5 Steps to start a General Trading Business in Dubai

by Zaara 16, Jul 2019

5 Steps to start a General Trading Business in Dubai

UAE has been continuously topping as one of the major business locations for all foreign investors and start-up entrepreneurs from various parts of the world. Over the last 2 decades, there has been huge development and growth in the business and financial sector in UAE.

Apart from these sectors, there has been continuing growth in various other sectors such as trade and logistics, restaurant and cafeteria and other such management consultancies.

General Trading Business in Dubai

Dubai has been considered one of the most popular trading ports around the world. Starting general trading in Dubai will be a beneficial investment, especially for foreign business investors and entrepreneurs. To start a general trading business in Dubai, one needs to follow certain steps for ensuring that the business has been planned and implemented properly and legally as the laws of Dubai are really strict.

These steps are mentioned below:

  1. Type of business.
  2. Plan out the activities.
  3. Fix the jurisdiction
  4. Find a sponsor.
  5. Legal formalities.

1. Business Plan

The first step in starting up a business is to plan out what type of business you want to start with. It's better to start your business with a proper plan. Most of the jurisdictions in the UAE, including Dubai, requires a properly formulated plan. The plan should have the following information contained therein:

  • Market
  • Products and activities
  • Total number of employees
  • Office space requirement
  • Initial investment
  • Marketing tactics
  • Investors, financing
  • SWOT analysis
  • Competitors.

The above-mentioned parameters are to be studied and formulated properly. One should choose the market wisely, the activities more wisely, and the initial investments with due care.

2. Decide the Activities

A trading business wherein the business owner wants to focus on a limited activity shall be requiring a specific trade license. The business owners want to operate with different activities; then, the business shall be considered a general trading company. A general trading license would be required therein; a general trading license usually costs more as it allows trading of various products. The activities which are to be carried by such a business plays an important role in the overall setup.

3. Fix the Jurisdiction

To choose a particular jurisdiction of the company, the business owner needs to know all the jurisdictions available in the market. In Dubai, the jurisdictions have been classified into three types. These are:

  • Free Zones
  • Mainland
  • Offshore

There are currently 48 free zones prevailing in Dubai. Such free zones are incorporated within a distinct jurisdiction and are governed by the respective authorities. Free zones are really beneficial for foreign investors and entrepreneurs as these free zones provide certain beneficial; aspects such as a company established in a free zone in Dubai are completely tax-free. Then, there will be 100% ownership of the business investor in the company.

Whereas in the mainland case, the business investor would be required to find a sponsor for setting up a company in mainland Dubai. Such a local sponsor will be given some 51% shares with the required remuneration every month.

Coming to the offshore company formation, an offshore company is a company that is usually established in another jurisdiction but the parent corporation in another country. There is no physical office in such jurisdiction. Hence, they are not physically present in the country.

4. Find a Sponsor.

As discussed, if the business owner chooses the mainland to set up a company, it will involve certain requirements. One of the most important requirements is finding a sponsor who can help you in the establishment. The said sponsor will be getting a share of 51% in the company. Basically, there are 3 main types of sponsors available in Dubai.

  • Those sponsors will sign your documents and will take care of your business problems. These types of sponsors usually charge the lowest fees.
  • The second type is the middle-level government functionaries who have big connections, and these sponsors will help you when you are stuck. The fee for such sponsors will be higher.
  • The last type is those who are high- level brands and are connected at the senior levels. Their fee is mostly the highest.

5. Legal Formalities.

Obtaining a license for your business is of utmost importance as it makes your business legal. A general trading license will be required for a general trading company wherein many activities and products are traded, imported and exported.  Such license covers every aspect, such as all the accessories, clothes, furniture and fixtures, pieces of equipment and other electronic appliances. Below mentioned are the steps through which one can obtain a general trading license for the company:

  • Choosing an appropriate trade name for the company
  • Planning all the business activities
  • Filling up the application as submitting it for approval
  • Getting external approvals if required
  • Arranging the required legal documents such as the memorandum of association and all the government-approved documents
  • Choosing a business location and obtaining a tenancy contract properly attested by Ejari.
  • Submission of the application to the Department of Economic Development(DED)
  • Paying the requisite fee for the issuance of the license

In case of a free zone or offshore establishment license, the company is required to submit the original documents to the Commercial Registry at the trade license and commercial registration department. On completion of the said process, the DED will issue the Trading license. The said license is valid for 1 year. A general trade license cost in Dubai is around AED 30,000 TO AED 40,000 depending upon various factors.

Documents required –

  • A license application signed by managers or legal representatives.
  • An MOA
  • Attested company name approval letter from DED.
  • Passport copy of management partners.

On submission of these documents, the company officials will check and verify the documents. After which, the name of the company will be added to the commercial registry. The DED will then forward all documents to the Federal Ministry of Economy for its publication. On successful publication, the ministry will issue the approval letter.

Conclusion

To set up a general trading company in Dubai, the business owners and entrepreneurs would be required to go through a long procedure wherein proper documentation and legal formalities would be complied with. Such legal procedure is advisable to be done by an appointed Business setup consultant. We at Commitbiz provide professional support concerning setting up a business in Dubai. We deal with every formality and aspect, making sure to satisfy all your business needs. Do Contact Us.