A Complete Guide to Starting a Business in Dubai

When it comes to starting a business in the Gulf region, the UAE – particularly Dubai – is usually near the top of the list of choice locations.

The emirate is known for its low level of bureaucracy and digitalised processes, strategic location in the Middle East, and, of course, its extremely low tax rate, which remains at 0% on both personal and corporate incomes.

Many people are also drawn to the emirate because of the streamlined process of business setup in Dubai. The same holds true whether or not you are familiar with the UAE and its corporate standards.

If you want to start a business in Dubai, one of the first things you should do is to find reliable company formation services. With their help and professional guidance, you can get all the required documentation work done to get you started, including obtaining your licence, submitting visa applications, opening a business bank account, etc.

Also, when you have seasoned experts in company setup in the UAE advising you every step of the way, you know that you’ll be following relevant rules, regulations and requirements. This way, you can confidently move forward and grow your business.

To help you become more familiar with the process, here’s your complete guide to starting a business in Dubai.

Setting Up Shop in Dubai – Mainland vs Free Zone

When planning to establish a business in Dubai – whether it’s to open a school or a retail or media business – it’s crucial to know the distinction between a mainland and free zone company.

After all, you’ll need to choose between the two before you can go about the company formation process and acquire a business licence in Dubai.

Mainland Company

There was a time when foreign nationals who wanted to start a UAE mainland business needed a local, Emirati or UAE national to act as a sponsor or local service agent (LSA). This local sponsor would then own a 51 percent stake of the company and it was only with their participation that foreign nationals could start a business in Dubai’s onshore or mainland business zones.

However, after the introduction of the 100% foreign ownership law in 2018, this requirement was finally lifted. Because of this game-changing move in UAE investment law, foreign nationals can now explore establishing a new firm in Dubai without the need for a UAE national to act as their local sponsor or LSA.

However, this new rule on business setup in the UAE excludes specific industries, including: 

• Banking and finance
• Blood banks, quarantines and venom/poison banks
• Certain recruitment activities
• Commercial agencies
• Fishing and related services
• Insurance
• Investigation, security, military (includes military weapons, explosives, dress, and equipment manufacturing facilities)
• Medical retail (includes pharmacies)
• Oil exploration and production
• Pilgrimage and Umrah services
• Post, telecommunication and other audio-visual services
• Printing and publishing
• Road and air transport
• Water and electricity providers

Free Zone Company

Foreign nationals who want to open a business in a free zone (also known as a free trade zone) in Dubai will own 100% of the company.

With an offshore business, you can easily safeguard your wealth and assets. However, firms operating in a free zone can only do business and trade with enterprises outside the UAE. Also, in lieu of a business licence, you will be issued a certificate of incorporation.

Types of Company Structures

The following are the many corporate structures that the UAE provides to entrepreneurs and businesspersons who wish to do business in the country, including Dubai.

Sole Proprietorship

A sole proprietorship is a business that is owned and operated by one person who has complete control over the company’s activities and owns 100 percent of any earnings. This company entity is the most basic type of corporate structure in the UAE, with no particular criteria other than that you hold a residence permit if you are a foreign national.

• If the proprietor is not a UAE national, an LSA is assigned to open the business and take care of licensing requirements and government-related concerns.
• There is no minimum amount of capital required for a sole proprietorship.
• The company name must be relevant to the sort of business activity being conducted.
• Only one manager is allowed in a sole proprietorship.
• Only UAE and Gulf Cooperation Council (GCC) nationals are permitted to hold commercial or industrial sole proprietorships.

Limited Liability Company

The limited liability company or LLC is the most popular type of business entity in the country. In an LLC, the partners’ liability is limited to the amount they invest in the company.

However, LLCs cannot engage in professional or consulting activities, with the exception of banking, insurance, and investment. 

• Any industrial or commercial activity can be carried out by an LLC.
• The UAE national counterpart owns 51% of the company, whilst the remaining 49% can be owned by the company owners.
• A UAE accredited auditor is required for LLC creation.
• The corporation can have a minimum of two and a maximum of 50 shareholders.
• LLCs must choose one to five managers as part of their operational business structure.

Private Shareholding Company

In the UAE, a private shareholding company is known as a private joint shareholding company (PrJSC). A private joint shareholding company can be established with a minimum investment of AED 5,000,000 from at least three investors.

Apart from professional business operations, this company structure is compatible with a wide range of commercial and industrial activities. 

• To form a private shareholding corporation, you must first get clearance from the Ministry of Economy.
• It is possible for a firm to have multiple branches. Each individual branch may engage in any or all of the activities covered by the main business licence.
• One manager must be appointed by the company.
• A UAE national must possess at least 51% of the shares.
• A national of the GCC region can own as much as 100% of shares.

Public Shareholding Company

A public shareholding company or public joint shareholding company (PJSC) is a legal company having a minimum capital of AED 30,000,000 and transferable shares of equal value. In a public shareholding company, each shareholder is only liable to the amount of their capital.

