Types of Business Entities in Dubai

by Zaara 09, Nov 2020

Types of Business Entities in Dubai

A feasible factor why foreign investors come to Dubai is the  types of companies that they are permitted to create in the UAE.  There is indeed a wide variety of structures available, from simple sole proprietorship structure to much more complicated business forms and free zone structures, Dubai does have one of the most versatile laws to set up a corporation. If you are interested to know more information about setting up a company in Dubai, our advisors will be of assistance.

Business Entities in Dubai

The Department of Economic Development sets appropriate legal frameworks for Dubai based businesses. The rules and regulations for each differ accordingly, and the categorization is dependent on the company's ownership. The corporate bodies in the Emirate of Dubai are regulated by federal law No. 8 of 1984. The business organization proposed will work into one of the seven corporate structures.

  • Public Joint Stock Company
  • Limited Partnership
  • Limited Liability Company
  • Private Shareholding Company
  • Joint Venture
  • Partnership Limited by Shares
  • General Partnership

Here are some of the Exceptions,

  • Corporate structures under which foreign investors are not allowed.
  • Corporate entities located in free zones 

Let us get to know in-detail on the various corporate structures available in Dubai.

1. Public Joint Stock Company 

  • It is needed to form PJSC for insurance, finance, and fund investment business projects on behalf of third parties. 
  • Minimum ten promoter shareholders requirement, unless a government body is involved as a co-promoter. 
  • A minimum of 55 per cent of the share capital must be offered for subscription to the general public. 
  • Promoters are expected to subscribe at least 20 per cent but are limited to a maximum of 45 per cent of the company's share capital. 
  • The responsibility of the shareholder is limited to the sum of the nominal value of shares.
  • The responsibility of the shareholder shall be limited to the total value of the shares owned in the company. 
  • Shares shall be transferable freely so that UAE nationals own 51 percent of the company's share capital. 
  • The initial requirement of three directors however restricts a maximum of fifteen directors. 
  • The chairman must be UAE nationals, as well as a number of the board members.

2. Private Shareholding Company 

  • Minimum requirement of three promoter shareholders.
  • Minimum share capital requirement is two million AED for business setup in Dubai.
  • PSC shares can not be offered for sale to the general public , Enabled to cover up on PJSC and  
  • Any other regulations which apply to a PJSC shall also apply to a PSC.

3. Limited Liability Company 

  • Limited Liability Company can engage in any legal activity other than insurance, banking, and fund investment on behalf of third parties. 
  • Company formation in Dubai has a minimum requirement of two shareholders, however, limits  the number of shareholders cap to fifty. 
  • No minimum equity capital recommended. 
  • The promoters would be able to assess the equity and interest of the stock. 
  • Share capital should be sufficient to achieve the company's goals.
  • The responsibility of the shareholder is limited to the sum of the nominal value of shares.
  • UAE nationals must possess a minimum of 51 per cent of share capital. 
  • An LLC is forbidden from selling shares for sale to the general public, and from taking deposits or loans from the general public. 
  • Profit and loss can be divided equally according to the company's shareholding pattern.
  • Minimum requirement of one director, however, maximum number of directors is five. 
  • Business management can be managed by a maximum of five designated executives, who do not need to be company employees. 
  • The company's executives may be from any nationality. 
  • Mandatory annual appointment of auditors, and. 
  • An LLC shall contribute 10 per cent of its net profit to the statutory fund each year before the fund hits 50 per cent of the company's share capital.

 4. General Partnership

  • In a general partnership, there might be two or more partners, who shall be jointly and severally responsible for all liabilities. 
  • The general partnership name may consist of one or more partners' names, or may have a proper trade name. 
  • Both general relationship partners have to be UAE nationals. 
  • No minimum prescribed part capital.  
  • A partner's interest can be transferred in the manner provided for in the relationship agreement or with the consent of both partners. 
  • All decisions made in the general partnership shall be taken with the mutual consent of both parties, unless otherwise stated in the partnership memorandum.

5. Limited Partnership

  • A Limited partnership shall consist of both general partners and joint partners. 
  • General partners are collectively and severally responsible for all obligations, while limited partners are reliable in the partnership to the extent of their capital investment. 
  • All general partners must be UAE nationals, and maybe expatriates. 
  • The limited partnership name will consist of a partner's name or more. 
  • Starting a company in Dubai needs no prescribed minimum share capital. 
  • Banned from issuing negotiable shares.

6. Partnership Limited by Shares

  • You can start a company in Dubai with both general partners with limited and unlimited liabilities.  
  • General partners shall be responsible as far as their assets and limited partners shall be liable as far as the nominal value of the share held in the company. 
  • General partners must be UAE nationals while expatriates can be limited partners. 
  • Partnership name(s) may consist of one or more partners' names. 
  • Minimum capital requirement is Five Hundred Thousand AED for business formation in Dubai and share capital are divided into equivalent-value units. 
  • Partnership management needs to be assigned to the general partners.
  • Other regulations are common to joint-stock corporations and also extend to limited-share partnerships.

 7. Joint Venture

  • A JV can be created through an agreement between two or more partners to share the JV's profit and loss. 
  • A JV is to consist of active and inactive partners. 
  • JV agreement can be either oral or written, and it is not necessary to be registered for licensing in the commercial registry. 
  • Company operations under JV shall be conducted on behalf of one or more active partners; the inactive partners shall remain unknown to third parties. 
  • Active partners shall get a license to carry out JV's business activities. 
  • The JV Agreement shall define objectives, company modules and management methods of JV. 
  • The issuance of negotiable shares are forbidden to JV, and
  • JV decisions shall be made with the consent of both parties unless otherwise provided for in the JV agreement.

Why Commitbiz?

These are some of the main types of companies that can be established in Dubai. Commitbiz is a 360° business consultancy solution with a successful track record of developing world recognized companies in UAE. We offer A-Z incorporation services for all types of business structures, legal entities and company jurisdictions in UAE. If you want to open any of these companies in Dubai, then we at Commitbiz can fully assist you in setting up a business in Dubai or anywhere in UAE. To know more about the legal business forms and any other query in company incorporation in Dubai, contact us today and talk to our experts right away!