Having your own business is very profitable in Dubai as it is the land of opportunities and chances. However, many do not know about business setup in Dubai.
So if you are one of those people looking for some answers, you have come to the right place. Setting up a business and company formation in Dubai is challenging, tedious, and time-consuming.
There are many essential considerations, permissions, and steps you must follow. Otherwise, you will lose a lot of money and even face some legal or criminal charges from authorities.
Getting a good roadmap before starting a business in Dubai is necessary, and good advice is always essential for a new business startup.
Hence for this purpose, we have come up with a guide on how to set up business in Dubai that will help all kinds of companies.
How to setup business in Dubai?
As mentioned earlier, setting up business in Dubai is quite an overwhelming task. So you might require proper guidance or advice.
Hence let’s take a look at the complete process and steps of setting up business in Dubai from the start.
Step 1. Choose sector
First, you need to decide the type of industry or sector you want to start your business in. This is important because only certain companies can be opened in specific locations in Dubai.
There are several sectors in business such as media, industry, bank or monetary organization, retail, hospital, healthcare, etc. For instance, if you want to open a business related to alcohol, then you can only set it up in the free zones.
So it is essential to first research and be sure about which sector you want a new business setup in Dubai.
Step 2. Choose location
Another factor in choosing before starting a business in Dubai is location. There are three types of areas to start a business – free zone, mainland, and offshore.
We will discuss these locations in detail in the separate topic below. But it is essential to point out before starting a business which area is profitable for your business activity.
Step 3. Name your company
It is essential to name your business or company in UAE. However, there are a few things you need to keep in mind.
The name should not be offensive to the country since foul language is highly prohibited. If you are using a foreign name or language, you must verify the language is not offensive to the religion or culture of the UAE government or their people.
Step 4. Prepare a proper paperwork
After choosing the sector, location, and name of your company, now it’s time to bring your business to life by preparing proper legal paperwork.
To register your company in the UAE, you must complete an application and provide copies of the passports of your shareholders.
Mainland companies will be required to have a certain amount of money to do business. This must be stated in a document called the Memorandum of Association (MOA).
Step 5. Submit clean paperwork
You will need to provide your paperwork in the business plan outlining the company’s activities. If you set up a company in a free zone, you may need to provide a Non-Objection Certificate (NOC).
NOC is a letter from your current sponsor confirming that you are allowed to set up another business in the UAE. Once you have submitted all the required documents, the authorities will review your application and decide whether to approve your company registration.
Step 6. Get a business license
You will be given a Certificate of Incorporation or license if you have all the paperwork, such as a business plan, application forms, and passports for your shareholders.
This document will allow you to start doing business in the UAE. However, if your application is rejected, you must submit it again with the correct documentation.
Step 7. Open your business bank account
You can also get a business loan or investment from the bank where you have your business account.
See also: Check our Dbd guide on – Best Bank in UAE & Dubai to select a bank account for your business.
Step 8. Start doing business
Now you are all set to start doing business in Dubai. You have followed all the steps and are in good condition to prosper in Dubai.
Keep in mind you have to be patient because it is a challenge to be a successful businessman immediately, so keep on trying and do not give up immediately.
Requirements for new business setup in Dubai
To start a business in Dubai, you must provide certain documents or fulfill other requirements. Let’s discuss some of the requirements needed for a new business setup in Dubai.
- Business license
A license application is the main requirement for any new business set up in Dubai. You will need a business license to prove your company is legitimate and approved in Dubai.
Once you have your business license, you will be protected by the law. However, you will be held accountable if someone tries to sue you or you are caught doing something illegal.
- LLC agreement
An LLC operating agreement is a document that sets out the rules for how a limited liability company will operate. This document is specific to the needs of the company’s members.
Every member of the company must sign the agreement to make it legitimate. Only after the deal becomes legal will you be able to set up a new business in Dubai.
- Business name certificate
Another essential requirement to open a new business in Dubai is your legal business name certificate.
To get your business name, you have to follow specific criteria such as the name of your business should be unique, should be legal, should not contain offense any religion, and mention Allah.
- EJARI certificate agreement
You must complete an EJARI registration every time the individual signs any new business or tenancy contract. EJARI is a government-run program that regulates all rental agreements in Dubai.
