Dubai Company Formation Guide
With its diverse population and ever-growing economy, Dubai is an attractive option for those looking to set up businesses in the Middle East region; However, company formation Dubai can be tedious and the government has set strict rules. Regarding the type of business a foreign individual or company can set up as well as ownership guidelines for different types of businesses.
Dubai Company Formation Types
A commercial presence within the region has many advantages: it is much easier to search for market prospects, build contacts and establish a relationship with clients and potential clients. Due to the unpredictable nature of business in the UAE, many businessmen prefer to interact with well-known entities or those that come through recommendations. This is an important aspect of doing business in Dubai, even more so than in other countries.
There are several types of businesses that an individual or a foreign investment company can choose to establish in the region:
- Direct trade – where business is done directly with dealers and distributors in the area.
- Branch office – additional approval required by the Department of Economic Development so representative offices are allows 100% foreign ownership with the appointment of a local sponsor. Although the sponsors are not involved in the day-to-day running of the company, their primary goal is to facilitate obtaining legal documents such as visas and business cards and usually a percentage of the company’s profits are paid.
- Business – additional approval required by the Ministry of Economy and Commerce and a business requires the appointment of a local individual or company.
- Limited Liability Company – requires at least 51% local ownership with the approval of the Department of Economic Development. The minimum capital investment is $82,000 or AED 300,000.
- Free Zone Companies – Companies established and managed by the Free Zone authorities while the company is wholly owned by the person who established it without the need for a local sponsor to act as a contact. Freezone company formation has many benefits including exemption from import duties, easy recruitment procedures that give access to competitive skilled labor.
All company formations in Dubai need a license so operate legally in the emirate and in general. These licenses fall into the three main categories:
- Commercial licenses – regulates all types of commercial activities
- Professional licenses – regulate professional services, craftsmen and craftsmen
- Industrial licenses – regulate industrial and manufacturing activities
Most licenses are issued by the Dubai Department of Economic Development however, a few industry specific licenses are issued by other authorities and the ministries:
Department of Tourism and Commerce Marketing – Issues licenses for all businesses related to hotels and tourism
Central Bank of the UAE – Issues licenses to all banks and financial institutions
Ministry of Economy and Trade – Issues licenses to all insurance companies
The Ministry of Finance and Industry – Issues licenses to all manufacturing companies
Health Ministry – Issuing licenses for companies that deal in medical and health products and services
Ownership Requirements in Dubai Company Formation
In general, UAE law states that UAE nationals own 51% of all companies established within the country with a few exceptions:
- Where local citizens are require to own 100% of the ownership as in the case of general partnership companies.
- In free zone areas where 100% foreign ownership is allows without the need for a local sponsor.
- In professional companies or those dealing with artisans where 100% foreign ownership is allows.
- Where companies wholly owned by the countries of the Gulf Cooperation Council enter into partnership with the citizens of the United Arab Emirates
- Where 100% ownership of GCC nationals is allows
- When registering a branch or representative office in the Dubai