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Dubai, in all its business dynamicity and innovative spirit, invites all kinds of people from around the globe—investors, entrepreneurs, and seasoned businessmen alike. The commitment to growth that Dubai promises is unparalleled in any other city in the UAE.
However, what entails beyond and before setting up and starting business operations is one of the most crucial things in regards to Dubai. The legal side of businesses is one of them. Every business, at least once, needs to consult a legal entity to smooth out the business proceedings or any issues in general.
Along the same lines, if you are an aspiring entrepreneur keen to make your debut in Dubai, then before diving headfirst into your entrepreneurial venture, you need to understand the legal framework for your business structure and the setup process as well. This is a crucial point for ensuring a smooth and compliant operation.
And to help you out, we have also brought together a blog with the different things you need to know about the legal aspects of starting your own business.
Legal proceedings don’t all take place at once. They are often segregated and streamlined. It is important to have all your documents ready when you approach the authorities for a license or for registration purposes. Here’s a proper view of what that may look like:
First, choose your business structure.
The legal structure you choose for your business will impact various aspects, including ownership, liability, and taxation. You need to choose your business structure first, as your licenses, area of operations, additional fees, etc. will be determined by that.
Here’s an overview of the most common business structures in Dubai:
This is one of the most commonly seen company structures, offering limited liability to its shareholders, meaning their liability is capped at their investment in the company. LLC formation requires a minimum of two shareholders, one of whom must be a UAE national if the company operates outside a free zone.
This structure is ideal for single-owner businesses, offering you complete ownership and control of your business. However, as the owner, you may hold unlimited liability for the company’s debts. Typically, sole proprietorship businesses operate on a smaller scale.
Civil companies can be established by two or more partners, with each partner’s liability limited to their investment. Unlike LLCs, civil companies have no minimum capital requirement but require a minimum of two UAE national partners. This structure is often used when foreign investors collaborate with local partners. If there is none, then a local service agent (LSA) can step in.
Now, this is an extension of an existing foreign company, operating under the parent company’s regulations. Branch offices, as you may already be aware, have limited operational flexibility compared to other structures.
Business Registrations and Licensing
Once you’ve chosen your business structure for your venture, the next step is to register your company with the relevant authority and obtain the relevant licenses. First, you need to choose the location where you wish to set up shop.
In Dubai, the major business spaces are the free zones. Here, there is unlimited potential for growth and networking, especially with the 100% foreign ownership allowance. If you’re thinking of setting up shop in the Free Zones, you need a Memorandum of Association (MoA), a business plan, passport documents of the partners, and a few more.
Operating a business plan on the UAE mainland may seem like it has less growth potential as compared to the mainland, but it gives you access to the local market as well. To set up shop on the mainland, you will need to register your company with the Department of Economic Development (DED).
The next step would be to obtain a license for your business to start operations and activities. Following registration, you must acquire the appropriate business license to legally operate in Dubai. The specific license type depends on your chosen business activities and company structure as well.
For mainland Dubai, you can legally get your license issued by the DED. As for the free zones, each free zone has its own authorities to issue specific licenses adhering to the regulations and permitted activities.
There are a few key legal factors that you must understand and take into account before beginning the planning for your business activities, like:
This law outlines the general principles governing commercial activities in the UAE, including contract formation, sales, and secured transactions. Which means that if there is something your business operates in that isn’t included in this code, it may be liable for legal inquiries and action.
Regulations governing foreign ownership in specific sectors are liable for areas where you cannot own 100% of your business as a foreign person. While certain sectors have limitations, many areas allow for 100% foreign ownership, particularly within free zones.
The UAE operates a territorial tax system, meaning only income generated within the UAE is subject to taxation. Mainland companies typically pay corporate income tax, while free zone companies generally enjoy tax exemptions on corporate income and import/export duties.
In other words, if your business doesn’t qualify for QFZP (Qualifying Free Zone Person) and your income is more than AED 375,000, you are liable to pay 9% of corporate tax. If your company qualifies for the same, then you are exempt from the same.
This law outlines employer-employee relationships, including work permits, visa sponsorship, minimum wage requirements, and employee benefits. If you will be expanding your team soon, it is best to have a look into this to legally abide by the labour laws of the region.
The UAE has established legal frameworks for protecting intellectual property, including patents, trademarks, and copyrights. Registering your IP with the Emirates Intellectual Property Office (EIPO) is crucial for safeguarding your creations, especially if you are in a creative field of business.
If you are employing overseas talent, you need to look into the requirements for work visas and sponsorship from your company to legally work in Dubai.
Compliance with the regulations set by the Central Bank of the UAE for opening corporate bank accounts and conducting financial transactions is a must.
Companies exceeding a certain size threshold are required to undergo annual audits by licensed auditors. These are very intensive and crucial processes to maintain the legal integrity of your company.
Navigating the legalities of setting up a business in Dubai can be complex. Especially if you are knee-deep in ensuring your business growth. Seeking guidance from qualified professionals like CDA can be a lifesaver in such situations.
Business setup consultants, lawyers, and tax advisors are some of the specialised professionals that can be key players in making sure your business stays afloat, abides by the latest regulations, and is on the right path to growth as well.
Some of the business help they can provide can be with drafting contracts, optimising your financial and tax strategies, and your business licensing and registrations when you begin.
Compliance is one of the major aspects of the legal side of operating your business in Dubai. Here’s how you can do that:
Business licenses typically require annual renewal, with associated fees. Ensure that you renew them from time to time in a proper manner.
Maintaining records is one crucial aspect that comes into play during audits. Implementing a system for meticulously recording financial transactions and business documents can be a great change.
Stay updated on labour laws and ensure your employment practices adhere to regulations, including work permits, visa renewals, and employee benefits.
If your company is subject to corporate income tax, then you must file annual tax returns with the Federal Tax Authority (FTA) within the stipulated deadlines. Consider teaming up with a financial firm to tackle this best.
From choosing the right business structure to navigating regulations and maintaining compliance, a proactive legal approach is essential to setting up shop in Dubai. By understanding the legal aspects of starting a business in Dubai, you can set your venture on the path to success.
Since not everyone is well versed in the law while starting out a business, getting some help from seasoned professionals can be a bonus.
Dubai has cutthroat competition when it comes to business. So if you are one of the people who is looking forward to owning a business in Dubai, CDA can be your perfect legal aid in this.
From licensing and registrations to navigating audits and tax procedures in a smooth manner, CDA has professionals for everything. Don’t worry about the legal processes involved in setting up a business in Dubai. Our experts can assist you in staying compliant with all the regulations and requirements of different authorities. CDA can provide you with multiple business setup services, along with PRO and compliance services, at a very cost-effective price.
Need some legal help? Book an appointment with us.
Learn more about our business setup services here.
