When incorporating in the UAE there are a range of set up options to choose from. With multiple freezones, offshore and mainland jurisdictions, it often takes careful research to know which structure is best suited for your business.
In this series of articles, we will be looking at the most commonly used structures, weighing up their respective pros and cons, and offering insight on when best to use each type.
Limited Liability Company (Mainland LLC)
The Limited Liability Company, or LLC, is one of the most common structures used in mainland licenses throughout the various Emirates. Mainland companies are regulated directly by local government, such as Department of Economic Development (DED) in Dubai and Abu Dhabi. With SMEs contributing 47% to Dubai’s GDP the regulators are providing more and more incentives for start ups and MNCs to come to the UAE.
The current UAE law states that a company must be at least 51% locally owned (sponsor), with the other 49% allowed to be held by foreign investors.
The primary benefit of an LLC setup, is the fact that liability of each of the shareholders is limited to the amount of paid up capital of the company, although in Dubai there is no longer a requirement for a minimum paid up capital when forming your company.
For an LLC, you can have anywhere from 2-50 shareholders, with no restrictions on whether the shareholders are individuals or corporate entities, meaning greater flexibility particularly when organising group structures, however there is a limit on the number of investor visas available.
Key advantages of setting up an LLC:
- Quick: An LLC setup can be done very quickly, provided the documentation is all correct. Typically, for a new company forming with two or three shareholders, a trade license in Dubai can be obtained on the same day of application, using an instant license feature. This means you can setup your company without having a registered office space to begin with, although you will need to obtain one prior to renewing your license the following year in Dubai. In Abu Dhabi, newly announced regulations mean that you can now operate for up to 2 years without a license, applicable to 1,057 different activities under the Tajer Abu Dhabi package.
- Cost Effective: Depending on the choice of activity for your company, an LLC can be surprisingly cost effective, typically costing between 10,000 – 15,000 for simple trading companies. Although there are additional costs for external approvals on certain activities. Further changes to the government fee structures announced earlier in the summer mean that businesses now only pay 2.5% market fee on their leased office space when establishing and renewing their trade license, which is potentially a huge saving for businesses occupying large spaces or key retail locations.
- Flexible: With a wide variety of activities available from the DED, there is very little limit to the range of business that you can choose to do. Multiple activities within sectors can also be combined on a license, allowing businesses to be diverse.
- Visas: With a mainland LLC your only limit to the number of visas you may have, is the size of the office space that you rent for your business. Some designations are flexible, such as sales staff or drivers, which are positions that may not be office based. If you are employing managers or persons in skilled positions, it is important to ensure their individual qualifications are notarised and attested.
- Location: One key advantage of the LLC is the ability to locate your business anywhere within the Emirate. This gives businesses a greater range of choice in both facilities and pricing, and doesn’t limit your physical location to a certain area, like with the free zones.
- Market: The mainland LLC allows your company to trade throughout the UAE, without the need to appoint a local distributor or agent, unlike the freezones. This opens up the market opportunities to your company significantly, particularly with respect to engaging government tenders and contracts, which are only open to mainland companies.
When establishing an LLC you will need a local partner to hold 51% of the company. Your local partner can be either an individual, or a local company that is 100% locally owned. At Synergy, we recommend using a company as your corporate partner, otherwise known as a corporate nominee shareholder.
When engaging with your partner, you can establish a framework, that guarantees all financial and managerial control of the company to you, meaning you only have to pay your partner an annual fee for their services.
After reserving your trade name, and receiving an initial approval for your activity, you can then begin to finalise the requirements for your license, including sourcing your office space, as well as an external approvals that may be required for your activity. Once you have all your documentation ready you can submit them with the DED, pay your fees and collect your license.
If you are considering setting up your business in the UAE and would like to know more about the activities available, and the processes involved, then please contact us for a free consultation on firstname.lastname@example.org