How to open a company in Dubai

The administrative procedures for opening a company in Dubai are simpler and faster compared to other countries. It is because there is a focus on promoting entrepreneurship and providing greater flexibility with various options for the company’s structure.

For the incorporation of a company in Dubai, it is not necessary to be a resident, and there is no requirement for minimum capital.

The types of companies formed in Dubai should be tailored to your business model. You can choose either a free zone company or an offshore company.

Therefore, it is advisable to consult with a tax consultant in Dubai before taking any missteps.

Steps to Establish, Form, or set up a Company in Dubai

The laws of the United Arab Emirates state that a local partner is required to establish companies in Dubai. This local partner will hold the majority of ownership and control of the business, including the authority to close it if necessary.

The local partner will own 51% of the company’s shares, granting them the power to make all decisions related to its operations. However, this requirement does not apply to Free Zone companies.

To establish a company in Dubai, the following steps must be fulfilled beforehand:

1. Choose the Business Activity

Determine your company’s business activity and ensure it aligns with regulations.

2. Select a Legal Form

Decide on the company’s legal structure, such as a Limited Liability Company (LLC), Free Zone Company, or Offshore Company.

Choose a Trade Name: Select an appropriate trade name for your company and get it approved by the relevant authorities.

3. Obtain Initial Approval

Obtain initial approval from the Department of Economic Development (DED) or the relevant Free Zone Authority.

Draft the Memorandum of Association (MOA): Prepare the MOA, which outlines the company’s objectives, capital, ownership distribution, and management structure.

4. Get Notarization and Attestation

Notarize the MOA and other required documents at the Notary Public and get them attested at the relevant government department.

5. Apply for a Business License

Submit the required documents and apply for a business license specific to your company’s activity.

Secure Premises and Tenancy Contract: Arrange for a physical office or workspace and obtain a tenancy contract.

6. Register with Authorities

Register the company with the DED or the relevant Free Zone authority.

7. Obtain the Necessary Approvals

Obtain any additional approvals or permits required for specific activities.

8. Get Visas and Labor Approvals

Apply for employee visas and labor approvals from the General Directorate of Residency and Foreigners Affairs (GDRFA) and the Ministry of Human Resources and Emiratisation (MOHRE).

9. Open a Corporate Bank Account

Open a bank account in the company’s name and deposit the required share capital.

Following these steps, you can establish your company in Dubai while adhering to the region’s legal requirements and regulations.

It is one of the most crucial steps in developing a business plan. To ensure success in Dubai or any other location, it is essential to consider the target market and competition.

Additionally, some very significant aspects should be considered, such as:

• Funding needs.
• Staffing requirements, including the number of employees needed in the future and whether operations will be based in Dubai or abroad.
• Space requirements, determining whether office or warehouse space is necessary.

When all these aspects are carefully studied, there will be better opportunities to secure financing from banks.

Determine the Company’s Legal Structure in Dubai

This step involves deciding on the legal structure and status of the company. There are three types of companies available in the United Arab Emirates:

1. Offshore Company

An offshore company allows operations from anywhere worldwide and does not require a physical presence in Dubai.

2. Free Zone Company

This type of company offers more tax advantages but is only suitable for certain business activities that permit this legal form.

3. Mainland Company (LLC)

A mainland company provides more operational freedom by allowing activities in multiple sectors and establishing business anywhere in Dubai.

Choosing the company’s legal form is essential for registering the business and obtaining a license.

3. Choose the Company Name in Dubai

Other aspects, such as the company name, must also be chosen when deciding on the legal structure. The title should reflect the company’s business activity.

4. Pay the Share Capital

For the company’s incorporation, choosing the owner, seeking local support if required, and establishing share capital is necessary. The company’s address and headquarters must be designated.

5. Register the Company

If you want to register the company, a name must be assigned and presented to the Department of Economic Development in Dubai. The title should not be offensive or reference political or religious views.

The documents required for registration depend on the structure chosen and the economic sector to which the company belongs.

During the company registration process, the Ministry of Commerce must show that there is enough capital available for investment.

Dubai company incorporation costs vary between 10,000 and 33,500 AED.

This amount guarantees against liabilities, although it can be withdrawn shortly after.

6. Apply for the Company’s Activity License

In Dubai, a license is necessary to conduct any economic activity, and there are three types of license in the United Arab Emirates:

• Commercial License: For companies buying and selling goods.
• Professional License: For companies providing professional services.
• Industrial License: For manufacturing or industrial companies.

The appropriate license is essential in establishing the company and starting its operations in Dubai.

• Professionals
• Commercial
• Industrial Licenses

To obtain any of these licenses, an annual fee must be paid. The amount depends on the type of license. The annual fee ranges from 15,000 to 25,000 AED, Dubai’s currency.

To apply for an Onshore company license, a commercial bank account from an institution located in Dubai is required. The permit must be used for Free Zone companies in the chosen Free Zone. For companies subject to local legislation, applications should be made through the Department of Economic Development (DED).

The documents required to apply for the license are as follows:

• Certificate of trade name reservation.
• A Memorandum of Association (MOA) defines the scope of the company’s activities.
• Original and photocopy of the passport.
• In the case of office rental for Onshore companies, the lease agreement must be presented.
• Initial approval certificate issued by the government.
• If necessary, a no-objection certificate issued by the sponsor must be presented.

Types of Companies in Dubai

There are three types of companies in the United Arab Emirates, each with its incorporation method:

A. Free Zone Company

A Free Zone company is a geographical area where companies are offered advantages to promote economic growth and investment.

These companies have their headquarters in Dubai.

Free zone companies must operate in specific areas, such as:

• Industrial sector.
• Product sales, such as electronics, dropshipping, among others.
• Services and Consultancy include advertising, IT, holding, marketing, and communication.
• Import and export of furniture, food, and vehicles, among others.

The advantages of establishing a Free Zone company are as follows:

• Possibility to own 100% of the company’s capital.
• Ability to obtain a residence and work visa.
• The hiring of local staff is permitted.
• No requirement for physical offices.
• No taxes on capital gains and profits.

Exemption from customs duties for import and export outside the UAE. No social charges are required, and there are no dividend taxes.

Establishing a Free Zone company in the United Arab Emirates is straightforward and fast. Documents required include the passport, and a photo identification document must be presented.

B. Offshore Company

Offshore companies are intended for those who want to establish a business in Dubai without residing there. These companies allow working in Dubai without a bank account and conducting business in the UAE.

Offshore companies lack the same freedom as Dubai companies. They cannot have offices in Dubai, use UAE suppliers, or employ people.

Establishing an offshore company in a Free Zone is recommended because this option allows for 100% ownership of the company. This option also benefits from tax advantages.

C. Mainland Company (LLC)

Mainland companies have the legal status of LLC and can operate throughout the United Arab Emirates. These companies are the most common as they suit professionals, small traders, large companies, and restaurateurs.

The LLC legal status allows the incorporation of a company that operates throughout the United Arab Emirates but with certain conditions.

For this purpose, professionals experienced in creating companies in Dubai are necessary, as they will manage the company.

What is the cost of opening a company in Dubai?

Dubai company formation costs depend on the type of company chosen. However, the ordinary expenses generated are as follows:

• Fees for the DED commercial license, name reservation, and preliminary approval.
• A fee for the general license, a government innovation fee, and a culture fee.
• In addition to these fees, a market fee is payable to the Dubai Municipality, a service improvement fee, and a public waste fee. Other expenses are related to the company’s functioning.