This document or agreement is to legally keep landlords from not raising rents which will impact business later.
You can quickly sign EJARI registration from the online portal, and if your registration is legal, you will receive a certificate that acts as evidence.
- Business plan documents
Another vital requirement you must have before opening a new business is the outline of your business. These documents will prove you have enough money to open a business and have a larger amount than the liability.
You also have to outline your sector and location in which you have decided to open the new business.
- Letter of authorization
If you are starting a business in Dubai from a foreign country, you must provide a letter of authorization from a local business partner or authority.
You also need additional documents and letters to open a business in any particular sector or location. Once the government validates your authorization letter, you are all set to start a business in Dubai.
Now that you have learned about the requirements of opening a new business setup in Dubai, it’s time to talk about location.
Hence let’s get into it.
Where to start a business in Dubai?
It is essential to choose a location to start a business in Dubai. Different places have different advantages and disadvantages to opening a business in Dubai.
Generally, locations are categorized into three parts in Dubai – the Free zone, Mainland, and the offshore. Let’s get into it in complete detail about these business locations.
1. Free zone
The free zone is a popular business location in Dubai which is also called the Free Trade Zone. Dubai was the first emirate in UAE to introduce free trade zone to encourage foreign trade and business setup.
The best attraction of free zone in Dubai is their tax limitations on the business owner.
Pros of starting a business in the free zone
- You can own 100% of your business.
- There is no income tax or corporate tax.
- You can repatriate profits and capital without restriction.
- The company keeps its information about its assets confidential, supported by concerned authorities.
Cons of starting a business in the free zone
- Limited Trade opportunities with UAE and other countries
- Limited Trade opportunities with other business locations.
- Limited business activities and industries.
The business location where Dubai Economic Department (DED) allows a foreign or local private business organization to conduct business is the mainland location of the company.
Foreign investors on the mainland can easily set up businesses, including food chains, luxury goods shops, automobile manufacturing, and export and import businesses.
However, it is essential to note that a foreign investor can only hold up to 49% of the total equity if they are opening a business on Mainland. This is because a UAE national must hold most of the total equity.
Even though the business incorporation laws have changed, it is still easier for foreign investors to do business in the United Arab Emirates.
Pros of starting a business on the mainland
- Mainland businesses in Dubai are exempt from tax
- The capital requirement for mainland business is 0%
- Setting up a business in Dubai mainland is simple, and the visa application procedure is also efficient
- Business opportunities with other emirates such as Abu Dhabi, Sharjah, and more.
Cons of starting a business on the mainland
- Must have a local partner with 51% of the ownership of the company
- Have to pay multiple taxes and charges to become a legitimate business
Offshore business is a business that lies only in paper. It is also regarded as a paper company.
An offshore company is a company that is legally registered in a country other than the one where its owners live to take advantage of taxes and simple regulations.
Pros of starting a business offshore
- Gateway to expand your business opportunities in other countries.
- It can help keep your identity hidden and confidential.
- Offshore business is the legitimate way not to pay tax or evade tax.
Cons of starting a business offshore
- Do not have permission for any kind of business.
- Offshore business in Dubai is costly.
Cost to setup business in Dubai
There are three different places to start a business in Dubai. The cost of starting a company will be different depending on the location and type of business.
So let’s divide the cost it will take to set up business in different locations in Dubai.
1. Cost of free zone business setup in Dubai
There are two areas of free zone in Dubai, and they are Dubai Airport free zone and DMCC. To form a free zone company in Dubai free zone, the minimum share capital is AED 1000 per share.
Similarly, in DMCC free zone, if you want to start a new company, it will cost a minimum of AED 50,000, whereas each shareholder must bear a minimum of AED 10,000.
For a minimum of AED 1 million capital, you can get a general trading license in Dubai free zone. U.AE, “Cost of a free zone, https://u.ae/en/information-and-services/business/starting-a-business-in-a-free-zone#:~:text=in%20free%20zones.-,Capital%20requirement,-There%20is%20no”
2. Cost of mainland business setup in Dubai
Setting up a business on the mainland is quite expensive compared to other locations in Dubai. First, you must register your business with the government, which will cost just AED 23,000 from 2021.
