Business Setup in UAE

The United Arab Emirates (UAE) has emerged as a global business hub, attracting entrepreneurs and investors worldwide with its strategic location, business-friendly policies, and robust infrastructure. Setting up a business in the UAE offers many opportunities across various sectors, whether you want to establish an online enterprise or a traditional business.  Setting up a business in the UAE involves a series of procedures and obtaining necessary approvals from the Department of Economic Development (DED) and other relevant authorities to ensure official registration. In this article, we will explore the detailed procedure for setting up a business in the UAE, guiding you through each step to help you understand the requirements and streamline your business establishment process.

Filings.ae can streamline your business setup process in the UAE, providing expert guidance and comprehensive support throughout the process.

Benefits of Setting Up a Business in UAE

The UAE offers a plethora of advantages that make it an attractive choice for business setup, including:

• Investor-friendly environment with high ease of doing business

• Tax-free or low-tax regime for most business activities

• Strategic location facilitating access to global markets

• World-class infrastructure and modern facilities

• Diverse and multicultural workforce

• Robust legal system safeguarding investments

Steps to Business Setup in UAE

Establishing a business in the UAE involves several key steps, each crucial for ensuring compliance with local regulations and securing the necessary permissions. Here is a detailed overview of the process:

1. Identifying the Nature of the Activity

The first step in setting up a business in the UAE is clearly defining the nature of the economic activity you intend to undertake. This decision is critical as it determines your company's legal structure and the license type you will need. The UAE offers more than 2,000 different economic activities, ensuring a wide range of options to suit various business ventures.

2. Choosing the Right Type of License

Depending on your business's nature, you must obtain the appropriate license. The UAE categorises business licenses into six main types:

• Industrial License: For businesses involved in manufacturing or industrial activities.

• Commercial License: For companies engaged in trading activities, including import, export, and sales.

• Crafts License: For businesses involved in craftsmanship and trade-related activities.

• Tourism License: Required for businesses in the travel and tourism industry.

• Agricultural License: For entities engaged in farming and other agricultural activities.

• Professional License: For service-oriented businesses and professionals such as consultants, doctors, and lawyers.

A single license can encompass multiple business activities, allowing for a versatile business structure catering to various operations.

Identifying the Legal Form

Choosing the appropriate legal form for your business in the UAE is a critical step that depends largely on your business requirements and objectives. The UAE offers a variety of legal forms to accommodate different business needs and activities:

Partnership

• Definition: A business owned by two or more individuals who share profits and losses.

• Features: Shared management and liability.

• Suitable for: Small to medium-sized enterprises that do not require significant capital.

Limited Partnership

• Definition: Consists of general partners who manage the business and bear unlimited liability and limited partners who invest but do not manage and have limited liability.

• Features: Allows for a combination of active management and passive investment.

• Suitable for: Businesses that require outside investment without giving up management control.

Limited Liability Company (LLC)

• Definition: A company structure where the liability of shareholders is limited to their shares in the company.

• Features: Offers flexibility and protection of personal assets from business liabilities.

• Suitable for: Most types of businesses, including trading and service-oriented companies.

Public Joint Stock Company (PJSC)

• Definition: A company whose shares can be publicly traded on a stock exchange.

• Features: Requires significant capital investment and is subject to stringent regulatory requirements.

• Suitable for: Large businesses and corporations looking to raise capital through public investment.

Private Joint Stock Company

• Definition: Similar to a public joint stock company, but shares are not publicly traded and are held privately.

• Features: Allows for more private control and limited public scrutiny.

• Suitable for: Businesses looking to maintain private ownership while having a flexible capital structure.

Branch of a Foreign Company

• Definition: An extension of a foreign parent company operating in the UAE.

• Features: Can conduct business activities similar to the parent company and is not a separate legal entity.

• Suitable for: Foreign companies looking to establish a presence in the UAE market without forming a separate local entity.

The chosen legal form must align with the nature of the economic activity your business will undertake. 

 3. Reservation and Registration of the Trade Name

The trade name is a crucial element that distinguishes a business license from others, helping to avoid any potential confusion for customers. It should be relevant to the type of license and clearly indicate the nature of the business.

 You can apply for the registration of a trade name through the Department of Economic Development (DED) in each emirate, either by visiting their office, using their website, or through their smart application.

Terms and Conditions for Selecting a Trade Name

• Legal Form Abbreviation: The trade name must include an abbreviation that indicates the legal form of the company, such as "LLC" for a limited liability company.

• Appropriateness and Decency: The trade name must not contain any inappropriate or offensive words and should not violate public sensibilities.

• Relevance to Economic Activity: The trade name should align with the economic activity the business will engage in, ensuring consistency and clarity.

• Restrictions on Certain Names: The trade name must not include names associated with Almighty Allah, government entities, or the names and logos of third parties.

