The business-friendly environment of Dubai is known around the globe. Conglomerates of various fields have set up offices and headquarters in Dubai due to this environment, and many more continue to do so. But Dubai isn’t merely for large companies. It is also a startup hub, and companies that started in Dubai have gone on to become multi-million-dollar enterprises.
Among the many reasons for this business-friendly environment in Dubai, and in the UAE in general, are the laws and regulations that allow the setup of different types of businesses. Almost all major types of company formations are permitted in Dubai and depending on where you are setting up your company, it can take less than a week to get your company registered.
In Dubai, the type of business activity you will be engaged in, and the company formation, are two of the most important considerations when you are starting a new company. Here are the primary types of company formation in Dubai.
- Sole Proprietorship
A sole proprietorship is a company formation in UAE under which 100% of the company is owned by a single individual. All the profits of the company also go to the individual, and this individual will also be liable for all the debts and financial commitments of the company.
Most types of business activities can operate as sole proprietorships. However, certain business activities have limitations in the way they can be set up.
If you need to set up a professional company, you can do so regardless of nationality. However, if you are looking to set up a company as a sole proprietorship under a commercial or industrial license, you must be either a UAE national or a citizen of one of the countries of the Gulf Cooperation Council.
If you are not, a registered local service agent may be appointed to open the sole proprietorship on your behalf. The local service agent will be employed to determine license requirements and matters pertaining to the government.
A civil company is among the types of company formation in UAE which can only be opened by practising professionals. These professions can include surgeons, doctors, lawyers, engineers,
and so forth. Since the business activity performed by a civil company is professional, it can be owned 100% regardless of nationality.
However, a professional company that belongs to the engineering professional must have at least 51% ownership by an Emirati national. Even here, this Emirati national must have the license to practice as an engineer.
In case a foreign company is a partner in a civil company based in Dubai, the foreign company must belong to the same type of business activity. In addition, if a foreign company or national owns a civil company, the local service agent is required to carry out government and regulatory activities on your behalf.
Limited Liability Company
A limited liability company, or LLC, is one of the most popular types of company formation in Dubai. Apart from banking and the professional sector, limited liability can conduct any type of business activity. A limited liability company can have between 2 and 50 partners. However, at least 51% of the company must be owned by UAE nationals.
The profit and loss of the business are divided among the partners in the proportion of their shares in the business. In case a resolution is passed in a company meeting, the decision reached must reflect more than half the shareholding of the company. A limited liability company cannot list its shares in public for the purpose of securing loans.
The financials of the limited liability company are overseen by a UAE-accredited auditor. The administration of the company is to be handled by managers, of which there must be more than five in number. In case the number of shareholders is more than seven, a board of more than three members must be set up. A limited liability company must necessarily have LLC in its name.
Private Shareholding Company
A private shareholding company is also known as a private joint-stock company. It is a company formation in UAE under which the number of shareholders must be at least three, and the minimum amount invested must be at least AED 2,000,000.
Commercial, industrial, and professional businesses are permitted to operate as private shareholding companies. However, the establishment of such a company is subject to certain constraints.
In case the owners are nationals of GCC countries, 100% ownership is permitted. The regular operations and financials of the company must be overseen by an appointed manager.
The private shareholding company may convert into a public company after a minimum of two years. However, even so, the company stocks cannot be made available for investment to the public.
Public Shareholding Company
A public shareholding company is a company formation in Dubai with a minimum capital of AED 10,000,000. The shares of the company share are worth equal capital and distributed among partners in proportion to their investment.
The value of one share of the company cannot be less than AED 1. At least 51% of the company needs to be owned by UAE nationals. In addition, at least half the members of the board of directors need to be UAE nationals, including the chairperson. At least 10 investors are required in a company.
All investors who sign the articles of association are considered founders. Between 20% and 40% of the capital of the company must be subscribed to by the founders.
The number of different options that you have when setting up a company in the UAE contribute to the perception of the country as being friendly for business. However, the regulatory compliance and laws associated with the process can be hard to figure out.
Shuraa helps you through every step in the process, and our business consultants with years of experience ensure that your new company can be set up in as smooth a way as possible.