You will also start incurring additional costs in license fees ranging from AED 10,000-50,000 and office fees from AED 15000 to 20,000 per year. The minimum share capital required for mainland companies is from AED 1000 to 1,000,000.
Hence unlike the free zone company, the mainland cost of starting a new business is relatively high and will on the expenses you want to occur and how large you want your business to be.
3. Cost of offshore business setup in Dubai
An offshore company is much cheaper and less formal than a free zone company or a mainland company. You can have complete 100% foreign ownership of the offshore company, and you do not need sponsors from the local region.
Additionally, you do not need to have an office set up for your offshore company. You also don’t need to have a lot of share capital.
This means that the licensing and annual fees will be less expensive. You can find companies in Dubai who can help you with this.
For an offshore company, you will need to incur up to AED 5000, and the annual fee may range from AED 3000 to 4000.
Hence it is essential to plan your finances while starting a business in Dubai, and sometimes it is necessary to have more money than the actual cost that you may incur.
Why is it profitable for a new business setup in Dubai?
Dubai has attracted various local or foreign business people to start a company in Dubai. According to data, Dubai has become home to over 20,000 new businesses in just a year.
So this proves that Dubai is quite attractive for business people to open new businesses. Here are some reasons why setting up a company in Dubai is profitable.
- Easy business environment
Dubai is an excellent location for business because of all the amenities and supportive business environment. In Dubai, the tax rate is 0% for corporate and personal incomes. You only have to pay for VAT which became eligible after 2019.
- Blooming economy
There are ample opportunities for businesses to thrive in Dubai. Dubai is a very diverse country. It has many industries, such as healthcare and hospitals, that are doing well. Moreover, Dubai’s GDP is relatively high.
There are many opportunities in business, so many investors and businessmen will take a chance on doing business in Dubai.
- Probability of high turnover
Dubai has one of the highest profit turnover rates due to many business opportunities, flexible market competition, amenities for business, and a booming economy.
So any new business set up, if done carefully, has a chance to become successful and, in return, generate high turnovers for businessmen around the world.
- Assistance from government
Usually, a new business in Dubai gets lots of help and assistance from the government.
The government encourages new businesses to set up by minimizing taxes, providing benefits, and assisting with locations. The government also invests some of its own money in these businesses.
- An adequate supply of resources
There is an adequate supply of resources in Dubai, ranging from petroleum and gas to human resources, which helps the new entrepreneur choose any sector to conduct business without worry.
There are many opportunities in the IT, healthcare, tourism, and infrastructure industries because of their sustainable production and availability of resources.
Hence these are some of the main reasons why it is beneficial for a new business setup in Dubai.
If you have a good plan, money, and know-how to start a business, we recommend you try it. You can get many benefits from starting your own business in Dubai.
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FAQs on how to set up business in Dubai
How much does it cost to start a small business in Dubai?
Starting a small business in Dubai will cost from 3,000 to 50,000 AED. The main cost will be for the trade license, which will start from 3,000 AED per year, and in the free zone state, it starts from AED 1000.
How can a foreigner start a business in Dubai?
As a foreigner, to start a business in Dubai, you have to set up a company with a UAE national as your business partner. The UAE national will own 51% of the company, and a foreigner can own up to 49%.
How can I start my own business in Dubai?
You can start your own business in Dubai by choosing an adequate sector and location and getting an agreement and official license approving your business in Dubai.
What businesses are in demand in Dubai?
Some businesses in demand in Dubai are the construction sector, e-commerce solutions, travel and tourism, real estate agencies, and the health sector.
Which business is profitable in Dubai?
Food and delivery, IT, and healthcare businesses are very profitable in Dubai.
Is it easy to start a business in Dubai?
Yes, Dubai is very friendly and easy for people to start a business, especially foreigners who can take advantage of its tax system and many business amenities.
If your ambition is a new business setup in Dubai, then without hesitation, you should give it a try. We hope our guide will provide you with all the assistance you need to start a business in Dubai.
You must know all the requirements to start a new business and which location to choose before opening a business.
We have also shown why opening a new business setup in Dubai is beneficial, so you may be encouraged to start a business in UAE or Dubai.