• Availability: The trade name must be unique and not already registered by another company to avoid duplication.

• Approval and Certification: The trade name must be approved by the DED, and if trademark protection is desired, it should also be approved by the Ministry of Economy.

• Renewability: Trade name certificates are subject to renewal, ensuring that the name remains legally protected and in compliance with regulations.

 4. Application for Initial Approval

Initial approval means that the UAE Government has no objections to the establishment of the proposed business entity within the country. This approval allows you to move forward with obtaining a commercial license. However, it is important to note that initial approval does not grant the authority to commence business operations or practice the business immediately.

Foreign investors are required to secure approval from the General Directorate of Residency and Foreigners Affairs (GDRFA) prior to obtaining initial approval. Additionally, certain business activities necessitate obtaining approval from relevant government authorities before applying for initial approval. For instance:

• Legal Affairs: Activities related to legal services must receive approval from the appropriate legal authorities.

• Security and Financial Entities: Activities involving security services or financial markets require approval from entities such as the Securities and Commodities Authority.

5. Memorandum of Association

Depending on the chosen legal structure of the company, a Memorandum of Association (MoA) may be required. The MoA outlines the company's objectives, the division of shares among partners, and other fundamental details. It is essential to prepare and sign an MoA if your company adopts any of the following legal forms:

• Partnership

• Limited Partnership

• Limited Liability Company (LLC)

• Private Joint Stock Company

• Public Joint Stock Company

6. Selecting the Location or Address for Commercial Activity

Every business in the UAE must have a physical address for its commercial activities. The business location must comply with the requirements set by the Department of Economic Development (DED) in the respective emirate and adhere to the zoning regulations of the municipality or the relevant authority.

Lease Agreement: A lease contract is mandatory for the office or warehouse space. Some emirates require this document to be certified. In Dubai, for example, the lease contract must be registered through the Ejari system, which is handled by designated Ejari offices.

7. Obtaining Additional Government Approvals

In certain cases, specific business activities require special approvals from federal or local government authorities in the UAE. These approvals are necessary to obtain a commercial license and ensure compliance with regulations governing the particular activity. Below are examples of activities and the relevant authorities from which you need to obtain approvals:

• Ministry of Interior: Approval is required for activities related to public transportation services, driving schools, fire extinguishing equipment, alarm and protection systems, used cars, used spare parts, and car rental dealerships.

• Ministry of Justice: Approval is required for legal activities.

• Municipality Department in the Relevant Emirate: Engineering and architectural activities need approval from the municipality department of the emirate where the business is located.

• Telecommunications Regulatory Authority: Approval is required for telecommunications-related activities.

• Executive Council: This council provides approvals for tourism and travel services, public services, trading charters, shipping and marine agencies, car clubs, air transport charters, and branches of foreign companies.

• Ministry of Economy: Approval is required for private joint stock companies and auditing firms.

• Health Authority in the Concerned Emirate: Health-related activities need approval from the local health authority.

• Supreme Petroleum Council: Approval is required for activities related to oil and gas field services and oil drilling services.

8. Receipt of License

After completing the necessary steps and obtaining all required approvals, you can receive your commercial license through the service centres of the economic departments or via their electronic service platforms. The documents required for issuing a license for all legal forms include:

• Initial Approval: Including all documents submitted for initial approval.

• Lease Contract Registration Certificate: A copy of the registered lease contract.

• Memorandum of Association: Duly certified.

• Additional Approvals: Approvals from other relevant government authorities, if necessary.

• Payment of Fees: Fees must be paid within a specified period (usually 30 days) from the issuance of the payment receipt. Failure to make the payment on time can result in the cancellation of the application.

9. Registration with the Chamber of Commerce

Finally, register your business with the local Chamber of Commerce to gain membership and access to business resources, networking opportunities, and additional support.

Each emirate has a Department of Economic Development responsible for business registration and licensing:

• Abu Dhabi: Abu Dhabi DED

• Dubai: Dubai DED

• Sharjah: Sharjah DED

• Ajman: Ajman DED

• Um Al Quwain: Um Al Quwain DED

• Ras Al Khaimah: RAK DED

• Fujairah: Fujairah Municipality

• Dibba Al Fujairah: Dibba Municipality

Following these steps, you can establish a conventional business in the UAE and tap into the myriad opportunities available in one of the world's most dynamic business environments.

Conclusion

Setting up a business in the UAE presents an array of opportunities for entrepreneurs and companies seeking growth and expansion. With its business-friendly environment, tax-efficient structures, and strategic location, the UAE offers a compelling destination for establishing a successful venture. By understanding the legal frameworks, following the proper steps, and seeking expert guidance, you can unlock new horizons and pave the way for long-term success in this dynamic and vibrant market.

 Filings.ae offers expert assistance for business setup in the UAE, ensuring a seamless process from initial consultation to obtaining the necessary licenses and approvals.