Dubai, renowned for its exceptional tax structure, is a prime location for company formation. It’s a leading city for business operations and a magnet for global investors.

The city is a preferred destination for both international and local organizations, thanks to its world-class infrastructure, strategic geographical positioning, and a diverse market that offers low operational costs and logistics. With over 25 Free Trade Zones (FTZ), Dubai has become a hotspot for global entrepreneurs looking to register their businesses.

Dubai Company Registration: Types, Laws, Documents, and Costs

Essential Legal Considerations for Business Ventures in the UAE

Before launching a business venture, it’s crucial to understand the legal requirements as stipulated in corporate law. This section explores the following key areas:

1. Business Entity and Jurisdiction: The choice of business entity, intended commercial activities, and operational jurisdiction are critical decisions.
2. Protection of Intellectual Property: Comprehending and protecting intellectual property, including trademarks, patents, and business domains, is vital to avoid unauthorized usage or imitation.
3. Business Licensing: Obtaining a business license from the Department of Economic Development (DED) is a prerequisite for conducting commercial activities within the UAE.
4. Partnership Agreements: Formalizing agreements with partners, particularly in familial or friendly partnerships, helps prevent future disputes and ensures transparency in business operations.

Business Licenses in Dubai

Grasping the intricacies of licensing is key to kickstarting business activities in Dubai. This section outlines the process and requirements for various licenses, such as:

1. Commercial License: This license, which enables the import, export, and sale of products and services, is crucial for businesses leveraging Dubai’s strategic location.
2. Professional License: Designed for service-oriented businesses, this license is required for professionals like accountants, legal advisors, and consultants.
3. Industrial License: This license, essential for manufacturing companies, permits the production and processing of goods within designated industrial zones.

Business Structures in Dubai

Dubai presents a range of legal structures to cater to varied business requirements, such as:

1. General Partnership Company: This structure, marked by mutual responsibility among partners, is generally limited to UAE nationals.
2. Joint Venture Company: A result of cooperation between foreign and local entities, joint ventures facilitate shared investment and management duties.
3. Public Joint Stock Company (PJSC): PJSCs, with share capital split into transferable stocks, provide avenues for public investment while complying with regulatory norms.
4. Private Joint Stock Company: Similar to PJSCs, but with limited share offerings and a minimum UAE national ownership requirement.
5. Limited Liability Company (LLC): A favored choice for diverse business activities, LLCs provide limited liability to shareholders and can accommodate up to 50 partners.
6. Partnerships: Restricted to UAE nationals, partnerships are available in various forms, including limited partnerships and partnerships limited by shares.

Key Business Laws in Dubai

Comprehending the crucial laws that regulate commercial activities is vital, such as:

1. Commercial Companies Law: This law enforces adherence to UAE nationality requirements and other regulations that govern corporate entities.
2. Anti-Money Laundering Law: Implemented to fight money laundering and terrorist financing, this law promotes financial transparency and integrity.
3. Tax Law: This law oversees taxation procedures, rates, obligations, and exemptions, ensuring adherence to fiscal regulations.

Different Types of Company Registrations in Dubai

Dubai offers a variety of company structures to cater to diverse business needs, including:

Free Zone Companies/Establishments

Free zone companies/establishments are located in Free Trade Zones (FTZs), where they follow unique laws related to taxation, ownership, customs, and more, distinct from mainland Dubai. Foreign entrepreneurs can have complete ownership of the company established in an FTZ. There are two types of companies that can be established in an FTZ: Free Zone Establishment (FZE) and Free Zone Company (FZC).

A free zone establishment (FZE) can be set up by a single shareholder with limited liability. A free zone company/LLC can have more than one shareholder (up to five). Both natural and legal persons can establish a free zone establishment or free zone company. The legal requirements for incorporating a free zone company/establishment are as per the regulations and rules set by the respective free zones.

Limited Liability Company (LLC)

An LLC in Dubai can be established by a minimum of two shareholders and can have up to 50 shareholders. The liability of an LLC’s shareholders is limited to their contributions towards the share capital. An LLC can engage in any business, excluding banking, insurance, or monetary investment.

Onshore Company

An onshore company is established in mainland Dubai and is managed by its directors from Dubai. Previously, Dubai allowed only 49% ownership for foreign entrepreneurs, and it had to be established along with a national sponsor or agent.

However, this has been amended by the Dubai government. Currently, a foreign entrepreneur can have 100% ownership in a Dubai onshore company, excluding companies established for economic activities with a strategic impact relating to seven sectors.

Offshore Company

An offshore company is a business formed and operated outside the country’s jurisdiction. It is a wholly foreign-owned company registered in Dubai but has a base in another country. Foreign entrepreneurs have 100% ownership of offshore companies.

Branch Office

A branch office is an extension of the parent company. Any foreign company can set up a branch office in mainland Dubai and most FTZs across Dubai. It is a viable option for companies looking to expand into the UAE local markets.

