Ras Al Khaimah (RAK), in the last few years, has become a right industrial and trading hub with an economy that continues to develop and thrive. Investors and entrepreneurs worldwide look at RAK as a manufacturing and trading destination for their businesses.
One can start a business in RAK via different legal entities. The sole establishment is for individuals who want to become their boss and make all the decisions related to their business.
What is the Sole Establishment in RAK?
A sole establishment is a simple business model whereby an individual conducts business in his or her capacity according to a license obtained by the governmental authorities. This form of corporate entity is referred to as an 'establishment' rather than a company, and the business is not a separate entity from the sole proprietor. As such, the individual proprietor is personally liable to the full extent of his or her assets for the business's liabilities. The sole establishment concept is regulated under the Federal Commercial Transactions Law No. 18 of 1993 (the "Commercial Code") and the relevant RAK government policies.
- Sole Establishments owned by UAE / GCC Nationals: Mainly UAE nationals and nationals of GCC countries (subject to certain conditions) are allowed to form the individual establishment in Ras Al Khaimah. A practice has, however, arisen in the last few years whereby an Emirati national gets a license for a sole proprietorship and by way of a contractual arrangement, allows a third party to use and benefit from the license, including to take on all management functions of the company and preserve the profits. Nevertheless, this type of arrangement is not supported as it is fundamentally illegal, and problems can arise if the business relationship between the parties breaks down. Further, the license's legal holder will be 100% liable for debts visà-vis any third party who may not know the private arrangement.
- Sole Proprietorships owned by non-GCC Nationals / Service Agent Arrangement: Foreigners may establish a sole proprietorship in the Emirates. However, the law restricts the activities a foreigner may engage in, as a sole proprietor, to specific fields. These restricted activities include the following:
- The provision of medical services
- Engineering consultancies
- Legal consultants
- Computer consultants; and
- Similar services and non-trading activities
A sole foreign proprietor is expected to appoint a local service agent. The Notary Public must authenticate the local "service agency" contract. If the sole foreign proprietor does not have an existing residence in the UAE, then the foreigner's residence in the UAE should be sponsored by the new organization. Thus, the process for setting up a sole proprietorship vary according to the nationality or identity of the prospective sole proprietor. However, the standard and fundamental requirement for establishing any sole proprietorship are that a license should be obtained from the RAK Department of Economic Development ("DED") for the envisaged activity after applying together with all relevant documents.
The Process to Set Up a Sole Proprietorship in RAK
- Fill out the Business License Application Form at the RAK Department of Economic Development (DED)
- Submit all the required documents
- Pay the fee
- Collect the License
The documents required to set up your business in RAK are -
- Copy of the Applicant's Passport
- Copy of the Applicant's Emirates ID
- Copy of the General Manager's Passport and ID card (if any)
- Academic Certificates and prior practical experience of the License holder or General Manager (if activities require this)
- Permission from other Governmental bodies according to the activity
- Certified Original Rent Contract by the Municipality and a Copy of Property Ownership after approval from the Inspection Division at the DED regarding the site
The process can be overwhelming, and hiring a business set up consultant can help businesses complete this process in a hassle-free manner.
How can we help you?
Company formation in RAK is a lucrative proposition, and one must select the most appropriate legal entity to represent one's business. Commitbiz offers a wide range of highly consistent business management services that can help you realize your business initiatives in Sharjah. Our professionals specialize in company incorporation, registration, accounting, tax advisory, and bookkeeping services. If you are looking to set up a company in Sharjah or anywhere in the UAE, do contact us. We'll be glad to assist you.