Dubai is perhaps the hottest economic hub in the Middle East and Africa, other local economies are playing the catchup game.
However, setting up a business in Dubai or any other Emirate in the UAE comes with some unique challenges, one of which is deciding on the kind of business license that is most suitable for your business.
Today, we will be looking at the 3 major types of business license that is available to foreign entrepreneurs and what makes each different from the other.
#1 – Professional Services License
As at the time of writing this article, professional services license is the only mainland business setup structure that allows foreign entrepreneurs to retain 100 percent ownership of their business.
As the name implies, this kind of license is granted to individuals who engage in providing professional services. Although professional service providers are not required to give up any part of their ownership to a local partner, they are mandated by law to have a national service provider who receives an agreed fee.
The beauty of this type of license is that while national agents receive a certain amount as agreed between the business owner and the agent, he or she (the agent) do not have any ownership stake in your business.
In addition, the term “professional services” covers a very wide area according to the UAE’s law. A reliable company formation expert will help yo identify whether your business qualifies as one.
#2 – Commercial Business License (LLC)
Although some entrepreneurs, especially those who are new to the UAE market do not fancy the idea of working with a local partner, the advantages of setting up your business in the mainland far outweigh the demerits. Moreover, there are some legal steps you could take to make sure that your business interest is fully protected by law.
For instance, if you are working with a full-service company formation firm, your consultant can help you arrange for a subcontract to be signed by you and your local; partner. This will help to ensure that your business interest is protected even though you are mandated by law to have a partner who maintains at least 51 percent of the business owners.
When this happens, it means that your partner will more or less function as a national agent, receiving an agreed amount per year without having any authority over your business.
So, LLC business license is the kind of license issued to entrepreneurs who wish to establish a trading business or industrial (manufacturing) business. The advantage of this kind of license over the free zone license is that it allows you to conduct business in any part of the UAE without restrictions.
#3 – Free Zone License
Establishing your business in the free zone comes with a wide range of benefits.
Firstly, the foreign business owner or entrepreneur is allowed to retain 100 percent ownership of the business. This means that you don’t need a local partner or national agent to set up your business and you are not mandated by law to share your profits, pay an agent, or divulge important business information to anyone.
Secondly, establishing a business in any of the free zones gives you the opportunity to enjoy 100 percent exemptions personal and corporate taxes. This also allows you to repatriate 100 percent of your profits.
However, free zone businesses are not allowed to conduct business transactions with the local market. To overcome this barrier, a free zone business must liaise with a local agent, distributor, or business who will be paid an agreed amount per month or per transaction, depending on the agreement.
So these are the major types of business license in the UAE. If you need more information about business set up in the UAE, do not hesitate to contact us.
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