The Nuances You Should Know Before Opening a Startup in Dubai

Dubai has a business and enterprise environment that is famous all over the world.  The location boasts of an appealing regime that attracts zero personal and corporate income taxation while presenting trading opportunities across Europe, Asia, and North Africa, and beyond. The city appeal to many startup entrepreneurs given the several incentives and incubation schemes designed to help new businesses thrive. Besides, this complex, multicultural and fast-moving environment has a straightforward business registration process with the ability to repatriate 100% of the profits. 

The following factors should be considered while planning to set up a business:

  • Zone to set up the company 
  • Cheapest free zones 
  • Ways to establish a low-cost business
  • Payment of licenses, certification, and legal paperwork
  • Business setup services 
  • The cost of Limited Liability Company (LLC) formation 
  • Charges levied by the Dubai Government for business setup 

It is with this knowledge that we explore the nuances that entrepreneurs seeking to explore the opportunistic waters of UAE startup companies should know:

Understanding different business zones: Mainland, Free zone and Offshore

The zone in which the business is going to be set up determines the jurisdiction that will be adopted. Choosing operating jurisdiction depends on business type and the activities the company owner intends to participate in while in UAE. Each jurisdiction has its own advantages and disadvantages as well as business opportunities depending on the priorities of the investors. The priorities are defined by the type of business entity, the intended business activity, and the type of business partners. Mainland UAE is perfect for those seeking to trade within UAE while free zone works best for those seeking total control of the business while enjoying zero-taxation by working outside UAE and not trading within. In case an office or coworking space is not preferred, an offshore company is ideal as it gives them the freedom to trade in UAE while protecting the assets.

The cost of business setup

Every business startup, regardless of the location, needs a friendly budget that is inclusive. Calculating the cost need for a startup business is necessary as it opens channels of requesting funding, attracting investment options, and provides estimations and a timeline for the profits. Setting up a business in the United Arab Emirates involves operational costs and governmental fees, as well as a business investment fund. The costs are encountered in licensing, certifications, registrations among other costs. It should also be noted that any delays may lead to extra costs incurred. Once the business setup process has begun, it is important to avoid delays or extensions where possible. Also, most documents need renewing as the interlinked setup process continues.

Legalities and paperwork

While setting up a business in UAE, there are strict rules and regulations to be followed regarding legal formalities, paperwork, and documentation. Failure to follow these rules may lead to a heavy fine on the company. This includes opting for the right jurisdiction as per the nature and activities of the business. When opting to start a business within the mainland zones, a UAE nationality partner is required. This business partner is entitled to a 51% partnership. If the company is set within the free zone parameters, a local service agent is required who is entitled to a nominal fee. To guarantee secure operations and total control, business entrepreneurs are advised to seek silent partners. 

As a startup, drafting an MOA/LSA puts a business on the right side of the law. The MOA ensures the limitations and liberty of every partner within the company are laid out clearly. On the other hand, the LSA defines the duties and responsibilities of the agent along with the compliances to be fulfilled. This legal documentation should be done with the help of a legal advisor and Arabic translated copies obtained. 

When it comes to registrations and restrictions, the standards, and regulations by the Department of Economic Development (DED) determine the naming of the company. The trade name is the identity of the business and should therefore align with the license type. Registering a trading name takes approximately three days and has a validity period of 6 months. While determining the business type and registration, entrepreneurs should understand that some business activities have restrictions or prohibitions within the UAE boundaries. DED operates within Law No. 13 of 2011 that empowers the department with the regulations of the economic activities within mainland zones. For a business to be fully registered, it requires physical premises. Whether it is coworking space or rental offices, the tenancy agreement documents need to be submitted to Real Estate Regulation Authority (RERA) and EJARI before being approved by the DED.

In terms of licensing, UAE has company registration and business licensing as a parallel process. On registering the company as per the DED regulations, the business owners are free to pick their license from the right offices. Business licensing depends on the nature of business activities and the chosen jurisdiction with the common ones being commercial, industrial, and professional licenses. Once the initial approval has been received, it should get approximately one week to receive a valid trade license. On submission of the required documentation to DED, a transaction number is provided. The collection of the business trade license can only be one on completing the final payments. A business can only be identified as an entity once the trade license has been collected. 

Culture and diversity 

The United Arab Emirates has a rich and dense history that is characterized by recent growth in the world of business and architecture. This has attracted a diverse population that comprises almost 200 nationalities spread across the region. Whilst this glorious city presents an entrepreneurial destination with high possibilities of building a thriving business, it is important to identify and acknowledge the huge cultural diversity within the city. The existing cultural borders need to be considering starting a business. 

Dubai is continuing to grow and become a business hub thanks to the secure and supporting environment, business-friendly infrastructure, variety of zones, stable exchange rates cultural diversity, and friendly immigration laws. While considering setting up a business in the city, it is advisable to acknowledge the extensive and thorough registration process. While that might seem like a setback, having an office or renting coworking space within the vastness of the city will give the business the exposure it deserves.

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