How to start a business in Dubai as a foreigner

Dubai has earned a reputation as an attractive destination for foreign entrepreneurs looking to establish their businesses. Its strategic location, business-friendly environment, economic stability, and world-class infrastructure offer a multitude of opportunities for investors across various industries.

In the first half of 2022, 45,653 new business licences were issued in the emirate, an increase of 25% over the same period the previous year, underlining the success of recently implemented residency and labour reforms and investor confidence in the growth potential of Dubai.

By carefully considering the legal requirements, business structure, taxation implications and cultural dynamics, you can navigate the process of establishing your business with confidence and optimise your business for success from the outset.

What are the main considerations when starting a business in Dubai as a foreigner?

Jurisdiction

Once you have a clear understanding of the nature of your business activity, the industry in which you plan to operate and your investment budget, you should consider the jurisdiction which aligns best with your industry or sector, provides proximity to customers, suppliers, and strategic partners and optimises tax obligations and financial viability.

The two primary options available are setting up on the mainland or registering your business within one of Dubai’s many free zones. A mainland setup provides better trading scope with access to the entire UAE market and overseas whereas free zone entities are generally restricted from conducting direct business activities outside of their designated free zone unless they engage a local distributor or agent or establish a branch office to expand their trading capabilities.

Another important distinction between mainland and free zone companies is the level of support available within the free zones. Free zones in Dubai typically have a specific focus on certain industries or sectors, as such they offer specialised infrastructure, incentives, and support for businesses operating in those areas which may make it easier to access industry specific resources, funding and business connections.

Ownership

In the past, one of the key differentiators between company setup on the mainland versus in a free zone was the allowance of full foreign ownership. Free zones in the UAE have long allowed for 100% foreign ownership whereas this was not previously the case with a mainland company, which restricted foreign investors to a maximum 49% shareholding with the 51% majority being held by an Emirati partner or sponsor. However, as a result of the 2019 Foreign Direct Investment Law, mainland companies can now also have 100% ownership for the vast majority of business activities.

Legal Structure

The legal structure of your business in Dubai has significant implications on various aspects of your operations from liability protection to taxation, credibility and compliance requirements.

Several legal structures are available for businesses in Dubai. Here are the main options:

• Limited Liability Company (LLC): An LLC is the most commonly used legal structure in Dubai. It requires at least two shareholders and provides limited liability protection to the shareholders. There is no minimum share capital requirement under UAE Companies Law nor requirement to deposit the share capital in a UAE bank. However, the entity must be able to show sufficient capital to achieve its stated aims with details provided in the LLC’s memorandum of association.
• Free Zone Company: Free zone companies are popular for foreign investors. Each free zone in Dubai has its own regulations and benefits, but they generally allow for 100% foreign ownership and provide tax advantages, simplified procedures, and full repatriation of capital and profits. Free zones cater to specific industries and offer industry-specific infrastructure and support.
• Branch Office: A branch office is an extension of a parent company and operates under the same legal identity. It allows the parent company to conduct business in Dubai, but it does not have a separate legal entity. A local service agent is typically required to act as a liaison between the branch office and government authorities.
• Representative Office: A representative office is primarily established for non-commercial purposes such as marketing, research, or feasibility studies. It does not engage in profit-generating activities and cannot undertake direct business transactions. A local service agent is usually required to register and operate the representative office.
• Sole Proprietorship: Sole proprietorship is suitable for individual business owners. It allows for 100% ownership by the individual and is typically suited for certain professional activities. However, this legal structure does not provide limited liability protection, meaning the individual’s personal assets are at risk.
• Civil Company: A civil company is applicable for professional services such as legal, accounting, consulting, or engineering. It is formed by professionals who are licensed to practice their respective professions. Partnerships in a civil company can be structured with limited or unlimited liability, depending on the agreement between partners. 

What are the main documents and approvals needed to set up a business in Dubai?

While the specific documents and approvals required to set up a business in Dubai can vary depending on factors such as the chosen legal structure, business activity, and the jurisdiction in which you plan to operate, some common documents and approvals typically required for most company setups are:

1. Business Plan: A comprehensive business plan outlining your proposed activities, market analysis, financial projections, and growth strategies. This document helps demonstrate the feasibility and viability of your business to relevant authorities.
2. Trade Name Reservation: Obtain approval for your desired trade name from the Department of Economic Development (DED) or the relevant free zone authority. This step ensures that your chosen name is unique and available for registration.
3. Memorandum of Association/Articles of Association: For an LLC, you will need to draft and notarise the Memorandum of Association (MOA) and Articles of Association (AOA). These documents outline the company’s structure, objectives, ownership details, and operational guidelines.
4. Shareholder/Partner Agreements: Agreements among the shareholders or partners, outlining their rights, responsibilities, and ownership percentages. These agreements help govern the relationship between the company’s owners.
5. Licence Application: Submit the licence application to the relevant authority, such as the DED or the free zone authority. The application will include details about your business activities, shareholders, capital, and other relevant information.
6. Lease Agreement: Provide a copy of the tenancy agreement or lease contract for the physical office or premises where your business will be located. This demonstrates your legal right to operate from that specific location.
7. Approvals and Permits: As well as a trade licence from the DED/free zone authority, some business activities require additional approvals and permits from relevant government departments or authorities such as health and safety permits, environmental permits, specialised industry licences, and other sector-specific approvals.
8. Visa and Immigration Documents: If you plan to hire foreign employees, you will need to process their work visas and residence permits through the General Directorate of Residency and Foreign Affairs (GDRFA).
9. Bank Account Opening: Open a corporate bank account with a local bank in Dubai. This requires providing company documents including the certificate of incorporation, MOA, trade licence and any shareholder/partner agreements and meeting the bank’s specific requirements.

How can The Knightsbridge Group help?

The Knightsbridge Group has over 20 years of experience in the domain of corporate structuring and wealth management. We have unparalleled knowledge of business practices and legal requirements in the UAE as well as an international network of contacts and a deep understanding of the needs of modern-day high net worth clients and international businesses.

We can help you set up a business in Dubai, assisting with obtaining the necessary licences and permits, completing the required paperwork and liaising with government authorities on your behalf to streamline the setup process and ensure that your business meets all legal and regulatory compliance requirements.

If you need help with this or any other immigration, financial or corporate structuring issue, please don’t hesitate to contact us on info@kbgroup.ae and we will be happy to help.