What type of License, Activity Group & Legal form is right for your Business Setup in Dubai?
With four years to the Expo 2020, entrepreneurs locally and internationally are looking to setup and bring their unique services and products to Dubai, as it allows them to take advantage of the large scale developments and opportunities leading up to the event and the innovative and illustrious path that the expo will help lead the city towards.
As consultants with expertise in the setting up of business in Dubai, providing business consultancy and bespoke boutique services to entrepreneurs and business owners alike, we are eager to welcome new and emerging talent to the country and support them to ensure sustainable and productive growth. ACT ensure that those new to the market are educated, assisted and are able to start up without any hassle or stress, whilst providing transparent information relevant to the market and the services the companies wish to provide, or is provided prior to the business starting.
In our first step in making you understand, defined below are the steps to ensure that the foundation of your business is strong. The choices made during this initial period decide the route your business will take.
1) What does your company want to do / offer commercially in the UAE? Who are your clients?
Are you looking to set up a trading organisation, offer a professional service or manufacture?
Each of these activities falls under a different license category, namely:
- Commercial License: To offer services of trade in the UAE.
- Professional License: If you look to offer professional services linked to a professional expertise, like legal consultants or medical care in the UAE.
- Industrial License: This license allows you to manufacture and produce within the UAE.
Once we can identify your business model, it will help in defining the options available to you, which also leads to understanding the next steps relevant to Main group and legal form and their associated costs. As each of these requirements is linked, financially and commercially.
2) What Main Activity Group does the service you want to offer fit into?
Once we understand the above information detailed in point 1, we advise you on the options available and the numerous activities that can be added under one main group and one license. Further, what options or variances in support of the company can be facilitated to all the Commercial services you wish to offer, the constraints you may have in support of legal form, costs and governances.
Example: - The DED (Department of Economic Development) lists business activities that companies may offer under several different Main Activity Groups.
An example to make things clearer:
If you would like to set up a company that offers Event Management services (activity code: 749946), it would fall under Consultancy -D- management, information and marketing, and requires you to apply for a professional license.
If you would like to promote events, on behalf of other events, involve in activities of sponsorship sales, under the business activity Sport Events Marketing (activity code: 924131) which falls into the same activity group as event management, you can add this additional service onto your existing trade license and company memorandum. However, if you want to also trade in racing cars (activity code: 501007), you will have to apply a new license falling under the main group, Trading in motor vehicles and motorcycles.
3) Although the DED (Department of Economic development Dubai) defines each main activity group with a linked license to it, there is certain flexibility as to what legal form you would like to take up for the service you are looking to offer.
Each of the below legal forms are governed by different laws, different costs and liabilities associated with incorporation, company’s legal documentation and exposure of the partners:
1. Limited Liability Company:
This form of set up can be formed with a minimum of 2 and a maximum of 50 partners, whose liabilities are limited to their share in the business capital.
Foreigners opting for an LLC are required to go into partnership with an Emirati partner. The Emirati partner acting as a sleeping partner in most cases, holds 51% of the shares and it is essential that the right partner is chosen.
2. Sole Proprietorship & Civil Companies:
Sole Proprietorship is owned and controlled by one individual, the person will be responsible for 100% of the business debts and financial obligations.
A professional sole establishment / civil company owned by a foreigner must be supported with a Local Service Agent.
3. Foreign Branch / Representative Office:
For foreign companies looking to establish a presence in the UAE, they can opt for a foreign branch or a representative office.
A branch office can be formed under the same legal identity as its parent company and conduct business under the same name.
Alternatively, a representative office allows for promotion of the parent company. This means that office based in the UAE, is only allowed to perform activities relating to gathering of data, marketing projects and so on. The set up also limits the number of employees that can be hired.
Understanding each of the above steps and the choices available to you are crucial to the future of your business. What we have listed here simplifies and introduces the key concepts to you, however, there is more to do and for this we advise that you sit down with an expert like us to guide you through the entire process.