UAE is made up of seven states known as Emirates with each governed by its own local laws. The most popular commercial destinations in the United Arab Emirates remain to be Dubai and Abu Dhabi, while Sharjah and Ras-al-Khaimah are proving to be rising markets as well.
UAE, especially Dubai, is particularly known for its business-friendly policies. However, before you start packing your bag at the prospects of the brave new world awaiting in the sands of the Emirates, you might want to consider the following 7 things that every entrepreneur should know.
- Confirm visa eligibility
Dubai has one of the world’s most lenient visa and immigration policies, especially to businesses. Businesses are almost always granted visas. Operating business in Dubai requires business owners to bear visas, the number of which are determined on the basis of the nature and size of the proposed business plan.
Nevertheless, discuss complete eligibility requirements with your travel agent or consultancy. It is important to observe local customs and traditions in Dubai, the violation of which could lead to serious penalties.
- Free zone advantage
Unless you are planning to establish extensive operations throughout the Emirates, and especially if you are in service sector, then there is hardly a reason not to incorporate in a free zone. Free zones are duty free economic sectors that allow businesses to operate and trade outside the UAE.
These free zones involve no direct taxation or duties on fund transfer. Furthermore, free zones involve purpose-built infrastructure, and easily accessible and purpose-built residential and commercial properties for businesses to benefit from. Above all, free trades offer complete business ownership to foreign investors.
- Find a local venture partner (outside free zones)
If for some reason, you choose to register your business outside one of the free zones, then you would have to find and rely on a native or local partner, sometimes called a sponsor.
The local law requires the local partner to own 51% of the ownership of the business, making the new investor a minority partner. However, the advantage this mode of investment offers is the freedom to choose the business at any location of the choice of the investor.
- Find a local business location
Finding a local business location to operate is of paramount importance before making all the migratory and financial transactions to move to Dubai.
On the other hand, in free zones, there are a limited number of designated commercial and residential properties, out of which the foreign investor need to choose the best ones in order to commence operations. The availability of property can be a key factor in terms of the long term costs of your business and could determine the choice of mode of investment and the selection of a particular free zone.
- Registering and licensing fee
In case of operations outside the free zones, the company needs to be registered as a local LLC company and require a minimum capital of AED 300,000 ($ 81,600). The rather length legal procedures require the local partner to be the majority shareholder with 51%. However, the distribution of profit and loss may not follow this ratio.
In contrast, the free zones only involve a package of AED 50,000 to emigrate, register and acquire the license of the business with complete ownership. This contains a one-time AED 10,010 registration fee, an annual licensing fee of AED 20,010 and flexidesk charges of AED 17,620 only applicable for the first year. In addition to the fee, the business must provide a business plan, complete shareholder information and three proposed business names to start, apart from applying and holding 3 visas for the purpose of business operations.
- Make decisions on the basis of business model
It is important to base all the location and registration decisions on the basis of the business model. Sometimes new ventures can make the mistake of being lured by certain location and cost benefits to register in the completely wrong zone for the intended business type. Confirm all the details with the relevant authorities before finalizing registration and stay updated with any changes in the law.
- Always enter written legal agreements
Being careful is the smart way to move ahead in terms of initiating business in Dubai. This is particularly true if you are incorporating outside the free zones and are looking for a local partner. Always enter a binding legal written agreement to safeguard your capital. Sometimes people can insist on verbal agreements. Never enter one without proper procedures and attestation in the local court.
So when are you starting your own business? If you have a great idea, its time you need to get in touch with us.