Things to Consider Before Establishing a Small Business in Dubai

by Zaara 28, Oct 2021

Things to Consider Before Establishing a Small Business in Dubai

The Dubai government provides many kinds of business models for foreign investors to consider, such as direct sales, business agency agreements, branch or representative office, Limited Liability Company, and first investment in the free zone.

Dubai has a world-class company infrastructure and attracts world-class talent as a free trade zone; registration of a company gives full ownership and management of its businesses to international companies. Due to Dubai’s successful lifestyle and fast-paced company structure, company formation is a tremendous opportunity here.

Types of Company Structures

For companies to develop their businesses, the UAE provides three different types of business structures:

Free-Zone

According to the information obtained on the Dubai Multi Commodities Centre website, the Free Zone or Free Trade Zone is a defined region in which taxes and restrictions do not extend to industries, jobs or trade-in the manner appropriate in other parts of the country.

In the free zone, without the interference of authorities, products can be handled, landed, manufactured, reconfigured, and re-exported. The commodities are subject to customs duty only if they are moved within the country to customers.

Free zones are usually categorised around seaports, airports and trade-friendly areas.

On-shore

These businesses trade locally in the UAE market and globally as well. There are various types of on-shore companies that can be incorporated; depending on the kind of company, they need a UAE national, who will serve as a local sponsor, or a local service agent.

Off-Shore

There are businesses owned solely by expatriates. They are used for businesses operating within and outside the UAE as properties, foreign exchange, property, or holding companies. For businesses looking to do business internationally, this structure works well. It is only possible to contact them outside the UAE, not inside.

Essential Factors to Consider Before Establishing a Small Business in Dubai

1. Select the Company Operation

Before starting a small business in Dubai, the first thing to do is to select an operation you wish to pursue. Your business operation affects the set-up of your organisation. Therefore, with thorough study and review, it has to be selected and then concludes your market operation.

2. Clarity on Regional Allocation to Select the Right One

When you are establishing a company in Dubai, consider the zonal distribution. There are primarily three regions – Mainland, Free Zone and Offshore. Each zone has its advantages in starting a business in its place.

3. Registration of Best Trade Name

You need to register the company's trade name and choose a name that resembles the type of business you are going to do. It is essential to write a trading name with the Department of Economic Development (DED)

4. Selection of the License Category

The most significant move, if you are planning to set up a company in the UAE, is to select the category of licence based on your form of industry. The different kinds of license are:

i) Commercial License:

Compared to other business licences, the commercial licence in Dubai is the simplest to obtain. It is for enterprises that deal with general trade or specialised trading practises.

ii) Industrial License:

An Industrial License must be received by companies involved in manufacturing, producing, manufacturing, or participating in some other unique activity. An Industrial Trade licence has to be applied for by companies that turn natural resources into finished goods.

iii) Professional License:

It is essential to apply for a Professional License in Dubai for service-oriented companies such as craftsmen, artisans, and professionals. A professional licence in Dubai is required for accountants, auditors, consultancy services, printing and publishing, healthcare services, etc.

iv) Tourism License:

A tourism licence in Dubai must be obtained by companies engaged in Travel Tourism and Healthcare. If you open a restaurant, hotel or even a car rental company, you need to get a tourism licence.

5. Opening an Account in a Bank

When a business licence is issued, opening a corporate bank account becomes simpler. You can choose from a host of UAE banks that are foreign, local, and Islamic.

6. Applying for the Visa

Applying for a visa is also a significant move for a business start-up in Dubai. The application process for a passport is quick. It consists of four phases: admission, permit, adjustment of status, and evaluation of medical fitness. Emirate ID registration and visa stamping are then obtained.  A business consultancy service can help you with such PRO Services in Dubai.

7. Ensure Legal Job Enforcement

When it comes to legal work, the UAE government is stringent. Ensure that the enforcement and reporting are completed on time to deter and punish fines.

8. Understand the Regime of Taxation

It is essential to understand the tax regime if you are planning on starting a small business in Dubai. In the UAE, there is 0 tax in the free zones and 5 per cent VAT on the mainland.

Get Acquainted with Establishing a Company

1. For the Local Company

For your local market, you have to pick a local sponsor, someone who is a UAE national.

You must have a locally registered LLC company to leverage the potential of Dubai and the business opportunities it offers. As a 51 per cent partner, the UAE national should be taken. The benefits are that you can set up your company anywhere in the city, which gives you considerable power by the venue.

