Entrepreneurs looking to establish a new business in the UAE have two options on location – some choose to start their company in one of the country’s free zones to take advantage of the many tax, duty and repatriation benefits.
Others meanwhile opt to set up a company in the UAE mainland.
So which is your best option?
Well, if you are looking to trade directly with the UAE local market, undertake a broad range of business activities or take on government work then the mainland option may just be the right one for your business.
Checklist – set up a company in the UAE mainland
While the process to set up a company in the UAE mainland is not as complicated as you might think, it is not without its complexities. With this in mind, below you’ll find the definitive 10-point checklist to help you get your UAE mainland business up and running.
1. Choose your business activity: The first thing to decide before you set up a company in the UAE mainland is the industry in which you will trade. There are thousands of permitted business activities as listed by the Department of Economic Development (DED) that include trading, agriculture, hospitality and manufacturing. Unlike many free zone businesses that are restricted from certain activities based on their location, mainland businesses are free to trade in any of the 2000+ DED listed activities.
Unlike many free zone businesses that are restricted from certain activities based on their location, mainland businesses are free to trade in the any of the 2000+ DED listed activities.
2. Find your ideal location: Once you’ve decided your business activity, the next step is to decide where you wish to locate. Once again, unlike free zone companies, businesses in the UAE mainland are not restricted in where they can set up. The right location for you will depend on many factors such as your budget and chosen business activity. Should your company rely heavily on imports and exports, for example, then setting up near one of the UAE’s busy ports – Jebel Ali, Mina Zayed or Mina Khalid – would make sense. Another major advantage of setting up in the UAE mainland is that it’s easy to open branch offices, meaning you are not limited to one location and can build a large local presence over time.
3. Determine the legal structure that fits your business activity: From a legal standpoint, there are several types of business that can be set up by foreign entrepreneurs on the UAE mainland – the most common being a Limited Liability Company, or LLC. An LLC is an independent legal entity owned by two or more shareholders. A business wishing to trade under a commercial or industrial licence (including trading, industrial and manufacturing activities) must form one to set up a company in the UAE mainland. This would require a local sponsor. By contrast, setting up a professional service company does not require a foreign sponsor and can be 100% foreign-owned. So next up, let’s examine this in more detail.
4. Choosing a local sponsor or local service agent: Foreign entrepreneurs can only set up a company in the UAE mainland by partnering with either a sponsor or local service agent. Which of the two you require will once again depend on the type of business you wish to set up. If you decide to trade under a commercial or industrial licence as an LLC then a local sponsor is required. Your local sponsor can either be a UAE national or a UAE-based company. In both cases the local sponsor will own 51% of the business, however profits are not split down these lines and full control almost always remains with the foreign investor. For those wishing to trade under a professional services licence, a local service agent is required. In this case, the foreign entrepreneur still owns 100% of the business but the local service agent acts as their representative in all administrative dealings with government departments – and is paid an annual fee for their service in return.
5. Naming your company: Choosing a company name that sticks in the memory and conveys your brand values is not easy anywhere in the world. And in the UAE, there are even more considerations to keep in mind. In summary: offensive language is forbidden, company names cannot contain religious references, or indeed references to any known organisations (anything from ‘FBI’ to ‘Mafia’). Only full personal names can be included in your company name – meaning both first name and last name are required if you are using your personal name for your company name. When it comes to your company name in different languages, all names must be written as they are sounded out, rather than translated.
6. Getting your paperwork in order: When you first approach the DED to reserve your chosen business name and apply for your business licence, you then provide them with documents that will include: your licence application; memorandum of association detailing sponsor arrangements and ownership percentage among all partners; a certificate of incorporation (if one or more shareholders are corporates); the board resolution approving the LLC (if applicable); and copies of shareholder passports and visas.
7. Applying for visas: Another major plus point to setting up in the UAE mainland is that it allows business owners to apply for multiple visas as well as their own – in fact, there is no upper limit. Having said that, there is one caveat: the more visas you apply for, the more office space you must acquire – usually 100 sq. ft. of office or warehouse space per visa. This may be negotiable with the DED, however. For example, if you run a domestic cleaning company with 500+ employees working remotely, you’re unlikely to be required to take on 50,000 sq. ft. of office space. As the owner of a UAE mainland company, you will also be able to sponsor dependants – such as family members and domestic staff (maids or drivers for example) for their visas as well.
8. Owning shares in your company: There are two primary ways to own shares in your UAE mainland business – in your personal name or through a company. While both are feasible, owning your shares through a company is often the more sensible option. For one, if you own your shares in an offshore company, you’ll have a clear legal framework to ensure all shareholders are protected should any issues arise. For example, were a shareholder to die, your business assets would not be subject to Sharia inheritance laws. Plus, offshore companies allow foreign investors to repatriate funds away from the UAE. You can also own your shares via a foreign company – though first you would need to go through the legalisation process. This is essentially a procedure where documents – such as certificates of incorporation – are created in one country for use in another.
There are two primary ways to own shares in your UAE mainland business – in your personal name, or through a company.
9. Finding office space: Once you receive your business licence, it’s time to start hunting for office space. In the UAE mainland, there are a few common types available. Serviced offices are usually owned and maintained by a third party and contain everything you need to move in right away – desks, phone and internet access, reception cover. Your lease payment would usually cover rent, use of office equipment and utility bills. Shell and core are at the other end of the scale – they require full fitting and decoration, with bills on top of the rent. Somewhere in the middle are sublets which usually don’t require any fitting or decoration but you may have to provide your own office equipment and take care of the bills separately from the lease.
10. Partnering with a company setup consultant: Finally, you can decide whether to undertake the company setup process yourself or work with a UAE-based consultant. Setting up a business anywhere can be a challenge; setting up overseas more challenging still – particularly in the UAE with its nuanced legal and company formation process. So, while you absolutely can choose to go it alone and establish your business, you may find working with a consultant with local knowledge not only ensures you complete all the necessary steps correctly, but that it only takes up a few hours of your time – not bad when it could take weeks if you complete the whole process by yourself.
Virtuzone Mainland is dedicated to helping clients open a company on the UAE mainland, providing advice and assistance with every aspect of the company formation. To set up a consultation, please call us on +971 4 457 8200, send an email to email@example.com or click here.