Types of Business Entities in the UAE Free Zones

by Zaara 11, Nov 2020

Types of Business Entities in the UAE Free Zones

The United Arab Emirates presents a fertile ground for budding entrepreneurs and investors thanks to its uniquely diversified and expanding economy, and highly developed banking and financial service sectors. Additionally, the government of the UAE has also aided and encouraged this migration through welcoming policies that cut down on bureaucracy, offer tax-cuts, and reduce the procedures involved in setting up a company.

Setting up a business in the UAE can be a tedious process if you are not aware of the business regulations and legal procedures. Therefore, appointing a business consultant in the UAE like Commitbiz can help you lift the stress off of you. They will manage the entire process while you can concentrate on business operations.

Even then, we will give you a comprehensive overview of a few things needed to set up your UAE business.

A free zone business registrations are sought-after by many entrepreneurs due to the various tax advantages provided by the authorities. One of the things to know under the registration procedure is the types of corporate entities and which one suits best for your business activity. Let us get down to the main content, i.e. the types of corporate structures available in the UAE free zones.

Free Zone Establishment (FZE)

A Free Zone Establishment is a single shareholder company in the free zones. A free zone entity implementing rules and regulations are equivalent to its Memorandum and Articles of Association. There should be at least two directors and a secretary for FZE. The offices of director and secretary may be held jointly by an individual person. The documents required to set up this business entity are –

  • Personal details of the shareholder/owner
  • Bank's reference (Original)
  • Letter of Appointment for the manager with specimen signature (Notarized) along with their passport copy and Power of Attorney.

Free Zone Company (FZC)

Free Zone Company can operate inside the UAE, though only within the free zone boundaries. A Free Zone Company has two or more shareholders (both individual and corporate shareholders are allowed). A free zone company is a limited liability entity. An FZC should submit its audited financial statements to the UAE Free Zone Authority every year within three months from the end of the fiscal year. There should be at least two directors and a secretary for Free Zone Company. The offices of director and secretary may be held jointly by a single person. The documents needed to set up this business entity are –

  • Certificate of Registration/ Incorporation of the Company (Notarized)
  • Bank's reference letter concerning the creditworthiness of the company (Original)
  • Letter of Appointment for the Manager with his specimen signature (Notarized) along with his passport copy and Power of Attorney.

Upon signing the agreement for facility Lease and Personal Secondment, the Free Zone issues the license. On payment, the Free Zone issues the license and all other related documents.

Branch Office

A branch can be that of a foreign company or a UAE company. A branch office has the same legal identity as its parent company and operates the business under the name of its parent company. A branch office may only be involved in activities parallel to those of its parent company. Still, it is not allowed to carry on the business of importing the products of its parent company, a function set aside for local trade agents. In a few cases, the Branch of a foreign company is required to obtain an additional license from the UAE Ministry of Economy. The documents required to set up a branch office in the UAE free zones are –

  • Pre-approval application form
  • Copy of your passport along with your UAE residence visa and a copy of your Emirates ID if applicable
  • Proof of residential address in the country of residence (like utility bill or invoice)
  • Copies of parent company's documents
  • Details of office address in the UAE free zone
  • Third-party approvals for certain regulated business activities

Once a lawful existence has been established in a Free Zone, the business will need to lease premises or land and acquire a business license from the FZA. Various types of licenses apply in the different types of free zone. Businesses with trade and industrial licenses can only conduct business within the Free Zone or overseas. To sell products in the Emirates, a UAE official agent is required, and a joint venture needs to be formed.

All these legal procedures and much more can be completed by Commitbiz. Right from business incorporation to office space, we cover it all. Contact us today for more information.