2. For a Company at Free Zone

You have to relocate your company in one of the available free zones if you want to be the 100 per cent owner of your firm. For the business that deals with individuals, such as convenience stores and restaurant chains, this is impractical. The rental may be very high, but the benefits are massive.

 

  • Your start-up process is fast-paced.
  • You have duty-free customs limits.
  • You get 100 % ownership of your company.

 

The third step will be to find a position that would maximise your comfort and expenses. Depending on the product or form of trade that you are associated with, you need to find yourself in a region that is most lucrative for your company.

If your company is set up in a free zone, before selecting the place, you should take into account your company, business model, and product, based on the distance and costs necessary for your business.

The next step is to check whether your Visa is eligible for you and your staff to remain in Dubai and run the business. Visas are appropriate for almost the entire market for specific situations; the only thing that varies is their requirements depending on the office size, the company form and employees/investors.

To receive the visa, you need to work with your sponsor if your business is a local company in Dubai.

The final move will be to hire a registered agent to help direct you on the path to starting a company. These consultants will assist you, along with registering the business for you, in every step of the process. They also assist with opening bank accounts, arranging for auditors, taking care of the renewals and helping with other programmes. Their insight will assist you in planning and determining your business costs while working with the Free Zone officials and the local government bureaucracy. They even come up with specialists who can provide you with plans to set up your company, identify potential expenses, take care of your licencing and venue, and even get you through your company hurdles.

From data collected as of Q2, 2019, some of the initial costs (approximately) for setting up a free zone business are:

1. Office Space Rent (Annual or Term Cost): AED 15,000 +

Depending on the free one, the price varies. Your options will be opened depending on the number of workers the company hires, and the number of visas it can receive.

An extra service fee that will be calculated on your rent is charged.

2. Free Zone License (Yearly): AED 10000- AED 50000

This fee applies to all businesses in the trade, service and industrial sectors. The free zone you choose is the one that licences them.

3. Free Zone (one-time) Registration Fees: AED 5000-AED 45000

It is payable to the free zone authority for your business to be licenced. The cost of the course varies according to the Free Zone and the type of business you select.

4. Free Zone Visa: AED 3000-AED 5000 per Visa (yearly cost + renewal)

Depending on the office room you rent, the Free Zone businesses have a limited number of visas approved. The payments for workers living in the UAE and those arriving from abroad differ.

5. Bank Guarantee (annual)

For each of their workers, for example, all the Free Zone businesses need to display a guaranteed sum for 60 days of salary with a one-way ticket to their home country.

6. Registration Fee for Agent (one time + renewal)

To guide you with the setup of the business and the entire operation, you will need an agent. So you're going to need a local agent who will mandate all the procedures of the government.

Some of the other miscellaneous expenses are:

  • Initial Acceptance
  • Name of Trade: AED 500-1000
  • MOA: 1000-2000 AED

 

In the long run, having a successful marketing plan and understanding the brand will assist you. We at Commitbiz help the company to set up all professional materials by integrating them. Our specialists will guide you on which strategies to pursue and create workplace authenticity. Our goal is to be consistent both during the growth process and in the future. Contact us today; we will be delighted to guide you.

FAQs

What are the documents required for starting a small business in Dubai?

  • A document highlighting your complete business plan

  • Application form

  • NOC from the service agent

  • Tenancy contract

  • Passport copies of all the company shareholders

  • Local Service Agent Agreement

  • Memorandum Of Association

  • Emirates ID

  • Visa copy

 

What are the Best options for getting investment for starting a small business in Dubai?

  • Business Incubators

These are full-fledged organizations for helping business people and aspiring business people to start their entrepreneurial journey. They provide aid in terms of funding, networking, guidance, etc.

  • Institutional Investors

Institutions that have access to other’s money and have the power to invest it in such projects. They’re a great option for getting funded.

  • Venture Capitalists

Private equity investors with huge capital investing capability. They are also open to investing in risky ventures because of their business acumen and hunger for big returns.

  • Angel Investors

Individuals with great net worth, these people are the ones who are among the first set of people to invest in any startup. 

  • Local Funding

You can get funded by the various enterprise schemes launched by the government to promote business growth in Dubai.

Will I have to get a trade license for all types of goods, if my company is involved in multiple types of businesses?

If your business is into selling multiple categories of products, then go for a general trading license. That’ll help you to trade multiple types of goods with 1 license.

For businesses in Dubai involved in selling multiple activities, will they have to get a trade license for each business activity?

If the trade license you have acquired does not cover the business activity you’re doing, then it is necessary to get one for them.

What is the validity of a general trading license?

Valid for 1 year. After that you’ll have to renew it.

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