The selection of an appropriate legal structure is a critical step in the process of company formation in Dubai-free zones. However, foreign investors often get confused between two important company structures in Dubai’s free zones: the Free Zone Establishment (FZE) and the Free Zone Company (FZCO).
In most cases, business setup consultants aid the new investors select an appropriate corporate structure for their free zone company in Dubai. Selecting the wrong legal structure will derail your business operations.
In this guide, we will guide you on the differences between a FZE and an FZCO:
What is a Free Zone Establishment (FZE)?
An FZE is a legal entity set up in any of the UAE free zones by a single shareholder. An FZE offers all the free zone company formation benefits including 100% foreign ownership, tax exemptions, and ease of doing business.
Business up in Dubai free zones under the FZE structure is ideal for small businesses. An FZE in the UAE free zones has features such as:
- Single shareholding
- Limited Liability
- Simple to manage and administer
- Ability to choose from a wide range of business activities
What is a Free Zone Company?
An FZCO is a type of business structure available for company formation in Dubai-free zones. An FZCO structure is designed for companies with more than one shareholder. An FZCO also offers all the free zone company benefits such as 100% foreign ownership, tax exemptions, and simple regulations.
This type of business setup structure is ideal for larger businesses or joint ventures planning to set their footprint in Dubai.
Major Features of FZCOs:
- Multiple shareholding options (generally, two to five shareholders)
- Limited liability
- Access to a diverse range of business setup activities within the UAE free zone
FZE and FZCO: the Key Differences
If you are struggling to choose between an FZE and an FZCO in Dubai-free zones, it is advisable to consult with business setup consultants. We can demystify the key differences between the two legal entities. Some key differences are:
| FZE | FZCO |
| Permits single shareholding | Multiple shareholders allowed |
| Typically low capital requirement | Higher capital requirement compared to FZE. |
| Simple management and administration | Administration can be complex due to multiple shareholding. |
| More flexibility and control due to single shareholding. This helps in quick decision-making. | Needs consultation with shareholders while making decisions |
How to Choose the Right Company Structure?
You need to consider the following points:
- Assess the business activities permitted under the legal structure
- Identify the number of shareholders
- Understand the capital requirements for each structure
- Understand the tax implications or any other legal implications
- Check whether the structure helps you achieve your business goals
- Before entering Dubai, talk to experienced business setup consultants
Move to Dubai with the Help of Business Setup Consultants
If you are moving to Dubai to establish a business in a free zone, ensure you know everything about the legal structures. This small business setup guide on the differences between FZE and FZCO may come in handy for you while making a move to Dubai.
For any practical assistance in Dubai, it is advisable to consult with experienced business setup advisers. Jitendra Business Consultants (JBC), located in Dubai, is one of the best business setup consultants. We can guide you on business licensing procedures, activity selection, and legal structure advice and compliance requirements. Call us today for an insightful consultation.
