A Comprehensive Guide to Company Formation in the UAE

The UAE is undoubtedly a land of endless opportunities. Each of its emirates has impressive infrastructure, high-quality workplaces, a skilled workforce, and a great economy. The UAE offers limitless business potential across various sectors. The government actively supports foreign investors with a welcoming approach and this is why investors from around the world are always attracted to UAE to establish their businesses.

Investors can choose to establish their ventures on the mainland, in a free zone, or as an offshore entity in the UAE. First, let’s look at the main business structures that you can set up in the UAE.

LIMITED LIABILITY COMPANY (LLC)

Limited Liability Companies (LLCs) are among the most popular business structures for entrepreneurs looking to establish an entity in the UAE. An LLC can be formed with a minimum of 2 shareholders and up to a maximum of 50 shareholders, with their liability restricted to their respective shares of the company’s capital.

Benefits:

1. Shareholders are only liable for their share of the capital, protecting personal assets from business debts or legal issues.
2. Can be formed with a minimum of 2 shareholders and up to 50, making it suitable for small to medium-sized businesses.
3. Allows businesses to operate on the UAE mainland and access the local market directly.
4. Profits are distributed among shareholders based on their ownership percentage.

Limitations:

1. Requires at least 51% ownership by a UAE national or a company wholly owned by UAE nationals.
2. Limited to a maximum of 50 shareholders.

PARTNERSHIP COMPANY

A Partnership Company is formed when two or more individuals use their resources to establish a business, sharing the risks, profits, and losses.

Benefits:

1. Partners share the risks, profits, and losses, reducing individual burden.
2. Combines the skills, expertise, and capital of multiple partners.
3. Suitable for professional services like law firms, medical practices, accounting firms, etc.

Limitations:

1. General partners are personally liable for the company’s debts and obligations.
2. Differences in vision or management styles among partners can lead to conflicts.
3. The business may suffer if one partner decides to leave or underperforms.

PRIVATE JOINT STOCK COMPANY (PrJSC)

A Private Joint Stock Company (PrJSC) in UAE is privately owned and not government-backed.

Benefits:

1. Shareholders are only liable for their share of the capital.
2. Shares are not publicly traded, allowing for greater control over ownership.
3. Suitable for medium to large businesses with a minimum capital requirement of AED 2 million.

Limitations:

1. Cannot offer shares to the public, limiting fundraising options.
2. Must adhere to strict regulations similar to public joint stock companies.
3. Requires at least three shareholders to establish.

BRANCH OFFICE OF FOREIGN COMPANIES/REPRESENTATIVE OFFICE

A branch or representative office of a foreign company does not engage in sales, services, or commercial activities but instead promotes the operations of its parent company.

Benefits:

1. Allows foreign companies to operate in the UAE without local ownership requirements.
2. Focuses on promoting the parent company’s activities without engaging in direct commercial operations.
3. The parent company bears the liability, not the branch office.

Limitations:

1. Cannot engage in sales, services, or direct revenue-generating activities.
2. Requires a refundable bank guarantee of AED 50,000, which cannot be used as working capital.
3. Operates under the parent company’s brand and directives, limiting control and freedom.

You can establish your business in the UAE as a Free Zone, Onshore, or Offshore entity. Each type of business structure comes with its own unique benefits, regulatory requirements and limitations.

Freezone Companies

Free zones are specialized economic zones where goods and services can be traded, also benefiting from tax and customs policies. By establishing your business in one of UAE’s 46 free zones, you can take advantage of 100% foreign ownership, full corporate tax exemption, and the ability to repatriate 100% of your profits and capital.

Onshore Companies

Onshore companies or Mainland companies, have the advantage of accessing both the local UAE market and international markets. To register as a Mainland LLC, you must secure a license from the Department of Economic Development (DED) in the respective emirate where the business will operate.

Offshore Companies

Offshore companies are not permitted to conduct business activities directly within the UAE. Although, an offshore company can act as a shareholder in UAE mainland or free zone companies, providing an indirect pathway to enter the UAE market and engage in business activities through these subsidiary entities.

Now that you have got an idea about different business structures in UAE, get in touch with us today to know more about setting up your business in UAE!