How To Do a Company Formation In Dubai

Look as far as Dubai if you want to start a business abroad. Dubai offers many advantages and success for businesses looking to thrive and connect with the rest of the world.

Despite a global pandemic and a recession, the UAE economy has grown the fastest since 2011, exceeding initial forecasts. The UAE economy is expected to grow by 5.4% and 4.2% in 2023.

The city's growth prospects have drawn an increasing number of entrepreneurs. Fortunately, if you want to do a company formation in Dubai, the process is relatively simple, especially with the UAE's free zones.

Things To Be Known Before Starting a Business In Dubai:

The UAE is among the best in the Middle East regarding company settings. It is a global center that provides possibilities for people from all industries and countries. Furthermore, its liberal, stable, and business-friendly environment and several economic development measures entice international investors.

Starting a company in Dubai free zone or on the Mainland, 'What's the difference between the two?' you may wonder. And 'How can I know which option is the best?'
Each option has advantages and investment potential depending on your company's demands. And in this article, we'll discuss the major key differences between Mainland and Freezone & Offshore, starting with information about "what is mainland, free zone and offshore"?:

Key Differences Between Freezone, Mainland & Offshore

So, what is the difference between the Mainland and the Free zone & Offshore? The jurisdictions are extremely diverse, each serving a certain corporate structure. The key differences are listed below to help you decide which is best:

Mainland : 

• 100% Ownership.
• Mainland companies can do both B2b & B2C.
• Mainland companies must have 200 sq ft of office space.
• Visa limits do not apply to mainland companies; however, the number of visas depends on your workspace area. If your organization requires more visas, it must first acquire or rent a larger workspace.
• You would need government clearance from multiple government organizations for a mainland company, such as the Department of Economic Development, and the Ministry of Labour, the Department of Culture & Tourism, the Department of Public Works and the Department of Municipalities & Transport, and so on
• At the end of each financial year, all mainland companies are expected to prepare a financial audit.

Freezone : 

• 100% Ownership.
• Freezone companies can do only B2B (Business to Business).
• Freezone companies don’t need office space necessarily.
• The number of visas that free zone companies can apply for is limited. It depends on the free zone's regulations and ranges from one to six.
• Each freezone has it own set of rules, and the businesses set up should follow the rules of that particular freezone. Furthermore, you need permission for certain activities from non-free zone government authorities to set up business in the freezone.
• Certain freezones are exempted from audit preparation. Only free zone corporations like FZE and FZCO must undergo a year-end audit.

Offshore : 

• An ex-pat can own the entire company unless it is located outside of the UAE. An offshore company cannot have a physical presence in the UAE.
• They have the freedom to conduct business outside of the Emirates. They are not allowed to do business within UAE. 
• They are not permitted to have a physical office in the UAE. They are free to have it outside of the country.
• An offshore company formation does not require a resident visa because there is no need for an office space.
• Offshore formation is available in Ras Al Khaimah (RAK) and Jebel Ali  (JAFZA). That particular offshore authority is in charge of obtaining approval.

The Benefits Of Dubai Freezone Company Formation

Some advantages of Dubai free zone company formation include;

• 100% ownership without needing a UAE sponsor.  
• Quick and easy company creation.
• 100% repatriation of cash and profits. 
• 100% exemption from import and export tariffs. 
• Relatively simple recruitment policy.

The Benefits of Dubai Mainland Company Formation

The following are the benefits of Dubai mainland company formation:

• Unrestricted freedom to conduct business throughout the UAE. 
• 100% exemption from corporate and personal taxes. 
• They allowed 100% repatriation of profits and capital. 
• Potential bid and work on UAE government contracts. 
• Visa restrictions are based on office space.
• They can set up their office location anywhere in the registered emirate and establish multiple company branches creating a solid presence in the local market.

The Benefits of Offshore Company Setup in Dubai

Below are some of the benefits of offshore company setup in Dubai (JAFZA):

• Zero Corporate Tax.
• Low Authorised Capital.
• Double Taxation Treaties.
• Excellent Technological Infrastructure.

The Process of Company Formation in Dubai

Company formation in Dubai involves several steps and requirements. Here is an overview of the process:

Mainland Company Formation Process

Below is the process of Dubai mainland company formation;

Determine the type of company : The first step is to decide the type of company you need to set up. Dubai's most common types of companies are Limited Liability Companies (LLC), Free Zone Companies (FZCO), and Branch or Representative Office.

