Limited Liability Company Formation in Dubai

Limited Liability Company Formation in Dubai is the most common type of company set up in the Emirate. For an LLC, the number of shareholders may range from 2 to 50, with the liability of a shareholder limited to one’s share in the capital. 

An LLC may conduct any type of business activity except banking, insurance, or money investment. An expatriate shareholder may own a maximum of 49% of the shares of an LLC in Dubai, with the company requiring an Emirati local sponsor, also referred to as a silent partner, with 51% of the stock. 

However, profit and losses can be shared at a ratio different from the share capital. Trading LLCs are allowed to carry out business in their local emirate and export and import freely.

All About Dubai LLC Formation

In Dubai, the Department of Economic Development (DED) is the government body authorized to issue licenses for LLCs. It is responsible for classifying and regulating the types of economic activities that may be undertaken by such a company.

Let us have a look at the advantages and the things to consider for a Dubai LLC.

Advantages of a Dubai LLC Company Setup

A Dubai LLC comes with many benefits. Some of them are mentioned below:

• No restrictions on real-estate ownership
• A limited liability business is exempted from paying the standard 5% customs duty on imported goods.
• An LLC business can legally trade anywhere in the UAE, including the Free Trade Zones.
• No restrictions on the number of visas that can be obtained.
• No restrictions on the location where the business can rent/buy office premises space.
• The government has permanently waived any requirements for paid-up capital.

Things to Know Before an LLC Formation in Dubai

The following things should be kept in mind before setting up a Dubai LLC:

1. An LLC business in Dubai will require a minimum of two and a maximum of fifty shareholders.
2. A local sponsor or a UAE national must own the majority shares in the business.
3. The liabilities of the company are limited to the number of shares of a shareholder in the business. The shareholders are not personally liable for the company’s liability.
4. The minimum capital requirement to form an LLC in Dubai is AED 300,000. However, the capital requirement in other emirates is AED 150,000.
5. LLC business is not permitted to offer banking, insurance, or investment service on behalf of others.
6. Any legal, and commercial activity can be set up as an LLC in Mainland Dubai.
7. Renting an office space or a shop is mandatory. However, DED Dubai has recently approved instant licenses where renting an office is not required.
8. Trading LLCs are not permitted to conduct business within the Emirate as well as export/import goods freely.
9. All ex-pat shareholders are eligible to get a residence visa valid for three years subject to a minimum holding of AED 72000 share capital in the company. Expat shareholders can also sponsor their family and parents and are made subject to the fulfillment of documents.
10. Any number of employees can be recruited in LLC subject to fulfilling requirements from the Labour department.

Different Types of Dubai LLC Formation Cost Types

Mentioned below are the various fee types that need to be taken care of:

• Initial approval from DED – The economic department will be approving the business operations to get them started.
• Approval of trade name – This is the name your company is going to go by to do business. It includes fees for reservations, commercial name fees, and foreign name fees, and these make the prices fluctuate based on the name that is selected.
• Rent for office space – To rent an office in the mainland of Dubai is mandatory as it allows the authorities to verify the legitimacy of the companies. The office locations, after getting rented, also help in conducting inspections and ensuring that immigration laws stand. The rent can be termed yearly or termly.
• Attesting Memorandum of Association (MoA) – This is done between the partners of the company or the promoters/shareholders. Even though the costs differ on the share capital, it is just a one-time cost.
• Drafting of the contract of LLC in Arabic and English – This is also a one-time cost. For better understanding between shareholders, drafting of the agreement is done in both languages, with the mutual consent of both partners.
• DED Fees – The economic department also charges a nominal one-time fee to register the company.
• Mainland Trade License Fee (included in DED Fees) – Though acquiring a license is a one-time expense, the business activities will determine whether the fees would vary or not.
• Fees for Commercial License in Dubai (included in DED Fees) – When a company engages in commercial activity, this is a yearly fee that they have to pay.
• Chamber of Commerce Fee (Included in DED Fees) – This is also a yearly fee. It varies for companies depending on their type of business: general trading, industrial, manufacturing, etc.
• Commercial Services Improvement Fee (Included in DED Fees) – This is paid for the improvement work done by the government. This is a yearly fee.
• Administrative Services Fee (Included in DED Fees) – For all the paperwork that is to be done during the business setup, this fee is charged by the department. This is also a one-time expense.

How to Set up an LLC in Dubai?

A Limited Liability Company formation is the most widely adopted legal entity for a business setup in Dubai seeking to enter the UAE market. The steps to register this business are as follows:

Decide on a Trade Name

Choose a suitable name that is unique as well as relatable to your business.

Choose a Location

Choose a location that suits you according to the type of your business. Company operations have to be carried out through a physical/virtual office or warehouse.

Get a Local Sponsor for Your LLC Setup in Dubai

Make an agreement with a local sponsor who will own 51% of shares in your LLC business, and the remaining 49% can be owned by you.

Get the Required Documents

Collect all the required documents and submit them to the Department of Economic Development (DED) along with a completely filled application. The documents required to be submitted to DED and other authorities according to the type of LLC to be formed in Dubai are as follows –

• Duly filled registration application form
• Passport copies of all shareholders and managers of the company
• A passport copy of the local sponsor
• NOC from sponsor (if manager or partner has residence visa in UAE)
• Memorandum of Association (duly attested by a public notary)
• Registration of trade name and initial approval from DED
• Bank reference letter of each shareholder
• Location plan and tenancy contract attested by Dubai Municipality’s Planning Department and Civil Defence Department.

All the documents must be attested and notarized by the applicant’s home country and UAE consulate. The notarization procedure takes sufficient time, and it should be done soon after making a decision about the business setup.

Pay the Fees and Obtain the License

Get a trade license, Memorandum of Association (MoA), share certificates, tenancy agreement, certificate of incorporation, visas, labor cards, and other legal documents from relevant authorities. Registering an LLC in Dubai is approximately 1-2 weeks from the date of receipt of all the documents.

If you are looking to start a company in Dubai, do get in touch with us for guidance or advice.