Types of Company Formation in Dubai
The first decision every investor needs to take while setting up a business in Dubai is the selection of the right business jurisdiction. This is a strategic decision as there are mainly three jurisdictions: Mainland, Free Zone, and Offshore. Each varies from the other due to the restrictions and flexibility in license and business activities. With the assistance of reputed business setup consultants, the entrepreneurs can choose the right business jurisdiction.
Dubai has established itself as a strong contender among the global investment destinations after its diversification from an oil-based economy to a knowledge-based economy. By designing strong regulations and a business-friendly atmosphere, Dubai has succeeded in attracting investors from across the world. The implementation of the best policies and regulations has made the process of business setup in Dubai attractive to foreign investors. Dubai has always been committed to building a strong infrastructure and maintaining a stable political and social environment for investors to opt for company formation in Dubai, UAE.
The opportunities for a successful company formation in Dubai are diverse and highly beneficial for foreign investors. The mainland, free zone, and offshore jurisdictions are designed for investors with varied business requirements. Every type of business setup in Dubai is governed by stringent laws and regulations and the success of company registration depends upon meeting the standards set by the government.
This vigilance is especially needed while selecting the jurisdiction in which the entrepreneur is planning to start his business. Since the free zone, mainland, and offshore company formation provide the investors with entirely different benefits, the choice of jurisdiction becomes a strategic decision. While the mainland gives enormous trading opportunities in the UAE, the free zones have many restrictions on business activities.
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Features of the UAE Jurisdictions:
Free Zone Company Formation
Free Zones are one of the most favoured types of company formation in Dubai for investors who wish to do business in the UAE. The investors who cater to an international client base find the free zone company formation in Dubai attractive due to its cost-effectiveness and quick business setup procedures. There are more than forty UAE free zones to form a company, which are located in specially fenced geographical areas and more than twenty of such zones are situated in Dubai itself.
The free zone company formation in Dubai offers 100% ownership with high tax benefits. The free zones are basically designed for investors who conduct imports and re-exports and most free zones are located near ports and international airports.
The free zones are controlled and regulated by the respective free zone authorities who issue the trade license in Dubai for the investors. Though the procedure of business setup in Dubai Free Zone is much more straightforward, the entrepreneurs are advised to seek the guidance of reputed business setup consultants in Dubai.
Offshore Company Formation
The offshore company formation in Dubai is considered a great way for foreign investors who seek asset protection and investment diversification with great tax benefits. The process of offshore company registration in Dubai, UAE offers foreign investors a great opportunity to be taxed in both the UAE and the countries of origin of the investors. The UAE has signed Double Taxation Avoidance Agreements (DTAA) with around 115 countries and the offshore company registration in Dubai is a great way to avail of this benefit. However, the investors are not allowed to do any business in the UAE after registering an offshore company in Dubai or other emirates in the UAE. There are three offshore business jurisdictions in the UAE located in three emirates and they are: JAFZA Offshore (Dubai), Ajman IBC Offshore (Ajman), RAK ICC Offshore (Ras Al Khaimah)
The offshore investors need to hire the services of registered agents with authorities who can be the responsible manager for their companies. The registered local service agent’s name can be added to the National Economic Register as the responsible manager.
Mainland Company Formation
Starting a business in Dubai mainland is a great opportunity for foreign investors to enjoy conducting business in the wider UAE market. The mainland company formation in Dubai is controlled by the Department of Economic Development (DED) which regulates and issues the trade license.
By completing the process of company incorporation in the Dubai mainland, foreign investors can do business anywhere in the UAE. The legal structure of a mainland business is directly governed by UAE laws and regulations. Depending on the shareholding structure, the following types of legal structures can be set up in Dubai Mainland.
– Limited Liability Company (LLC)
– One Person Company
– Private Shareholding Company
– Public Shareholding Company
– Simple Limited Partnership
– Partnership Company
– Civil Company
Differences between Free Zone, Mainland and Offshore Company Formation in Dubai
1. Restrictions in Ownership
The major difference between the process of the mainland, free zone, and offshore company formation in Dubai is related to the ownership structure. While the free zone and offshore company formation in Dubai offer 100% ownership in the company for the investors, the process of mainland company formation has a shareholding requirement. The mainland company requires a local sponsor who holds a 51% share in the company. It is mandatory that the local sponsor should be a UAE national. The mainland companies under the professional license can have 100% ownership, provided they appoint a Local Service Agent (LSA).
2. Flexibility in Business Activities
In terms of conducting a business activity, the mainland company formation offers more flexibility to the investors. The process of mainland business setup in Dubai allows the entrepreneurs to conduct business anywhere in the UAE. The mainland companies are allowed to conduct business in commercial, professional, and industrial activities. On the other hand, the process of free zone business setup in Dubai is restrictive in terms of business activities as the investors are allowed to trade within the free zone or internationally. The offshore business structure doesn’t allow investors to conduct any business activity within the UAE.
3. WorkSpace Requirements
For successful mainland company incorporation in Dubai, the companies need to have a physical address. This is a mandatory requirement and the DED will issue the trade license only if the company meets this obligation.
