The United Arab Emirates, with its timely planned economic diversification projects, expanding FDI inflows, speeding up GDP, and globally accredited business-friendly businesses set up rules and regulations, have made the nation the talk of every foreign investor today. As a robust industry powerhouse with growth opportunities and world-class facilities, UAE, in its diverse jurisdictions, fosters distinct market activities within. As every company needs a unique framework to integrate, UAE is promoting numerous legal forms to help businesses develop, expand, and prosper.
In this blog, we will analyze various corporate frameworks that the Emirates has provided to its businessmen for doing business in the UAE. Let's go one by one through them.
1. Sole Proprietorship
As the name indicates, the sole proprietorship is managed by a single individual who controls all of its operations and holds 100 percent shares of any profits. This business organization is the simplest type of corporate structure in the UAE. It does not enforce any special conditions other than a foreign citizen getting a residency permit.
Characteristics of a Sole Proprietorship in the UAE
- A person of any nationality may have a sole proprietorship of a profession.
- Only nationals of the UAE and GCC can own a commercial or industrial sole proprietorship which must be 100 % owned.
- If the owner is not a citizen of the UAE, an LSA or a local service agent is named to open this form of business.
- The LSA should overlook the licensing requirements and the business matters relating to the government.
- A sole proprietorship has no minimum capital requirement.
- The company name must refer to the type of business operation.
- One manager can have a sole proprietorship.
2. Limited Liability Company
A Limited Liability Company at the UAE is the individual's most favored type of business entity. The clients' liability in an LLC is constrained to the amount of their participation in the company.
Features of an LLC in the UAE
- Except for finance, insurance or investment, technical or consulting activities cannot be carried out by this type of company
- An LLC may conduct some commercial or industrial operation.
- The UAE will have 51 percent control and the remaining 49 percent share.
- LLC preparation includes an Auditor certified by the UAE.
- Minimum 2 and maximum of 50 shareholders can invest in the enterprise.
- LLCs must nominate one to five managers as a stable business structure and choose from the legal partners.
3. Private Shareholding Company
This type of company in the UAE is known as a Private Joint Shareholding Company (PJSC). It can be built-up through a minimum partnership of AED 5,000,000 from at least three investors. These regulatory systems, alongside professional enterprises, are consistent with all kinds of commercial and industrial activities.
Features of a PJSC in the UAE
- Consent is given from the Ministry of Economy to create a private shareholding firm.
- The company must name one manager
- Required minimum capital is AED 5,000,00
- It can have more than one branch at the company. Can conduct one or more of the activities covered by the company's primary license
- A UAE citizen should own at least 51 percent of the shares
- A national of the GCC may hold up to 100 percent of the shares
4. Public Shareholding Company
Public ShareHolding Company is a legal entity whose investment is at least AED 30,000,000 with equally valuable transferable shares. Each investor is liable to the extent of their capital. Also known as the Public Joint Stock Company (PJSC) in the UAE is a public shareholding company. The business's trade name does not come from any collaborating investor except if it is a shareholder's patent or the title is entitled to the stockholder’s store.
Characteristics of a Public Shareholding Company in the UAE
- Partners may carry out any corporate, commercial, or professional activities in compliance with the DED business regulations.
- As per DED business regulations, the organization must have a maximum of 5 named managers.
- A Public ShareHolding company requires five leading members who are UAE citizens, who own between 30% and 70% of the capital stock.
- It may have more than one branch at the company. Can conduct one or more of the activities covered by the primary business license
5. Civil Company
Recognized professions like a doctor, accountant, engineer, and lawyer will open a UAE public enterprise. The company should have a 100 percent share owned by investors, and the activities approved for the public company can only be from the professional sector. More precisely, events such as these are narrated as physical or intellectual, performed under a given capital by one or more natural persons. Specific requirements for successful incorporation should be adopted to open a local business.
Features of a Civil Company in the UAE
- When a foreign company participates in a public company as a partner, it must be of the same form of corporate operation.
- Like in the case of single ownership, if the owner is a foreign national, an LSA is necessary for company incorporation.
- Partners of any nationality may commence this company.
- If the company engages in engineering activities, one partner should be a UAE national who owns no less than 51%.
- When the company takes part in consulting activities, the business must be owned by qualified partners with 100% control of the same operation.
6. Partnership Company
Under this type of partnership company, ownership is shared by two or more persons who share gains and losses according to the proportion decided. There are two primary Partnership forms. They are:
General partners who must be UAE citizens shall be liable for the debts of the strategic alliance
Partners are only liable for their outstanding debt up to the value of their authorized capital. Also, the limited partner cannot be a part of the administration, nor can his name be included in the partnership name.
Features of a Partnership in the UAE
- UAE nationals must be general partners in a straightforward limited partnership. Partners of other nationalities must be limited partners.
- There is no constraint on the share of general or limited partnership ownership.
- Limited partners should not interfere with the general partners' management or administrative issues. When they do, they will be held accountable for all contractual obligations.
7. Branch of a Foreign Company
A branch of foreign company demands that the organization has a UAE citizen. The division will carry out the same business practices as its parent company. It can lease an office on the premises, issue sales invoices to UAE and international customers, and sign local legal contracts. A branch cannot produce, import or export goods to/from the United Arab Emirates
8. Representative Office
A representative office in the UAE is not in its own right, a business entity, but a business operation that a branch can carry out. It has its criteria, including the permissions to promote and market the parent company’s business, not to conduct business processes. A Representative Office includes a Local Service Agent (LSA), a UAE national, or a business owned by one or more UAE nationals.
9. Joint Venture
Two or more legal entities or foreign companies form a Joint Venture. A joint venture can occur under one of the partner’s names, who must be a citizen of the UAE. It must be made clear that here the UAE national’s engagement must never be below 51 percent in any of these six types of company’s integration in the UAE.
It all depends on what form of business you want to start and where you want to set up a business in Dubai. If you need some advice on selecting a suitable business layout, we will help you with that at Business Setup Worldwide. Contact us; We will be happy to support you.