • Infrastructure: Ensure that the freezone offers the required office space, warehouse facilities, and business support services.

Step-by-step Guide to Setting Up a Freezone Company

1. Choose the Legal Structure:

Select the type of entity that fits your needs—whether it’s a Freezone LLC, a Freezone Establishment (FZE), or a branch of an existing company.

2. Company Name Registration:

The company name must reflect the business activity, include a suffix like FZE (Freezone Establishment), and adhere to UAE regulations.

3. Apply for a Trade License:

The required license depends on your business activities, whether they are commercial, industrial, or professional.

4. Select Office Space:

Choose from options like flexi-desks, fixed desks, or full office spaces based on your operational needs.

5. Register and Obtain a Trade License:

Submit the necessary documentation, including passport copies, proof of address, and a business plan, to the freezone authority for approval.

6. Open a Bank Account:

After obtaining your trade license, open a corporate bank account in the name of your freezone company.

7. Apply for Employee Visas:

Freezone authorities provide assistance with obtaining visas for your employees and management team.

Mainland Business Setup: a Versatile Business Model

Mainland companies, specifically the Limited Liability Company (LLC) structure, offer the flexibility to operate anywhere in the UAE, both within the region and internationally. This setup is particularly beneficial for businesses that require direct access to local UAE markets, as freezone companies are generally restricted to international trade.

Key Benefits of Setting Up a Mainland Company

1. No Trade Restrictions

Unlike freezone companies, mainland companies are free to trade within the UAE market and internationally. They can also take on government contracts, which is prohibited for freezone entities.

2. 100% Foreign Ownership in Certain Sectors

While mainland companies traditionally required a local sponsor with 51% ownership, recent reforms now allow 100% foreign ownership in many sectors, such as industrial and service-based businesses.

3. Diverse Business Activities

Mainland companies have fewer restrictions on their business activities, providing a broad scope for entrepreneurs to diversify and scale their ventures across different industries.

4. No Minimum Capital Requirement

The capital required to start a mainland LLC is not fixed and depends on the business's nature and operational needs.

5. Legal Entity Status

A mainland LLC is considered a separate legal entity, providing protection for personal assets against business liabilities.

Step-by-step Guide to Setting Up a Mainland Llc

1. Select a Business Activity:

With over 2,000 activities to choose from, thorough market research is crucial to determine the most profitable option for your LLC.

2. Company Name Registration:

Choose a name that complies with UAE naming regulations. Ensure it reflects your business's nature and doesn’t contravene public order.

3. Choose the Business Location:

The location of your business will depend on the emirate’s regulatory benefits, incentives, and infrastructure support.

4. Memorandum of Association (moa):

Draft and submit the MOA, which outlines your company's scope of business, ownership structure, and roles of shareholders.

5. Apply for a Business License:

Depending on the business activity, apply for the appropriate trade license (commercial, industrial, or professional).

6. Obtain the Trade License:

After approval, the company is issued a trade license, granting it legal recognition in the UAE.

7. Open a Corporate Bank Account:

Similar to freezone companies, mainland LLCs must open a corporate bank account after all necessary registrations.

8. Visa and Emirates Id Applications:

Obtain the necessary visas and Emirates IDs for employees, management, and shareholders.

Freezone Vs. Mainland: Which Is Right for You?

When deciding between a freezone and mainland setup, consider the following:

  • Target Market: Freezones are ideal for international trade, while mainland companies can trade freely within the UAE.
  • Ownership Requirements: Freezones allow for 100% foreign ownership, while mainland companies offer this benefit in certain sectors.
  • Operational Flexibility: Mainland companies have fewer restrictions on business activities and can scale operations across the UAE.
  • Cost Considerations: Freezone setups generally offer faster and less costly processes, while mainland setups provide greater access to the local market but may involve higher upfront costs.

Both freezone and mainland setups in the UAE offer excellent opportunities for business growth, but the right choice depends on your specific business needs and long-term goals. Freezones are perfect for companies looking for tax incentives, full foreign ownership, and a streamlined setup process, while mainland companies offer the flexibility to tap into the UAE’s thriving local market. Carefully evaluate your business model and consult with experts to determine the best route for your UAE expansion.

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