For the free zones, there are no stringent office space requirements to start a business in Dubai. The companies can either have a physical office in the free zone or can operate without one depending on the nature of the business activity and work requirements. The free zones also offer the Flexi desk system for the companies where they can use common business centre desks. The Flexi desk is a great benefit to the new startup entrepreneurs, which allows them to save initial costs of company formation.
4. Number of Visas
There is no restriction on the visas that the investors can obtain on a mainland trade license in Dubai. An E-quota will be issued by the Ministry of Labour for the mainland company that shows the visa eligibility. If the company requires more staff, the visa eligibility can be increased, but it depends on the office space. The company can get more visas if they have more office space. For the free zone licenses, two visas are offered for the smart office package, and if more visas are needed the investors need to lease out a physical space. The UAE has a systematic procedure for visa processing and efficient business setup services in Dubai need to be consulted to make the process quicker.
5. Approval from Government Authorities
To obtain a mainland trade license in Dubai, the companies need to secure approvals from various authorities depending on the business activities. Such government authorities include
- Dubai Municipality
- Ministry of Labour
- Department for Naturalization Residency affairs of Ministry of interiors or Immigration (MOI)
For specific business activities, approvals need to be obtained from the concerned authorities. For instance, approval from the Dubai health authority (DHA) is required to set up a business related to medical activities. Apart from this, there are certain activities that are categorized as special activities that need approval from the Legal
- Oil & Gas
On the other hand, the free zone company formation in Dubai is much easier compared to the mainland as usually the approvals from external authorities are not required.
How Registering a Company in Dubai Gives Great Benefits to Foreign Investors?
New entrepreneurs from across the world desire to start their first business in Dubai and the big companies consider the emirate as the perfect destination to expand their global presence by setting up a branch here. Factors such as a proactive government, modern infrastructure, existence of free zones, favourable tax regimes etc. have proven to be the top reasons why the foreigners are favouring Dubai to register a company. Dubai is a land of ever-growing opportunities and businesses ranging from trading and manufacturing to e-commerce and fintech are reaping profits in Dubai. The following are the top factors that prompt foreign investors to register a company in Dubai, UAE.
1. Dubai is a Gateway to International Markets
Dubai’s strategic location gives immense trade benefits to the investors as they get access to global markets such as Africa and other Middle East countries. The emirate is ideally located between the East and the West, which is a strong reason why the investor’s eye is on the process of business setup in Dubai. The strategic location of Dubai makes it the perfect place for setting up businesses like imports, exports, tourism and logistics.
2. Strong Support from a Proactive Leadership
Dubai is blessed with strong and able leadership that is hell-bent on providing support to the investors in all possible ways. The government has designed special strategies focused on various sectors such as Dubai Industrial Strategy 2030, Dubai Health Strategy 2021, Dubai Plan 2021 etc. The stable political environment in Dubai is a great benefit for foreign investors and the regulations are business-friendly.
3. Outstanding Connectivity to Global Markets
Robust infrastructure is an absolute necessity for attracting foreign investments and thereby bolsters the economy. Dubai’s focus on economic diversification has strengthened on the back of sophisticated infrastructure facilities including an international airport, seaports and superlative transportation facilities.
4. Expat Friendly Visa System
The UAE’s expat-friendly visa system has proven to be a boon for foreign investors who desire to set up a business in Dubai. It is easier for a foreign investor to obtain a resident visa after starting a business in Dubai. The UAE residency visa provides the investors with the right to lease out a property, buy a vehicle, and travel within and outside the country. The investors will also be able to sponsor their dependents easily after obtaining a residence visa. The best business setup consultants in Dubai provide the businessmen with expert assistance to obtain the visa quickly and without delays.
5. General List of Documents Required for the Process of Business Setup in Dubai
- Initial approval form duly signed by all the partners
- Trade Names
- Passport copies of all the shareholders
- MOA duly attested
- Tenancy Contract of office, Minimum office space required 500 Sq.feet. (for mainland companies)
- Details of the Shareholdings
- Address & Contact nos. for preparing MOA
- NOC from the current Visa sponsor if the foreign shareholders/Manager is UAE resident
Why Choose Jitendra Business Consultants for Company Formation in Dubai?
A reputed business setup consultancy firm like Jitendra Business Consultants (JBC) saves the investors from making a wrong choice by providing reliable company formation solutions. JBC has years of experience in assisting businesses from a variety of industries in successfully executing the process of forming a company in Dubai, UAE. JBC’s core strength is a team of highly qualified business setup consultants who are well-versed in all the local laws and regulations. This commendable knowledge of UAE regulations enables JBC to prepare every document properly and obtain necessary approvals from the government departments and ministries on behalf of the investors.
Jitendra Business Consultants is a one-stop solution for all the services related to the process of business setup in Dubai including company formation, company registration, bank account opening, visa processing, ESR filing, VAT filing, and accounting & bookkeeping & auditing of accounts etc. JBC is also registered as an agent with UAE offshore & free zone authorities. Being a business setup consultant in the UAE, JBC has formed hundred of companies with world-renowned free zones like DIFC, DMCC, JAFZA, DAFZA, D3, DIC, DMC, DSO, DWTC, DWC, RAKEZ, AFZ, UAQ FZE, IFZA & Saif Zone. By availing of the services of JBC, the investors achieve their business goals with the satisfaction of fulfilling all the regulations and requirements.