How To Setup A Business In Dubai
Everything you need to know to start a business in Dubai and more!
Setting up a business in any country can be stressful to most new business owners and setting up a business in Dubai is no different. It can also be challenging to find someone who can help you through this process and who knows everything there is about launching a business in the UAE.
To help provide you with a head-start and hold your hand through the process, we have put together this complete guide on how to setup a business in Dubai which you can use as a guide and checklist to get your business up and running as quickly as possible.
The foundations of business in Dubai
Before jumping straight into the deep-end, I feel that it would be of benefit to lay down some foundations.
The economic activity in the United Arab Emirates is controlled and regulated by the Federal Government as well as the individual emirates.
Many international companies have made efforts to establish business relations in the Middle East because there are many substantial business advantages. These distinctive advantages range from having an on-the-spot presence to making contacts and connections with customers, to monitoring orders and purchase transactions.
You may be surprised to hear that the Middle East is not always a first choice for companies to set up business, there are several reasons why this is so which we will touch upon later on in this guide.
The authorities in Dubai have made vast efforts to create an ideal commercial environment, which is conducive and orderly for doing business without being restrictive.
Dubai has provided an encouraging atmosphere for business startups and has been attracting foreign investors to tap into the import and export market ever since it displayed its position of economic stability on the global market.
However, setting up a new business can be a tiresome task because it involves several layers of government bureaucracy and procedural regulations.
The importance of starting business operations in Dubai involves understanding the regulations.
There are numerous options for doing business in Dubai, some of which are:
- Representative or Branch office
- Commercial trading agency
- Direct trading – e.g. direct selling to UAE established dealers and distributors
- LLC (limited liability company)
- Special Free Zone Investment incentives
Note that opening a branch or representative office requires a license from the Economic Development Department and appointed of local agent or sponsor; however, foreign ownership of 100% is permitted.
For commercial trading agency dealing, an agreement for appointment of a UAE based national or company is need under an agreement registered with the Ministry of Economy and Commerce.
A Limited Liability Company is one that is set up with up to 49% foreign ownership under license from the Economic Development Department. The remaining 51% is what a local sponsor can receive.
Business activity in Dubai comes under three broad categories of licensing, licenses for which are issued by the Dubai Economic Development Department.
- Commercial License – for all types of trading activity
- Industrial License – to set up industrial or manufacturing activity
- Professional License – to practice a profession or service, also covers artisans and craftsmen
License for specific categories of businesses are granted by specific authorities or ministries, such as:
- Banks and financial institutions – Central Bank of UAE
- Hotels and tourism related – Department of Tourism and Commerce Marketing
- Insurance companies – Ministry of Economy and Commerce
- Manufacturing companies – Ministry of Finance and Industry
- Medical products and pharmaceutical business – Ministry of Health
Structure of business
The Structure Of Business
The Commercial Companies Law and by-laws govern foreign business operations. Federal laws of the UAE define seven categories of business operations which are permitted in the UAE with not less than 51% of local equity. Several new laws have been put in place to regulate foreign investments and in accordance with international anti-money laundering measures.
These seven business organisation categories are:
- General partnership company – limited to UAE nationals only
- Joint venture company – between local party and foreign party with local equity participation of at least 51%.
- Limited liability company – minimum of two persons and maximum of 50 with limited liability according to their share capital in the company
- Partnership-en-commendams – currently not encouraged
- Private shareholding company
- Public shareholding company – all banking, insurance and financial companies must be public shareholding; however, foreign banks, financial institutions and insurance companies are permitted to set up a branch office in Dubai.
- Share partnership company – currently not encouraged
- The investment in capital for a private shareholding company is approximately US$ 0.5550 million (Dh. 2 million). Public shareholding companies generally large operations or projects with minimum capital of US$2.725 million (Dh.10 million).
Business setup costs
Every new business setup requires tremendous investment in capital. The tax-free nature of investment in Dubai is a very attractive option but the fees involved in obtaining new Trade Licenses have to be carefully scrutinised.
The free zones in Dubai provide ideal business startup options but each zone has different procedures and fee structures for business startups. Most of the free zones insist on the business owner investing a minimum amount of capital in a new business as compared to a branch or representative office of an existing company.
