Forming a company in UAE
Knowing the difference in the licenses available to you is key when setting up in the UAE
There are various types of company setups to choose from in the UAE. Each type of company has it’s own rules and regulations in order to operate in the UAE. The aim of this post is to give you the various options available to you, and also share the points to consider when choosing on an establishment.
1. Sole Proprietorship
A professional-type Sole Proprietorship can be owned by an individual of any nationality. If the owner is a National of a country other than the UAE or GCC, they require a Local Service Agent.
What is a Local Service Agent?
A Local Service Agent is an individual of UAE nationality who becomes your service agent for a yearly set fee paid in advance. Their purpose is to represent you before all official organizations to do with your company setup in the region. An industrial or commercial type Sole Proprietorship, can be owned only by UAE Nationals.
2. Civil Company
A Civil Company can be owned by any nationality. If your partners in the business are not of UAE nationality, a Local Service agent is required. A foreign company can be a partner in a Civil Company, as long as the foreign company is in the same profession as the civil company.
An engineering Civil Company can’t be totally foreign owned, a UAE National has to be part of your business, and owns no less than 51% of the business, must be an engineer of the same business activity.
3. Limited Liability Company
A Limited Liability Company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. An LLC can have 2 – 50 shareholders, each of whom is liable only to the extent of his or her share in the capital of the company.
LLCs can conduct any industrial or commercial business, but not professional – except banking, insurance or investment. The business name should be the same as the trade name or contain the names of one or more of its partners. The phrase “Limited Liability Company” must also be added to the business name.
The managers may be selected from the partners. Unless the Memorandum of Association states otherwise, the manager has full powers of administration. Within the scope of his or her powers, the manager’s actions and commitments are binding to the business.
LLCs must appoint a UAE-accredited auditor. In case of the death of any partner, his or her shares are transferred to the heirs mentioned in the will.
Points to note:
- LLCs cannot practice law, auditing, accountancy or any other type of consulting service.
- LLCs must appoint between 1 – 5 managers for the business.
- Ensure that the Memorandum of Association states the managers power of administration.
- At least 51% of LLCs must be owned by UAE Nationals, and can be owed by GCC nationals by up to 100%. The Memorandum of Association can distribute profits in a different ratio.
4. Private Shareholding Company
A Private Shareholding Company (Private Joint-Stock Company) is a partnership of at least three individuals. The minimum capital of AED 2,000,000 should be paid in by the partners in the business. A Private Joint-Stock Company can be created for any commercial or industrial type of business.
5. Public Shareholding Company
A Public Share Holding Company is a company whose capital is divided into transferable shares of equal value. It must have a minimum capital of AED 10,000,000. The company is intended for the investment of a patent of invention registered in the name of the said person, or it has, upon incorporation or thereafter, acquired premises and has adopted that premises; name as its own.
6. Simple Limited Partnership
A Simple Limited Partnership is formed between a minimum of two partners – one general partner and one limited partner. The general partners are liable for the company’s liabilities to the extent of all their personal and business assets; the limited partners are liable for a share of company liabilities equal to their share of the company capital. Each general partner and limited partner can own any share of the business. There is no minimum or maximum ownership level for any partner.
A limited partner may not intervene in management or administrative issues related to the other partners. If he or she does so, that limited partner shall be responsible for all the business’s obligations.
7. Partnership Company
A Partnership Company is a single business where two or more people share ownership. Each partner contributes to all aspects of the business and must administer the company unless a contract assigns administration to one partner or to another party.
The owners of the partnership company are jointly and severally responsible for the company’s liabilities. This means that if the business is unable to pay its debts with the proceeds of its operations, the personal and business assets of one or all of the partners can be used to pay creditors. No agreement to the contrary can be made against third parties.
8. Branch of a Foreign Company
A Branch of a Foreign Company must have a manager to represent the company and to open the branch, appointed by the Board of Directors. The branch will become the company’s Dubai headquarters, and its business shall be subject to the provisions of the laws of Dubai and the UAE. The branch can conduct selected commercial and professional activities, but cannot import goods into Dubai; this will be managed by a local trade or commercial agency.
The branch office must have an independent budget, its own profit/loss statements and must appoint a UAE-accredited auditor. A Branch of Foreign Company also requires a Local Service Agent (LSA), who can be a UAE National or a company owned by one or more UAE Nationals.
A Representative Office for Commercial Activities is not a business structure in its own right but it is a business activity that a branch can conduct. It has its own criteria, which includes the authorization to promote and market the parent company’s business – but not conduct business operations. A Representative Office requires a Local Service Agent (LSA), who can be a UAE National or a company owned by one or more UAE Nationals.
There are various branch office establishments available for companies who operate in the free zones and choose to have such type of a branch office in Dubai. There are various type of establishments available in the free zones, and they are governed by their own rules and regulations. Therefore each type of company setup within a free zone company should be studied in depth in order to see the benefits and drawbacks.
If we can assist you with direction on company setup, local service agents, or guide you in your business setup and do it for you,. Remember, research, inquire, and have patience, then the company setup will be a breeze!