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Legal Business Structure: 5 Types of Company Formation in Dubai
Establishing a company in Dubai can be challenging, especially for expatriates or foreign investors. The Department of Economic Development (DED) Dubai lays out the rules for establishing companies in Dubai and determining their legal structures. The rules and regulations for each types of company formation in dubai vary, and the categorization is based on the firm’s ownership.Â
- TABLE OF CONTENTS
- Types of Company Formation in Dubai
Types of Company Formation in Dubai
The following are the 5 most common types of company formation in Dubai:
Sole Proprietorship
A Sole Proprietorship is a legal entity owned and operated by a single individual. Being in complete control of operations and profits, the owner is 100% liable for debts or other financial obligations. The noteworthy points for this type of legal structure are:
- commercial or industrial type sole proprietorship can be owned only by the UAE nationals or GCC nationals
- owner of a consultancy type of sole Proprietorship should have a scientific qualification or degree for the activity selected
- sole proprietorship firm can have only one manager
- sole proprietorship has no minimum requirement for business capital
- The trade name should be related to the activity
- sole proprietorship can have branches, which can perform all activities included in the license of the parent firm
- firms and their branches can be sold, but the industrial or commercial type of firm can only be sold to UAE nationals or GCC nationals
One-Person Company
A One-Person Company is a limited liability firm owned by an individual or a corporate body. The difference between a sole proprietorship and this legal form is that the liability is limited to the shares held by the owning entity. The delicate points about this legal structure that one should consider are:
- A UAE national or GCC national can set up and own this legal form of firm.
- A corporate body that is 100% owned by UAE or GCC nationals can own a firm with a one-person company legal structure.Â
- The owner is a shareholder, and her/his liability is limited to the value of the shares she/he holds.
Share capital is as recorded in the Memorandum of Association (MoA)
The trade name should include the owner’s name, legal form (one person co.) and end with LLC
Civil Company
This legal form consists of a partnership for professionals in recognized fields such as doctors, lawyers, engineers, and accountants. There are some points to consider regarding this legal structure:Â
- Partners of any nationality can be involved in this legal form of firm.
- If the partners do not include any UAE or GCC nationals, the firms need a local service agent.
- If the company is involved in consultancy activities, the firm must be owned by professional partners practicing the same activity.
Limited Liability Company (LLC)
This is the most popular legal form of company in Dubai. An LLC has 2 to 50 shareholders, each of whom is liable only to the extent of their share in the company. Important considerations:
No professional or consultancy activities can be conducted by this form of the company except banking, insurance, or investment
An LLC can conduct any industrial or commercial activity
LLCs require a UAE-accredited auditor
Partnership Company
The ownership is shared by two or more partners who fall into the general or limited partner category. This can be explained more explicitly by considering the points below:Â
- UAE nationals must be general partners in a simple limited partnership. Partners of other nationalities must be limited partners.
- no restriction on the share of ownership of general or limited partners
- Limited partners should not intervene in the management or administrative issues of general partners. However, if they do so, they can become liable for all of the business obligations.
The above are the most common types of company formation in Dubai. The following are the other legal structuresavailable in Dubai which are more suitable for branches of businesses rather than establishing a company:
Branch of a Foreign Company:
A company registered abroad can have a branch in Dubai under UAE jurisdiction. It is 100% owned by the parent company. The branch cannot import goods directly; this must be done via a local trading firm.
Representative Office:
This setup allows for marketing and promotion of the parent company’s business only, not operational activities. It must appoint a Local Service Agent (LSA)—a UAE national who has no financial or legal interest in the business.
Branch of a Dubai-based, GCC-based, or UAE-based Company:
These branches must perform one or all of the licensed activities of the main company. Multiple branches may carry out different activities if all are covered under the main license.
Branch of a Free Zone Company:
A Free Zone company may expand into the mainland by obtaining a DED branch license, along with Ministry of Economy approval and a local service agent.
SME License:
An SME license is issued for businesses 100% owned by UAE nationals and can take any legal form.
Dubai Mainland License Cost
Starting a company in Dubai Mainland costs from AED 14,500. You can enjoy 100% company ownership of various commercial and industrial activities and avail free business support services when you set up your company with Choose UAE.
Choose UAE
Choose UAE‘s Company Formation Specialists can provide professional business setup guidance and assist you in your decision-making by offering well-informed options from the suitable business activity to the right license type. Get the most out of Choose UAE’s optimal customer service experience with hassle-free licensing, residence visa assistance, corporate bank account opening, branding and website support, and virtual office solutions, all handled by a dedicated account manager to ensure an efficient and seamless setup experience.
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