The issue of employee sponsorship is also fairly prevalent in free zones i.e. the company sponsors its employees and arranges required documentation and visas for residing in the country.
Another important aspect in business expenses is the cost of goods import into Dubai. The Customs in Dubai issues clear and strict guidelines on the types of goods that can be imported as well as the costs.
Trading and business dealings through the GCC common marketplace invites less custom fees and expenses.
Benefits of Free Zone trading
Some businesses are approved for operations in Free Zones like Dubai Airport Free Zone and Jebel Ali Free Zone for example. Free Zone establishments are issued Trading Licenses which are renewable annually provided the company holds a valid lease license from the free zone authorities. There are many incentives and bonuses provided to establishments in free zones.
- Exemption from import duties
- 100% repatriation of profits and capital
- 100% foreign ownership
- Exemption from corporate taxation with additional bonus of renewable 15-year Free Zone guarantee
- Access to inexpensive energy in abundance
- Availability of competitive, experienced and skilled workforce made possible through simple yet efficient recruitment processes
- Huge support level from free zone authorities.
The Free Zones also offer assistance to new businesses in the form of:
- Advice and consultancy services on corporate structure for business based on current and future plans
- Drafting documents, managing submissions to authorities, notarizations, legalities, language translation etc.
- Putting together partnership options for branch office, professional agency or offshore company
- Seeking approvals from departments, ministries and local authorities
- Setting up company bank accounts
- Visa and work permit processing formalities
Do’s and Don’ts of business dealings in Dubai
Getting acquainted with the various aspects associated with setting up a business presence in Dubai helps to avoid and overcome any foreseeable problems.
Negotiating local sponsor – taking a UAE national as 51% partner with payment of annual fee.
For 100% business ownership without local sponsor, a Free Zone location is a must. This may not be ideal for certain businesses like retail stores, restaurants and cafes etc.
Choosing a location which provides optimum benefits of costs, convenience and suitability.
Confirming Visa requirement and fulfilling eligibility criteria.
Hiring a business consultant to assist with the processes.
Free Zone registration of company should not be done without visiting location and understanding pre-conditions.
Business plans must not be finalized going only by published information; as business rules are subject to frequent changes, contact with relevant authority is absolutely essential.
Business licenses should not be chosen with ascertaining suitability to business model.
Bank accounts should not be opened without confirming minimum requirements and charges.
Sponsorship process with local sponsor should not be undertaken without signing a legal written document.
How much does it cost to startup a business in Dubai?
The answer to this is totally dependant on your type of business. For example if you are a consultant and just require a small office outside of Dubai in somewhere such as Ras Al Khaimah then you would be looking at approx. 20,000 – 30,000 AED plus visa costs.
If you require to be in the heart of the city such as the business bay then this price will easily jump up to 50,000 100,000 AED.
Marketing your business in Dubai
Designing a Logo
With the sheer amount of time dedicated to setting up a business in Dubai, there leaves very little time for the creative process and logo design should really be at the bottom of your to do list. If you are serious about your business and are not the creative type then hiring a logo designer in Dubai is one of your better options.
There are many logo design companies in Dubai as well as freelancers that can help design a high quality, original, brand-able logo design.
How much should I spend on a logo? This is a question that is on most business owner’s lips. Logo’s can be designed from as little as 100 AED however don’t expect quality or originality for this price. We offer a full logo and branding service starting from 1,497 AED.
Getting a website in Dubai
Many business owners make the big mistake and believe that they should just have a website to look professional. Although this is partially true, there are far more benefits to having a good looking website for a business.
A website should convert visitors into sales and should not just be a digital portfolio. A carefully thought out and well written website can boost a businesses income and therefore by not investing time and money into this can be costly mistake.
Hire a great web design company in Dubai to ensure that you get a professional looking website that has hi quality images and well written content.
Search Engine Optimization
SEO is the term used by online marketers for getting a website on the top of the search page results. The words you type into Google are what they refer to as keywords.
Using a good, professional SEO agency in Dubai will help you get your website more exposure and more customers providing the SEO campaign is implemented correctly.
To find a good SEO company in Dubai then you should check out our advice by clicking here.