5 Essential Things to Know Before Starting a Business in Dubai Free Zone

by commitbizadmin 06, Mar 2020

5 Essential Things to Know Before Starting a Business in Dubai Free Zone

Starting up a business in the UAE is a relatively quick and hassle-free procedure. However, many business-people are hesitant about setting up a business in the UAE. This is because incorporating a business in the UAE requires a citizen of the UAE to own 51% of the company, who is generally referred to as a partner or sponsor, among a plethora of other reasons such as hiring policies, immigration policies, higher freight charges etc.

Dubai Free Zone

The government has established various free zones in the UAE to attract more foreign trade investment, each of which is regulated by its free zone authority. Free zones are allowed to draft their company laws, which are independent of the company laws of the UAE (or mainland). Foreign companies are permitted to own their business in a free zone completely. Out of the forty-plus free zones in UAE, most of the free trade zones are located in Dubai as it acts as a commercial and financial hub of UAE.

Therefore, it is effortless to start a business in Dubai, especially in the Dubai free zone area. However, there are still specific pre-requisites a business-person should keep in mind before setting up a business in Dubai Free Zone.

Here are five essential things that will help you to incorporate a business process.

1. Choosing the Type of Business Entity

There are mainly three types of entities that can be set up in Dubai free zones, which are,

  • Branch of a foreign or local company.
  • Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
  • Free Zone Establishment (FZE).

The differences between these types lie in the number of shareholders and whether the said shareholder can be a natural or a legal person. A Free Zone Company can be registered with two or more shareholders, while a single shareholder can establish a Free Zone Establishment. These shareholders can either be an individual or a company.

All free zones in Dubai might not register both types of companies. Hence you need to check with individual free zone authorities about the kind of company they can register.

2. Choosing a Business Activity

After selecting the kind of business entity you want to establish, it is pertinent to decide on the business activity you wish to carry out. Many free zones in Dubai allow for multiple business activities. Hence, as an entrepreneur, you have diverse areas to set up a business in. Choosing a business activity is the earliest decision you have to make, and it is also the most important of all the other decisions.  This is because the next two steps are reliant on the type of business activity you choose.

3. Choosing a Business License

Depending on the kind of business activity you decide, will limit you to the type of business license you can apply. The following are the general types of licences that can be obtained in free zones in UAE,

  • Commercial/ Trading
  • Consultancy/ Services
  • Industrial
  • Educational
  • Media
  • eCommerce
  • Offshore
  • Freelancer
  • Warehousing
  • Manufacturing

It is important to note, however, that the Dubai Aiport Free Zone (DAFZA) is allowing dual licenses to be obtained.

4. Choosing a Dubai Free Zone

As stated above, the type of business activity you choose will determine the type of license you can obtain, which, in turn, will allow you to choose a free zone you will be able to set up a business in. It is important to know that not all free zones in Dubai allow the same kind of business licenses to be obtained. E.g. the Dubai Academic City (DAC) allows educational licences to be obtained while the Dubai Techno Park (TP) doesn't allow the same.

5. Choosing a Trade Name

After knowing all the other essentials, the final task is to create a trade name. It is advised to inspect the same with the respective free zone authority or with the Department of Economic Development (if needed) about guidelines for permitted trade names and to check whether the potential name has already been registered.

The general guidelines of the Department of Economic Development (DED) are as follows,

  • The name must not violate the public morals or the public order of the country.
  • It must be followed by the legal form of the company, i.e. LLC, FZE, DMCC etc.
  • It must not have been previously registered in the country.
  • It is compatible with the required type of activity and legal status.
  • It should not contain the names or logos of any religion, or governing body or any external body.

Even after knowing these essentials mentioned above, it is still helpful to rely on someone when starting a business in Dubai. Let's have a look at the benefits that you can derive by availing them.

Why to Avail Professional Services in Dubai?

Availing the services of a professional when incorporating a business in Dubai provides for many benefits that will affect you and your newly incorporated company, even in the long term. The benefits are as follows:

  • Conservation of time and resources- setting up a company without any help will lead to wastage of time and resources when these time and resources could be focused on more important tasks. 
  • Legal help- a professional will be well versed with all the laws and regulations of Dubai and in essence UAE, which you as an entrepreneur may not be.
  • Guide- a business consultant will act as a guide while starting the business, leading you down the most optimal path for your company. The consultant will help you even after you have set up your fledgeling company in UAE.  
  • Customised Services- every company has different needs and problems. These needs and problems require customised solutions which only a consultant can provide.

This is where Commitbiz steps in. We are a premier business consultant, with our expert advisors being well-versed in the process of company incorporation, especially in the Dubai free zones. We can help you simplify and expedite the process of establishing a company. To know more, do contact us- we would be delighted to assist you.