The United Arab Emirates has undergone a remarkable transformation over the past few decades, evolving from a nation focused on fishing and pearling to a financial powerhouse with a diverse range of thriving industries. With a stable political system, strong economic growth, favourable tax policies, and open trade regulations, the UAE has become an attractive destination for investors.
Starting a company in Dubai, or anywhere else in the world for that matter, is a significant decision that involves various tasks such as planning, research, budgeting, set-up, and decision-making. Therefore, it would be a good idea to seek guidance and assistance from business setup consultants in Dubai. However, if you wish to do things by yourself, this guide will cover the crucial steps when it comes to business setup in Dubai, UAE.
Understanding Business setup in Dubai
If you’re interested in starting a business in Dubai, you’re not alone. Here are the different options available to you:
1. Online Method
The UAE Government has introduced the Basher service, which allows investors to establish their businesses in the UAE within 15 minutes using a unified online platform. This platform connects with federal and local government entities to provide commercial licence services.
Additionally, the Abu Dhabi Business Centre provides investors with an instant licence service to start their businesses online, and the government has launched the Dubai Virtual Commercial City program (VCC) which allows entrepreneurs and freelancers from around the world to start a virtual company in the UAE even if they don’t live in the UAE.
2. Traditional Method
The traditional method of business setup in Dubai involves a series of steps, procedures, and approvals from the Economic Department and other government agencies.
Starting a business in the traditional ways involves the following steps:
- Identifying the business activity
- Choosing the right legal form
- Registering the trade name
- Securing the initial approval
- Drafting a Memorandum of Association or Local Service Agent agreement
- Select the right business location
- Obtaining additional government approvals
- Submitting documents and paying the fees
Starting a business in Dubai is relatively straightforward. However, securing the services of business setup consultants in Dubai can make the process even simpler. They can assist you in creating a business account and handle all the paperwork and other related tasks on your behalf.
a) Identifying the business activity
The business activity is the foundation for selecting the legal form and type of licence, such as commercial, industrial, or professional. This is why it is important to identify the core sector or industry around which your business will be centred.
There are six types of licences available: industrial, commercial, professional, tourism, agricultural, and occupational.
It is worth noting that an investment/business can have multiple business activities and there are over 2,000 business activities to choose from in the UAE.
b) Choosing the right legal form
The legal form of the business is mainly determined by the business requirements and it also determines the applicable laws and regulations. In the UAE, investors have the option to choose from the following legal forms:
- General partnership
- Limited partnership
- Limited Liability Company (LLC)
- Public Joint Stock Company (PJSC)
- Private Joint Stock Company (PrJSC)
- Civil company
- Local company branch
- GCC company branch
- Foreign company branch
- Free zone company branch
- Sole establishment
- Holding companies
It is important to note that the legal form of the business must align with the chosen business activity.
c) Registering the trade name
A trade name distinguishes one business from another and represents the nature and form of the business. Investors can apply for a trade name through the economic department in each emirate, via its website or mobile application.
When choosing a trade name, it is important to consider the following provisions:
- The trade name must be followed by the business structure acronym, such as LLC, EST, PJSC, or PrJSC.
- It should not violate public morals or order in the country.
- It should be compatible with the required type of activity and legal status of the company or business entity.
- It should not contain names of any religion, governing authority or logos of external bodies.
- It should not have been previously registered.
During the application process, you will be issued a payment voucher or a transaction number, which you will need to use as a reference when making the payment.
It is worth noting that the local department of economic development registers the trade name, while the Ministry of Economy registers the trademark.
d) Securing the initial approval
Initial approval means that the UAE government has no objection to the establishment of the business in the country and allows the investor to proceed with further steps in setting up the business. However, it does not grant the authority to operate or carry out the business activity.
Before obtaining initial approval, foreign investors must first gain approval from the General Directorate of Residency and Foreigners Affairs. Some activities require additional approvals from government entities related to the specific business before applying for the initial approval, such as those related to legal affairs, security affairs, and financial securities and commodities.
e) Drafting a Memorandum of Association or Local Service Agent Agreement
Depending on the legal form of the business, a completed and signed Memorandum of Association (MOA) or Local Service Agent Agreement (LSA) may be required for business setup in Dubai.
The MOA is required for the following legal forms of business:
- Limited partnership
- Limited liability company (LLC)
- Public joint stock company (PJSC)
- Private joint stock company (PrJSC)
f) Select the right business location
All businesses in the UAE must have a physical location to operate and the premises must comply with the requirements set by the respective emirate’s Department of Economic Development, as well as the local municipalities’ land planning regulations.
A rental agreement for the office or warehouse must be provided. In some emirates, rental agreements should be attested. The rental contract must be registered with Ejari in Dubai.
g) Obtaining additional government approvals
In some cases, additional approvals from government entities overseeing specific business activities are required. Below are examples of such activities sorted by the ministry:
Ministry of Interior: Issues approvals for activities related to general transport such as driving schools, fire equipment, alarm and safety systems, used-car dealers, used auto parts, and car rentals.
Ministry of Justice: Legal activities and legal consultancy.
Local Municipal Department: Architectural and engineering affairs.
Telecommunications and Digital Government Regulatory Authority (TDRA): Telecommunication activities.
Executive Council: Travel and Tourism, general services, charter trading, ship and maritime agencies, car clubs, charter air transport, and branches of foreign companies.
Ministry of Economy: Insurance-related business and insurance consultancy.
Local Health Departments: Health-related activities.
Supreme Petroleum Council: Onshore and offshore oil drilling operations as well as services related to gas and oil fields.
h) Submitting documents and paying the fees
After completing the necessary steps, investors can obtain their business licence from the service centres of the economic departments or through their websites.
Documents required for obtaining a licence for all legal forms:
- Initial approval receipt and all previously-submitted documents.
- A copy of the lease contract, attested by the Real Estate Regulatory Agency (RERA) in Dubai.
- Attested Memorandum of Association (for all types of companies).
- Approvals from other relevant government entities as required.
- Attested service agent contract (for civil establishments and companies that are 100% owned by non-GCC nationals) involving a local service agent in the UAE.
It is important to note that the payment for the trade licence must be made within 30 days of receiving the payment voucher. The applications will be cancelled in case the deadline is missed.
Starting a business in Dubai can be simple, but there are some steps and important factors to keep in mind. The process may be tedious and time-consuming, and it is crucial to have the right guidance and advice. Whether you choose to handle the process on your own or hire professionals to speed up the process, having an expert by your side will significantly make things easier for you.
With more than a decade of experience in assisting entrepreneurs with business setup in Dubai, Nair & Nelliyatt Chartered Accountants are counted among the business setup consultants in Dubai.
If you are seeking guidance on how to establish a company in Dubai, UAE, reach out to us today by sending us an email at email@example.com or giving us a call at +97143577678.