One of the first steps in starting a company in the UAE is choosing the right legal business type. There are a host of legal business entities in the UAE that investors can choose depending on their capital, shareholding pattern, nature of the business, etc.
Choosing the right legal entity is a critical choice as it determines the legal structure that your company is bound to and also forms a base in choosing your business activities, the inclusion of shareholders, and future business operations.
Here are the legal business types available in the UAE for you to set up your business.
The Sole Proprietorship is a business owned by one person. The business entity performs a range of activities like tailoring, saloon service, restaurant service, etc.
A Sole Proprietorship is 100% owned by an individual and not a company. The operations and profits remain with the owner.
Also, any financial obligations also remain with the owner and are liable to clear off all the debts for the successful business operations.
Nationalities other than UAE and GCC Nationals must appoint a Local Service Agent (LSA) to manage the licensing requirements and other liaising with the government.
Local Service Agents will act as a support partner in the UAE for a non-UAE national owned company. They will not be indulging in any of your core business operations or profit-sharing.
LSA provides liaising service with the government to ensure hassle-free business operations. Their services have to be renewed yearly by paying a fee.
One Person LLC Company is a limited company owned by an individual. The difference between a sole proprietorship and One Person LLC Company is that the business liability is limited to the company shares held by the owning entity.
A UAE national or GCC nationals can set up and own this legal entity. One Person LLC Company can be also owned by a corporate body that is 100% owned by a UAE or GCC national.
Civil Work Company includes several professionals of any nationality from various industry sectors like medicine, law, engineering, accounting, etc.
Nationalities other than UAE or GCC are required to appoint a Local Service Agent to liaise with the government officials to ensure smooth business operations in the mainland of UAE.
A Limited Liability Company (LLC) is a legal form that has the benefits of a partnership and corporate structure.
LLC company must have 2-50 shareholders; the shareholders are liable to the extent of their share in the capital of the company.
LLC Company can conduct any business activity that falls under the industrial, commercial, professional or tourist license in UAE.
It is to be noted that for forming an LLC Company, there must be a UAE local sponsor (51% of ownership) and rest can be owned by the foreign national.
A Private Shareholding Company (Private Joint-Stock Company) is a partnership of 2-200 individuals. There is a minimum capital of AED 5,000,000 in the business by the partners.
A private shareholding company can form any commercial or industrial type of business. Professional activities are exempted from this legal business type.
In a private shareholding company, 51% of shares will be vested among the UAE local partner and rest can be owned by the foreign investor.
A Public Shareholding Company is a legal type where the capital is divided into transferable shares of equal value.
Partners can invest in commercial, industrial or professional business licenses and allied activities in accordance with the Department of Economic Development.
There must be at least 5 UAE nationals in the founding members' panel (owning 30% -70% shares) in the public shareholding company.
Also, a minimum capital of AED 30,000,000 is to be pooled in by the founding members for the company formation under the Public Share Holding Company type in Dubai.
The Simple Limited Partnership is formed between a minimum of two partners - one general partner and one limited partner.
The general partners are liable for the company's as well as their personal obligations related to the company's operations.
Whereas the limited partners will have the obligations equal to the share in the company capital.
The company can only conduct the activities listed under the commercial and industrial license in the UAE.
The Simple Limited Partnership must have UAE nationals as general partners; nationals of other countries can be limited partners.
A partnership company is where two or more individuals share ownership. All aspects of the business are shared among the partners unless otherwise specified through a contract.
The Partnership Company can only conduct the activities listed under the commercial and industrial license in the UAE.
Partnership company's shares must be 100% owned by UAE Nationals and cannot be offered to the public.
No corporate body or GCC nationals can own a partnership company. The business liabilities have to be shared by the partners.
The personal and business assets of all the partners have to be used to pay creditors in case of business reporting losses.
Branch of a Foreign Company in UAE is eligible to conduct professional activities and certain commercial & industrial activities upon obtaining clearances from the Ministry of Economy.
A branch of a foreign company is 100% owned by the parent company and must operate in the same name and conduct the same business as the parent company.
A branch will require a Local Service Agent (LSA) who can be UAE national or a company owned by one or more UAE nationals.
A representative office for commercial activities is not a legal entity. It is a business activity the branch can conduct.
A representative office can be utilized by the parent company to promote and market the company’s business. They are not eligible to conduct business operations.
A representative office requires a Local Service Agent (UAE national or a company owned by UAE nationals) to carry our government liaising for obtaining clearances, renewals, etc.
A branch of a Dubai based Company must only conduct the list of activities included in the main company license.
A branch must be completely owned by the parent company and must appoint a manager to supervise the operations and act as a contact person.
The branch of a UAE based company works similar to how a branch of Dubai company works. Read the above section for the details.
The branch of a GCC based company works similar to how a branch of Dubai company works. Read the above section for the details.
The branch of a free zone company can carry out commercial, industrial, and professional business provided the main company is authorized to do business in the mainland of Dubai.
If the main company license is in any of the free zones in UAE (not as a branch of foreign company). You can apply for a branch license from DED to expand your operations in the mainland of Dubai.
An Intelaq License can only be set up by a UAE national. It is a home-based business to conduct any type of professions like trading, art, creatives, tailoring, boutique, etc.
The business must be able to be operated in a residential environment. The business must not cause disturbance to the neighbors. It can take the legal forms of Sole establishment, LLC Company, Civil Company, etc.
There is no sponsorship of employees under this business form.
The SME License can be applied by businesses that are 100 % owned by UAE Nationals. It can take up any legal form. The license is valid for three years and allows the owner to sponsor employees.
To know more about the legal business forms for foreign investment in Dubai, talk to our experts right away!
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