Dubai Fact-File Part 1:
Business Formation for Individuals
1.1 Dubai Individual Business Structures
Forms of company or business structures used by individuals
in business: Dubai law sets out strict criteria for
the ownership of a business in the country. Generally speaking,
51% of equity must be owned by UAE nationals, though there
are exceptions including branches of foreign companies, so-called
‘professional’ or ‘artisan’ companies and those located in
the Dubai International Financial Centre (DIFC) or Jebel Ali
Free Zone. Otherwise, there must at least be a local sponsor
(or agent, depending on whether the activity being undertaken
is commercial or professional in nature), prepared to act
on behalf of the business in question in certain circumstances.
A Dubai Sole Establishment is a very common form of business
structure in Dubai. It is a widely recognised form of business
and is relatively straightforward to establish, once a local
sponsor/agent has been found. This structure is ideal for
individual traders or entrepreneurs.
In addition to the sole establishment, there are a number
of commercial structures best suited for larger businesses;
all forms of business must be approved by the Dubai government,
however, and there are laws governing the use of company names
and location of offices.
A General Partnership is restricted to citizens of the United
Arab Emirates (UAE) only, as is a Limited Partnership. However,
a Partnership Limited by Shares may be a mix of UAE nationals
and foreigners, with the latter permitted to have an active
role in the business. Minimum capital of AED500,000 is required
to start such a partnership.
A Dubai Limited Liability Company can be formed by between
two and 50 individuals and the liability of each person will
be restricted to the extent of their shareholding in the company’s
capital. The requirement for a minimum capital level at start-up
has been removed. There is, however, a condition that there
generally must be at least 51% equity ownership by local persons
or entities. This applies to any business form. However, there
are no such conditions applicable to the distribution of company
profits.
Dubai law requires that any company involved in banking,
insurance or financial services must be run as a Public Shareholding
Company, though it may be possible for businesses operating
in these sectors to do so via a branch office or a representative
office. Such business structures are more suited for larger-scale
operations, with minimum start-up capital set at AED10m (GBP1.8m),
placing them firmly out of the reach of the small business
person in the vast majority of cases; there may also be restrictions
on the nationalities that may establish such operations.
A Private Shareholding Company may be set up with AED2m (GBP363,000).
Directors of this type of business must predominantly be UAE
nationals.
It is possible to establish a Joint Venture Company, where
a local person or persons are licensed by a foreign entity
or individual to conduct business on their behalf. The local
‘partner’ assumes complete liability for the business and
this structure is not really suited for companies wishing
to operate in general business sectors, but may be suitable
for specific projects.
Foreign companies may establish a Branch Office or Representative
Office in Dubai, though they must appoint a local agent. 100%
foreign ownership of a branch or local office is permitted.
Local agents, though, can only be full UAE nationals, or business
entities 100% owned by UAE nationals.
The Terms 'Freelance', 'Sole-Trader' and 'Self-Employed':
Anyone who wishes to be self-employed in Dubai must
first find a local sponsor. The sponsor may be an individual
or a local business entity.
A self-employed person can operate as a sole establishment
(sole trader) or a sub-contractor. A sole trader would usually
find his or her own customers or clients, whereas a sub-contractor
would carry out work for (usually) one company or other individual.
A person working as a freelancer, for example, as a computer
programmer would normally work under a contract.
However, there is no legal distinction between the aforementioned;
they merely represent different ways of describing a self-employed
person.
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