• In accordance with Department of Economic Development (DED) business legislation, partners can engage in any industrial, commercial, or professional business activity.
• The organisation must have a maximum of five appointed managers.
• It must have at least five UAE nationals as founding members. Furthermore, the UAE national founding members must own between 30% and 70% of the capital shares.
• A firm can have multiple branches. Each individual branch may engage in any or all of the activities covered by the main business licence.

Civil Company

In the UAE, recognised professions (e.g., doctor, accountant, engineer, or lawyer) can establish a civil company. It can have 100% shareholding partners, with civil company activities limited to the practice of specific professional operations described as physical or intellectual. 

• A foreign corporation investing as a partner in a civil company must be involved in the same industry as the civil company.
• If the owner is a foreign national, an LSA is necessary for the business establishment process.
• This firm can be set up by partners of any nationality.
• If the business engages in engineering activities, one of the partners should be a UAE national controlling at least 51% of the company.
• If the company is engaged in consulting activities, it must be 100% owned by professional partners engaged in the same activity.

Partnership Company

The ownership of this sort of company entity is shared by two or more partners, who split earnings and losses according to a predetermined ratio.

Partnership companies fall under two categories: 

• General partnerships where the general partners must be UAE nationals, with both being responsible for the partnership's debts.
• Limited partnerships where partners are only liable for the debts of the company up to the extent of their capital contribution. In addition, a limited partner cannot be a member of the management team or have their name appear in the partnership's name. Non-UAE national partners can only be limited partners.

There are no limitations on the percentage of ownership held by general or limited partners.

Branch of a Foreign Company

A UAE national is required for a foreign company to open a branch in the UAE.

The branch must engage in the same type of business as its parent company. It can rent space in a building, issue UAE and international sales invoices, and sign local legal contracts.

However, a branch is prohibited from manufacturing, importing, or exporting products to or from the UAE.

Representative Office

A representative office is not a separate business entity, but rather a business activity that a branch might engage in. It has its own set of requirements, including the ability to promote and market the parent company’s business. 

However, it cannot operate as a business.

An LSA is required for a representative office.

Types of Business Licences

Depending on your business goals, you can establish a variety of firms in Dubai.

But first, you need to choose the type of business licence you want, as the Dubai Department of Economic Development regulates three different forms of business licences, namely: commercial, industrial and professional licences. 

• Dubai commercial licences are offered to businesses that engage in trading operations, such as sales.
• Industrial licences are required for businesses that engage in manufacturing, processing, or packaging.
• Professional licences are appropriate for sole proprietors in Dubai and relate to directly or personally offered services such as consulting.

If a businessperson wishes to operate a firm in one of Dubai’s free zones, the same business licence categories apply.

Essential Steps to Start a Business in Dubai

Starting a business in Dubai requires you to take a number of crucial steps to realise your vision and business goals.

More or less the same steps apply whether you are starting a business in Dubai as a foreigner.

1. Select a company name.

When it comes to naming a company as part of starting a small business in Dubai, there are certain guidelines to keep in mind.

A company name must not use offensive language or refer to Allah or some other religion. If you plan to name your company after an individual, they must be the owner or partner in the company.

2. Provide the required incorporation documents.

Aside from the company name application and specifics of your business activities, you have to be ready to present shareholder passport copies.

If you are applying for a free zone business, make time to familiarise yourself with specific free zone requirements.

3. Wait for business licence approval.

Once your application to start a company in Dubai has been processed, you will get a notification of when and where you can get your business licence.

4. Open a business bank account.

After you successfully open a business in Dubai, it's time to open a corporate bank account.

There are several highly reputable local and global banking and financial institutions in the country you can choose from, depending on your requirements and preferences.

5. Facilitate visa applications.

Your visa requirements may include your own, your business partners' and your employees.

At this stage, PRO services in Dubai will come in handy as they can assist you with attestation, Emirates ID registration and other visa- and labour-related activities.

In most free zones, however, business owners can apply for visas for their partners, staff and any personnel you need to operate your business.

Cost of Setting Up a Business in Dubai

As you might surmise, starting a business anywhere necessitates a large upfront expenditure in terms of office space, licensing fees, employee visas, and other related business setup expenses.

The total cost will also vary depending on the sort of business you want to start (i.e., commercial, industrial, or service), as well as the legal structure you choose.

The amount of capital required for a business in Dubai varies based on the type of business. As an example, PJSCs require AED 30 million in cash. Meanwhile, PrJSCs require AED 5 million in cash.

Other types of operations do not have to have a minimum capital requirement, so you can start business in Dubai with a relatively low investment. However, this must be expressly stated in the memorandum of association (MOA) and be an amount judged to be ‘adequate’ to meet business requirements and legal guidelines.

Start Your Business on the Right Footing

Starting up a business in Dubai can seem a tad challenging on the surface – what with the legal requirements you need to meet. 

However, things can be a whole lot easier when you work with a trusted and reliable business consultant in the UAE that’s well-versed in the ins and outs of company formation in Dubai and neighbouring emirates. 

Ready to set up your business in Dubai? 

Talk to us at Emirates First today.