Commercial and Professional License in Dubai, which one should you choose?

It is crucial to know the type of licence needed to run a business in Dubai, and two such licences are the commercial licence and the professional license. The various licences have their characteristics and restrictions favourable for diverse business operations. It will be crucial for any person who intends to do business in Dubai to grasp these disparities, especially those from other countries new to the region.

What is a commercial licence?

A commercial   license in Dubai is offered to business people dealing in trading goods. This encompasses the purchasing and selling of physical goods as well as engaging in import and export trade. Activities that come under Commercial Licence are business and commercial activities like sale, purchase, building and construction, and real estate.

Commercial licence entities can also engage in other activities than mere buying and selling. For instance, investment services, cleaning services, advertisement, and surveillance services can also fall under this license even they are not trading goods. The Commercial License is advantageous because one can have several activities under one license in line with the business activities.

What is a Professional License?

A Professional License, on the other hand, is those which are meant for the services providers, business that are based on professional skills or Knowledge. This license is specific to companies and individuals, producing and delivering consultancy, education, medical services, IT solutions, and creative services including beauty salons or crafting.

More to that, With the Professional License in Dubai, the business takes legal identity depending on the training and experience of the owners or employees of the business. This makes it suitable for the freelancer and the independent practitioners who sell their services directly to customers. When comparing a Commercial License to a Professional License it is important to know that the latter is aimed at rendering services rather than goods.

Ownership Structure

The possession form of every type of license is unique.

For a Commercial License:

• In the past, the FDI policy allowed up to 49% of the foreign investment in a business while the rest 51% would be owned by a UAE national.
• Nevertheless, a new regulation that was laid down in June 2021 opened up 100% foreign ownership in several fields for Mainland Companies. This regulation has encouraged more foreigners to fully own their firms without necessarily seeking the services of a local ally.

For a Professional License:

• There is absolutely no restriction on foreign ownership meaning that foreigners can own the business 100%. Yet they need to appoint a Local Service Agent (LSA).
• The LSA is a UAE national and work for the business but does not own any of the shares or have financial management of the Company. They have no say on business choices or earnings, thus giving a level of autonomy to foreign proprietors.

Liability Differences

As for the differences with Commercial Licenses, there is another value called Liability.

• Commercial License: Those with a Commercial License can be LLCs or limited liability companies. It has limited liability; the owners of businesses cannot be held liable for the debts that the business houses undergo. It also provides a relatively better trading framework for the extensive business of trading operations.
• Professional License: A business formed under a Professional License normally operates with liability to an indefinite level. This means that the owner of the business is individually liable for any contracts or dues. Sole Establishment may be formed as a business by a single practitioner, while Civil Company may be formed as a business if there are several owners. The unlimited liability structure is generally preferred in businesses that are relatively small or have a service theme and little risk.

Required Capital

The minimum share capital requirements also vary between the two license types:

• Commercial License: This was after the Department of Economic Development (DED) in Dubai had set a minimum share capital of AED 300,000. However, it is crucial to understand that there is no need to provide this amount either – it only has to be endorsed.
• Professional License: Professional License companies require a minimum share capital of AED 150,000. As it is the case with Commercial License, this amount does not have to be deposited either. It’s just a bureaucratic necessity anyway.

Business Activities Allowed

Each license permits different types of activities and it all requires the accurate choice of license depending on the business.

• Commercial License: The achievement of this license makes it suitable for companies that are trading and selling tangible products. Examples of organizations where a Commercial License may be obtained include; retail stores, real estate companies and general trading companies.
• Professional License: This license suits any fiscal that provides a certain kind of service rather than the kind of good. Consultants, the architects, educators, various institutions that provide creative services usually opt for a Professional License.

Renewal and Compliance Requirements

Both licenses need to be renewed annually in order to legally operate a business in Dubai afterwards. License renewal requires submission of new documents in addition to filing renewal application and paying renewal charges.

For both types of licenses:

• You have to update your lease agreement for the business premise.
• Comply with any other requirement imposed by the DED or other related authorities may require.

Selecting the appropriate license 

Therefore, it is always a wise decision to discuss with a business advisor when deciding between a Commercial and Professional License depending on your business activity, ownership objectives and risk appetite.

• Activity Type: Learner’s Trade License is suitable for businesses whose nature is trading, while Commercial License is appropriate for other types of businesses. If it is professional service oriented, the Professional License suits your purpose better.
• Ownership Goals: To a foreign investor, who may not be willing to partner with any local partner, a Professional License is recommendable. But many Commercial License in Dubai activities incorporated in the 2021 regulation permits 100% foreign ownership.
• Liability and Risk: Think about how much liability you are ready to take. It is also important to note that choosing less liability (Commercial License) may offer more protection than a greater liability (Professional License), especially for low-risk service-based small businesses.

Final Thought

It can be implied that both the Commercial and the Professional Licenses bring specific advantages to Dubai businessmen. The Commercial License works for trading organizations while the Professional License is more appropriate for service organization. To get the right license, there held significant differences between ownership, liability, fees, and activities are crucial to distinguishing between the two types of licenses. The selection of the right license type shall contribute to legal compliance, maximum control of the company’s activity, and, thus, successful operating and development of the enterprise in the framework of legal opportunities of the Emirates.

Get license application procedures sorted with CDA

Getting a license application filed with the authority with the required documents might seem to be complicated, especially for the business entities residing oversees. CDA’s professionals have been sorting this complication for the clients and enabling them to apply for the licenses let it be a commercial or a professional license for more than a decade. The team at CDA can enable you to maintain all the required documents and get business set up operations and the licensing procedures sorted. 

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