Setting Up Limited Liability Company
There is great potential of growth in setting up Limited Liability Company in Dubai as it is a popular choice among small business owners in the UAE. Its main advantages are liability protection, tax relief and management flexibility.
The standard type of company in the UAE Mainland is the Limited Liability Company (LLC). The Department of Economic Development (DED) issues all licenses for an LLC. The DED is also responsible for regulating the economic activities of these LLCs.
A Limited Liability Company can trade and provide services anywhere in UAE unlike the free zone companies. In other words, it has freedom to trade anywhere in the UAE or GCC states, including all free zones as well. LLC legally exits as a separate entity from its owners. Therefore, owners are not responsible for the business debts and liabilities.
Benefits of Limited Liability Company
- Limited liability: In an LLC, the shareholder’s liability is only up to the shares in the company’s capital. In other words, the personal assets of the owners are free from any business debt.
- Membership Flexibility: Members can be individuals, partners, trusts or corporations. Also there is no limit on the number of members.
- Management: In an LLC, members can manage the company or elect a management to do so. On the other hand, a corporation is managed by a board of directors and not shareholders.
- Compliance requirements: LLCs require less formalities when compared to corporations. An LLC need not hold regular board or stakeholder meetings. This reduces problems and paperwork.
- Special Profit Allocation: An LLC can make special allocation of profits and losses among members.
- Ability to deduct losses: Members who are active participants in the LLCs business can deduct its operating losses against the member’s regular income to the extent which is given by law.
- Ability to use cash method accounting: Most LLC companies can use the cash method of accounting. Which means income is not earned until it is received.
- Property contribution: To set up LLC is not taxable even for the minority interest owners whereas corporations only allow being tax free for the contributors who have control on the business.
Limited Liability Company in UAE
Because of certain benefits in UAE, it gives great potential of growth to an Limited Liability Company in Dubai and UAE. Some of these benefits are:
- Trade location: There is no restriction on where the company can trade in the UAE. In other words, you can set up branches anywhere in the UAE.
- Number of visas: There is no restriction in number of visas that can be obtained for the employees.
- Office Location: In UAE, there is no restriction on where the LLC can rent or buy office space.
- Minimum Capital: There is no minimum share of capital requirement.
- Tax Advantage: An LLC is a “pass through” entity for tax purposes. This helps in avoiding double taxation.
- Reliability in Market: While creating an LLC, there is no requirement of local UAE partners in Dubai and expatriate can have 100% of shares in the company for the commercial activities. This makes the company more secure for the investor.
- Freedom to do any Business: An LLC can conduct any business activity in the UAE as per the activity availability and government department requirements.
In conclusion, in the LLC mode of company formation offers a number of benefits to the investors and shareholders in the company. In UAE, the added benefits make it a preferred option for small and medium level businesses.