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October 8, 2020

Business Setup in UAE: Benefits, Procedures and Requirements

Why Do You Want to Set Up a Business in UAE?

The United Arab Emirates (UAE), apart from being one of the fastest-growing travel destinations boasting of rich history & traditional culture, exotic places, and safe environment, is also an up and coming business hub. In the last two decades, it is one of the favourite nations for investors from all over the world. Moreover, the growing opportunity and the rapidly growing infrastructure in the UAE is another crucial factor that is bringing many multinationals and corporations to this country. Here in this post, we are talking about a few key things that you need to be aware of in case you are planning to set up your business in UAE.

Benefits Doing Business in the UAE

Here are the main benefits and features of doing business in the UAE:

The UAE has an excellent environment for doing business. Registration of a company in the UAE promises many benefits to business owners.

World-Class infrastructure
With world-class infrastructure, UAE has become the first choice for individual entrepreneurs and corporations planning to move their business to some of its world-renowned cities. In the last two decades, UAE cities have become home to a large number of business centres, offices and industrial facilities. And the wheel of growth continues to introduce new buildings unstoppably even today. You can register both onshore and offshore companies here without any difficulty.

Investor-Friendly Taxation
The tax system in the UAE is investor-friendly for both local and foreign business owners.

Easy and Quick Registration
When it comes to business formation and company registration in the UAE, it is an uncomplicated process. If you hire a business setup consultant for the purpose, it becomes even more easy and quick. A consultant can help you with paperwork and also assist you in accessing constituent documents.

What are the Procedures to Register a Business Setup in UAE?

Starting a business in the UAE is a hassle-free process. It should not take you more than a week once all your legal formalities are sorted. However, before the legal formalities start taking place, you will need to consider some factors while accomplishing the process:

1. What is the Type of your Business?
The type of your business will tell you what license you will need to apply for your business setup in UAE. Whether you are looking for a commercial, industrial or professional, the trade license and the activities that come under it will determine what operations you can start. Please note that certain trade activities like jewellery trade, veterinary activities, food trading, and legal consultancy require further approvals from different government departments.

Each Emirate in the UAE has its own Department of Economic Development (DED). It lists the total number of activities available in that emirate; the investors can make choices from the list. Dubai has a list of over 2100 activities from which you can choose. Just in case you are unable to find your activity, you can contact the DED of that city. Each free zone in all seven Emirates has its own regulations and licensing formalities.

2. What Type of Ownership You Are Seeking?
If you are a foreign national and are looking for 100% ownership of your company, then you need to apply for a Free Trade Zone license. Each emirate has its share of Free Zones, and every free zone caters to a specific type of business activities. Your awareness regarding this will help you find the right option. UAE has over 45 free zones for different categories of operations. So, in free zones, you don’t have an alternative option.

If you are looking for a trade licence in UAE or want to run your business here, you will have to obtain a license from the Department of Economic Development (DED) of that particular emirate where you want to register your business. There are certain restrictions on ownership share for foreign investors, based on different legal formalities under DED.

3. How Important are Legal Formalities?
Every business type has different rules regarding their business formation, which depends on the type and location of the business. Here is an example: if you are looking forward to starting a legal consultancy firm, you can open it as a branch of a company or as a stand-alone company. One cannot start this as a sole proprietor. Every free zone has its own rules and limitations related to company formation. You must talk to your business setup consultant to know it better.

4. Why Do You Need A Trade Name?
A trade name is one of the most crucial parts of the legal formalities in the UAE. It helps in identifying the nature of business unless it is a branch of another bigger company or entity. You can find all the rules of trade names on the DED official website. Before you choose a name for your business, you can always check the website.

5. Do You Have to Pay Share Capital?
Minimum share capital is normally mentioned in the Memorandum of Association of your proposed company. In most cases, payment of minimum capital is not required at the time of business setup.

6. How to Find a Premise for Your Business Setup?
After all your legal formalities and forms are ready, you should shortlist a few office premises with costs and other necessary details. This means, once your legal formalities are approved and cleared you can move ahead with other procedures. If you are looking for a setup in free zones, you will easily find suitable premises to cater to your requirements along with electricity, internet, water connections and necessary other amenities. If you have registered your business in Dubai, you will get a fee waiver on new power connections.

7. Can You Hire Employees for Your Business?
Before the Department of Economic Development in UAE issues a license to business owners, a firm has to hire a manager to manage its operations. He/She should be hired even before your registration is approved. However, in many cases, you may not be permitted to hire at all. For details, you should consult a professional agency or business setup consultant to understand the procedure better. If you are in free trade zones, each zone has its own regulations relating to the structure of your business. It is important to be well-informed about the various standards regarding hiring before making any decision.

8. How Important is Local support?
It is compulsory to have local support, be it an agent, partner or sponsor to obtain DED licenses. It is a great benefit for foreign investors. If your business setup is in a free trade zone, then local support can help your business grow effectively. However, it is not mandatory for all kinds of business setups, as UAE provides massive opportunities for easy business formation for all business types, irrespective of nationality.

What are UAE Laws?

The law for business formation in UAE is very welcoming, but it is essential for business owners, especially foreign investors to follow the law of the land and prescribed moral conduct and adhere to all the rules and regulations. Failing to abide by any rules and regulations may invite fine/court cases/social embarrassment and finally a bad reputation in the market, leading to failure in business.

Following are the basic rules to stay out of trouble:

● Disrespecting any religion is not allowed
● Making obscene gestures or swearing can invite fine/court cases/imprisonment
● Touching or kissing not allowed in public
● Clicking photos of other individuals without their consent

What are The Different Types of Permissible Business Establishments in the UAE?

If a foreign entity plans to establish a presence in UAE, below are the five types of business establishments in which they can invest:
● Apply for a ‘Permanent Establishment” Create a UAE ‘Free Zone Entity’
● Enter into a ‘Commercial Agency Agreement’
● Establish a ‘Branch Office’
● Register a ‘Civil Company’ in Sharjah and Dubai (available only in these 2 locations)

What are the Steps to Follow to Start a Business in UAE?

● Select a business activity type
● Select the jurisdiction
● Decide the company structure/legal form
● Obtain approval for your company name and activity
● Apply for your trade/business/industrial/professional license
● Open a bank account
● Register your company
● Find a local agent/partner/sponsor
● Get your other necessary approvals from external entities
● Draft your Memorandum of Association (MOA)
● Find and rent a business setup/office
● Obtain tenancy contact and Ejari
● Obtain initial approval
● Now you can obtain your trade license

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