Dubai is a ravishing city with state of the art infrastructure facilities, impressive communication network, technology and innovation driven business set ups, inviting tourism sector. With all these Dubai has beckoned many businessmen in and around the world to establish their business in Dubai.
Dubai is divided into two sections in terms of locating a business activity. One is the Dubai mainland and the other is Dubai Free Zone. Free Zones in Dubai provide lots of advantage to the entrepreneurs in terms of 100% repatriation of capital and profits, 100% ownership etc. However, they cannot perform business activity outside the Free Zone. It requires them to have local partner or agent. Whereas, for business licenses in Dubai Mainland, an expatriate or foreign company can set up business in Dubai provided a local service agent or partner is involved.
Dubai Mainland is a geographical location wherein private business enterprises or branches can perform a business activity with the approval of the Department of Economic Development Dubai (DED).
An expat who is willing to commence a limited liability company in Dubai mainland need to have minimum 2 shareholders and maximum 50 share holders. They have to appoint a local Emirati (an individual or company) called a sponsor, who secures 51% of the company’s shares and the rest 49% are with the expat. The sponsor is not involved in the daily operations of the business.
GCC national or local national can have 100% ownership of the LLC. Foreign company interested to launch a branch in Dubai mainland can have 100 % ownership with local service agent or sponsor who is UAE national or company of UAE national.
Sole proprietorship or civil company can be formed by foreign national with 100% ownership along with a local service agent. This LSA has no direct involvement with the entity, but helps in getting establishment cards, labour cards, visas etc.
Joint Venture of foreign entity and local entity can also be initiated in Dubai mainland, where 51 % of the shares rest with the local Emirati. The profit and loss can be shared according to the agreement.
Licensing in Dubai:
The elementary step in conducting business in Dubai mainland or anywhere in the world is the attainment of trade license. A trade license provides in authentication of the company’s legal entity. It is an assurance to the accountability of the business and ensures proper proceedings of the company.
DED issues different types of licenses for company formation in Dubai mainland. In certain cases, confirmation from the concerned ministries or other government authorities is required. To get trade license, at first one need to select the type of activity, the legal type of business, its trade name, select a local sponsor. Then with the permit from the external authorities and necessary documentation, the trade license will be secured from the DED.
There are four major types of licenses issued by the DED:
- Commercial Licenses – These are licenses issued for enterprises who wish to do textile trading, technical services, contracting. All activities related to trading are termed on LLC format. An Expatriate has 49% shares in Limited Liability Company with the rest with the local national. 100% ownership can be attained only by GCC national or local national.
- Professional License – It is issued to management consultancy, document clearing agency or book keeping service providers. All services, professions, artisans, craftsmen come under this licensing. They can have 100 % ownership with LSA or partners.
- Industrial licensing – This is for manufacturing sector. This may require sanctions and adherence to specifications from various departments. Local sponsor or individual corporate acts as LSA in getting this license.
- Tourism license – Dubai is a tourism hub. An expat or foreigner who wants to set up travel agency in Dubai mainland can function as inbound tour operator, outbound tour operator or travel agent. An expat has to appoint a local service agent who gets 51% of the shares. The manager has to have 3years experience in this field. After issuance of license; they have to get Chamber Certificate from the Dubai Chamber.
Certain activities require approval from ministries or authorities like Restaurant needs consent from Dubai Municipality; rent a car needs validation from Road & transport authority; Advertising, publishing, & printing from National Media Council; banking and financial services from Central Bank of UAE; pharmaceutical from Ministry of Health, etc. All Commercial and Industrial license also needs to be registered under Dubai Chamber of Commerce and Industry. Some licenses need bank guarantee and additional charges to be paid to the third party.
Securing a trade license in Dubai is the first step in company formation. Acquiring a license takes you to the next step of setting up a business.