How to Start a Business in the UAE: A Complete Step-by-Step Guide
The UAE is now viewed as one of the best places to do business among all other countries in the world. Whether you are a new entrepreneur or a business person seeking to venture outside the boundaries of your own country, learning how to start a business in the UAE would definitely be the most critical step towards forming a very successful business in one of the most rapidly growing economies in the world.
Reasons to Start a Business in the UAE
Before we look at how one can start a business in the UAE, it is important to find out why so many entrepreneurs have chosen to do business here. The UAE is always ranked within the top 25 countries according to the World Bank’s Doing Business Ease of Index rankings. This is because there have been major efforts by the authorities to streamline processes, implement licensing procedures electronically, and bring in foreign direct investments.
Main strengths that make the UAE an excellent place for starting up include 100% foreign ownership of companies in almost all categories after amendments in the 2021 Commercial Companies Law, no corporate tax for foreign income within special economic zones, huge expatriate labor pools, and fast company registrations that may only take days.
Step 1: Select the Business Activity
The first thing that comes to mind once you decide to start a business in the UAE is the selection of the business activity. There are different types of business activities in the UAE: commercial activities, professional activities, industrial activities, and tourism activities. The selection of the business activity decides what type of license you will have, whether your company is to be incorporated on the mainland or in a free zone, and what approvals may be required by various sector-wise regulatory authorities.
Step 2: Select between a mainland or free zone license
The decision of whether to apply for a mainland license or a free zone license is arguably the first crucial decision you need to make once you understand how to start a business in the UAE.
Below are some considerations for each option.
Mainland:
- Engage in trade in the UAE without limitations
- Tender for government projects
- Establish an office in any part of the emirate
- Suitable for companies whose gross income exceeds AED 375,000 because there will be a corporate tax of 9% starting June 2023
Free Zone:
- 100% shareholding in the company by the owner is assured
- Zero corporate taxes and zero personal income tax for all qualifying business operations
- Ability to repatriate funds freely from the company to the country of incorporation
- Not allowed to engage in trade within the UAE without appointing an agent
Some examples of free zones in the UAE include DMCC (commodities and trade), DIFC (financial services), Dubai Internet City (technology), and ADGM (Abu Dhabi’s financial center).
Step 3: Choosing the Legal Structure
If you decide to incorporate your new business in the UAE, you have to select a type of legal entity that suits your needs regarding ownership and the way the business will be operated.
The most common types of businesses are:
- Limited Liability Company (LLC) – the most prevalent structure for inland enterprises that requires at least one and up to fifty shareholders
- Sole Establishment – used by individuals who provide professional services or engage in trading activities, which entails full personal liability
- Branch Office – utilized by firms from abroad looking to expand their operations in the UAE market
- Free Zone Company (FZC) or Free Zone Establishment (FZE) – suitable for businesses operating in free zones and involving different minimum capital contributions
Step 4: Registering the Trade Name
Your business name must follow the rules set out by the UAE. It cannot be offensive, refer to Allah or any other religion, or the name of any famous government organization, unless the owner is given special permission to use the name. For sole establishments, the name has to indicate the identity of the owner.
Step 5: Application for Initial Approval and Licence
In order to start a business in the UAE, it is necessary to obtain initial approval from the relevant government authority, either the DED in case of a mainland entity or the concerned free zone authority. Obtaining an initial approval means that the government is not against you carrying out your intended business activity, but it does not entitle you to begin trading.
After obtaining the initial approval, you apply for your final license as well as furnish documents, including:
- Copies of passports of all shareholders and directors
- Address proof of the shareholders
- MOA or Articles of Association
- Ejari tenancy or lease agreement (in case of a mainland company)
- No Objection Certificate in case the applicant is working in UAE
Step 6: Establish a Corporate Bank Account
After obtaining a license, you will require a UAE corporate bank account. Some of the main banks working in the country are Emirates NBD, Abu Dhabi Commercial Bank (ADCB), Mashreq, and First Abu Dhabi Bank (FAB). Banks perform comprehensive KYC (Know Your Customer) checks and due diligence procedures on all applicants. Having a solid business plan and good compliance history will facilitate the process of account opening greatly.
Step 7: Visa Application
As part of business formation in the UAE, you will also have the right to apply for investor/partner and employee visas. The quantity of visas available depends on the size of your office. Free zones provide a certain quota of visas for each license package offered. In case you decide to establish your company on the mainland, you will be able to set your visa quota according to the tenancy contract.
How Much Does it Cost to Start a Business in the UAE?
The total cost of setting up a business in the UAE may vary widely based on the following:
- The selected emirate
- The licence chosen
- The Free Zone selected
As an indication:
- The starting cost of a Free Zone package can be as low as AED 5,750 (USD 1,565)
- The typical cost for mainland licensing in Dubai will vary between AED 10,000 and AED 30,000+, based on activities and their number
- Additional costs such as office rental fees, visas, and other fees must also be considered
- The starting paid-up capital is zero for some Free Zones, while others stipulate minimum amounts
Mistakes to Avoid
Despite a somewhat simplified procedure, some things tend to be overlooked by first-timers who wish to establish a business operation in the UAE:
- Selecting a free zone without making sure that the business activity is allowed in such a free zone
- Miscalculating how long it will take to open an account at a bank (usually 4-8 weeks)
- Forgetting about VAT registration if the annual taxable turnover surpasses AED 375,000
- Skipping the annual renewal of the trading license will lead to penalties
Starting a business in the UAE is indeed much easier than it used to be in just a matter of years. This is due to the government’s efforts to digitize most of the licenses, eliminate the requirement for mandatory local sponsors in many sectors, and introduce more favorable conditions for foreign investors with the introduction of the Golden Visa for entrepreneurs and business owners.
It all boils down to thorough research prior to making any decisions: make sure that the business sector aligns with your choice of location and obtain all necessary documentation in advance, while working closely with an experienced business setup consultant who will know how to navigate between the laws in mainland areas and free zones.
With proper planning, the whole procedure of starting a business in the UAE can be done in as little as two to four weeks.
If you are ready to take the next step and start a business in the UAE, Fairway Biz is here to guide you through every stage – from selecting your licence to banking, visas, and compliance. Get in touch with our team today.
FAQs
- What are the essential processes to start a business in the UAE?
The key steps to establishing a business in the UAE include selecting the business activity, choosing the jurisdiction, registering the business name, obtaining the necessary approvals, and finally applying for the business license.
- Do I require a local sponsor for setting up my business in the UAE?
Not all businesses in the UAE require a local sponsor because many business activities do not require a local sponsor, especially in free zones and some mainland industries.
- How much time will it take me to start a business in the UAE?
Setting up a business in the UAE might take between a few days and a few weeks, depending on factors such as the business activity chosen, jurisdictions, approvals, and paperwork.
- What types of business licenses exist in the UAE?
Some of the common business licenses in the UAE include commercial, professional, industrial, and e-commerce licenses.
- What are some of the advantages of establishing my business in the UAE?
Starting a business in the UAE offers tax advantages, strategic location, full foreign ownership options, world-class infrastructure, and access to global markets.