Benefits of Registering a Company in Dubai

• Provision for 100% repatriation of capital and profits
• Cost-effective recruitment due to lenient labor laws
• Exemption from personal or corporate income taxes
• Outstanding physical infrastructure
• Availability of shared and virtual office facilities in some FTZs
• Exemption from Commercial company’s law provisions in FTZs
• Exclusion from import and export duties

Steps to Form a Company in Dubai

Every entrepreneur/applicant should adhere to the following procedure to register a company in Dubai:

Decide on the Business Structure

Before applying for company registration in Dubai, an applicant should first decide on the business structure. The options include establishing a free zone company or free zone establishment in the FTZ, LLC, onshore company, offshore company, or a branch office. The choice of the appropriate business structure depends on factors such as the number of shareholders, capital requirements, and the commercial activities to be undertaken.

Reserve the Company Name

The applicant should select a company name in accordance with the local laws. It should be unique and not similar to an existing company name. The availability of the proposed company name should be confirmed with the Dubai Economic Department (DED) or the respective Free Zone Authority. The company should conduct its business activities under its approved company name.

While choosing the company name, the applicant should consider the following:

• The name should not disturb public peace or violate the public morale of the country
• It should align with the company’s legal form
• It should not be previously registered
• It should be in accordance with the business activities proposed to be undertaken by the company
• It should not contain the name of any governing authorities, religions, or external bodies’ names or logos
• It should not be insulting, controversial, or derogatory
• When the names of entrepreneurs are chosen, they should reflect the full name of the person and not nicknames

Securing a Business License

Once the company name is reserved, the applicant should apply for a business license that aligns with the intended business activities in Dubai. The business license is a legal permit that allows its holders to conduct the specified business activities. The Department of Economic Development (DED) is responsible for issuing local company licenses.

Choosing the Company Location/Jurisdiction

Applicants need to select the location for their company’s office space. They have the option to either purchase or lease land for the office. The choice of office space depends on the chosen business activity, the number of employees, and the budget allocated for the same. The various free zones in Dubai offer different office sizes ranging from 20-30 sq.m. to 2000 sq.m. and beyond.

Opening a Corporate Bank Account

After securing all the necessary registrations and approvals from the relevant authorities, the company needs to open a corporate bank account to manage the company’s financial transactions.

Required Documents for Company Registration

• Copy of the passport of the shareholders and directors
• Copy of the national identity card of the directors and shareholders
• Recent bank statement, credit card statement, or utility bill containing the name and residential address of the shareholders and directors
• Company’s Memorandum of Association and Articles of Association
• Board resolution detailing the formation of the branch or subsidiary and nominating an authorized manager
• Share capital information
• Duly authenticated contract of appointment of a company or service

Understanding the Costs of Establishing a Business in Dubai

The cost of establishing a business in Dubai is influenced by various factors, including the type of business activity, the jurisdiction under which the company operates, and the necessary approvals and certifications.

The costs have been categorized into two main sections: Mainland and Free Zone.

Cost of Setting Up a Company in Dubai, Rakez, Sharjah Freezone

Establishing a business in the UAE offers inherent cost-saving benefits, such as tax advantages, strategic locations, and a robust economy, making it a preferred choice for business setup in the UAE compared to other countries.

The cost of a Freezone business license varies based on different locations. Here are the major free zone business setup costs:

1. Sharjah Media City Freezone (SHAMS) starts at AED 5,500
2. Dubai Freezone – IFZA starts at AED 12,500
3. Dubai Freezone – DUQE starts at AED 12,500
4. Dubai Freezone – MEYDAN starts at AED 12,500
5. RAKEZ Freezone – Business License + 1 Lifetime Visa starts at AED 11,990

It’s advisable to consult with business setup consultants before processing the application as there are often promotions on company setup in various free zones.

Cost of Company Formation in Dubai Mainland

Similar to the free zone, the costs of setting up a company in Dubai Mainland depend on factors such as the nature of the business, the number of visas, and the premises.

1. Initial Approval in DED (Department of Economic Development) is AED 235 (One-time cost)
2. Approval of trade name – AED 735 (One-time cost)
3. Office rent – depends on the size of your office. The average office rent would be AED 50 and above per sq. feet per annum. Office rent depends on location and required area.
4. Attestation of Memorandum of Association (MoA) – AED 1200 (One-time cost); to be drawn up and approved by all partners of the company
5. Drafting of contract and court agreement attestation – AED 500 for typing (One-time cost); all the partners or their attorneys will need to sign the court agreement attestation
6. Registration with Ministry of Economy – AED 3,000 (One-time cost); your company will be registered upon the payment of this fee.
7. Trade license fee – Approximately AED 10,000
8. Market fees – to the government as a percentage of the office rent – 5% of the rent for shops, 20% of the rent for warehouses.

The above information provides a detailed breakdown of the company formation cost in Dubai Mainland; however, the cost of setting up a company in Dubai Mainland generally ranges between AED 14,500 and AED 25,000.