Choose a company name : After deciding the type of company the next step is to select the appropriate name for it. The name must be unique and not already registered in the UAE. It is also essential to ensure that your name is not offensive or contrary to public morals.

Get initial approval : Once the name is chosen, the next step is to get approval from the Department of Economic Development in Dubai

Draft the Memorandum of Association (MOA) : The MOA is a legal document that outlines the company's activities, objectives, and ownership structure. It must be drafted in Arabic and signed by all shareholders.

Obtain a business license : You need a business license to do business in Dubai, and the type of license depends on the kind of business you choose to do and the location of the business. You can apply for a license through the DED or the relevant free zone authority.

Register your company : Once you have obtained your business license, register your company with the DED or the relevant free zone authority.

Open a corporate bank account : To conduct business, you must open a corporate bank account in Dubai.
Apply for visas : If you plan to employ staff, you must apply.   It can be done through the General Directorate of Residency and Foreigners Affairs (GDRFA).

Freezone Company Formation Process

Below mentioned is the process of Dubai freezone company formation;

Choose a free zone : Dubai has over 40 free zones, each with its rules, regulations, and benefits. Research the available options and choose the one that best suits your business needs.

Choose a company name :  The next step is to choose a name for your company. The name must be unique and not already registered in the UAE. It is also essential to ensure that your name is not offensive or contrary to public morals

Apply for initial approval : Once you have chosen a name, you must apply for initial approval from the relevant free zone authority. It involves submitting a business plan and other documents, depending on the type of business you plan to set up.

Draft the Memorandum of Association (MOA) : The MOA is a legal document that outlines the company's activities, objectives, and ownership structure. It must be drafted by the rules and regulations of the free zone and signed by all shareholders.

Obtain a business license : To operate a business in a Dubai-free zone; you need a business license. The type of license you need will depend on the nature of your business. You can apply for a license through the relevant free zone authority.

Register your company : Once you have obtained your business license, register your company with the relevant free zone authority. It involves submitting the MOA, business license, and other required documents.

Open a corporate bank account : You must open a corporate bank account in Dubai to conduct business.
Apply for visas : If you plan to employ staff, you must apply. It can be done through the relevant free zone authority.

Offshore Company Formation Process

Below mentioned is the offshore company setup in Dubai;

Select the Business Activity : First step to start an offshore company is to figure out what kind of business you want to start. A thorough understanding of the same would assist you in understanding the target market.

Finalize the Business Structure : It is critical to choose a suitable legal entity when forming a company since it will have a significant influence on the firm, which includes:

• International Business Company (IBC)
• Offshore Trust
• Offshore Corporation
• Limited Liability Partnership (LLP)
• Limited Liability Company (LLC)
• Unlimited Company
• Company Limited by Guarantee

Choose the Business Name: The company name should correspond to the commercial activity of the company. Ensure that the chosen business name is distinct and does not sound similar to the names of other companies in the industry.

Submit the Company Documents: Submit all the documents required for the company registration and make the MOA for the company.

Obtain a Business License : Creating an offshore corporation requires acquiring a business license or authorization. Following this, government officials must approve the documents. Once cleared, commercial activity can proceed as planned.

Open an Offshore Bank Account : To do business successfully, create an offshore bank account. On the other hand, business owners can open an offshore bank account in another country.
For example, you may create a business bank account in Seychelles or the British Virgin Islands if you run an offshore company in Dubai.

Starting a Business in Dubai as a Foreigner

Dubai has a favourable business environment for foreigners looking to start a business, with a streamlined process and minimal bureaucracy. Expats must obtain a business license and register their company with the DED before doing a business setup in Dubai.

It is always better to seek the assistance of business consultant experts to ensure compliance with local rules and regulations. Additionally, it is essential to have a solid business plan, sufficient funding, and a thorough understanding of the market and competition.

Conclusion:

The sort of business and activities you intend to undertake will determine which choice is best for you. Everything comes down to your requirements and objectives.

Business setup in Dubai can be complex, and it is recommended to seek the advice of a legal or business consultant to ensure that you meet all the requirements and comply with the laws and regulations.