Types of Company Formation in Dubai

Dubai is an attractive destination for company formation thanks to its growing economy, strategic location, and business-friendly environment. The POA&More team provides a comprehensive overview of the types of company formation in Dubai.

Available Types of Company Formation in Dubai

Dubai is a global business hub that attracts many investors and entrepreneurs thanks to its diverse economy and business-friendly environment. When considering company formation in Dubai, it is essential to understand the different types of legal structures available, as choosing the right structure will affect many aspects such as ownership, liability, taxation, and legal requirements. Here is a comprehensive guide to the types of company formation in Dubai:

Companies in the Mainland

Sole Proprietorship: Owned by a single person who is fully liable for the company’s debts and obligations. Only UAE and GCC nationals may own 100% of a commercial or industrial sole proprietorship. Foreigners may own a professional sole proprietorship (such as a consultancy), requiring the appointment of a Local Service Agent (LSA) who has no stake in the company but assists with government procedures.
Limited Liability Company: This is the most common form of company formation in Dubai. It consists of two to 50 partners, and each partner’s liability is limited to their share of the capital. These companies cannot engage in banking, insurance, or investment activities. General Partnership: A type of company formation in Dubai owned by two or more partners who are jointly liable for the company’s debts and obligations. All general partners in a simple general partnership must be UAE nationals.
Limited Partnership: Consists of general partners (fully liable) and limited partners (liability limited to their share of the capital). General partners must be UAE nationals.
Special Joint Stock Company: Consists of two to 50 shareholders, and the capital must not be less than AED 2 million.
Public Joint Stock Company: Consists of an unlimited number of shareholders, and the capital must not be less than AED 30 million. Its shares can be offered for public subscription.
Civil Company: Typically used for professionals such as lawyers, engineers, and consultants. Partners can be of any nationality, but if none of the partners are UAE or GCC nationals, a local service agent must be appointed.

Free Zone Companies:

Free Zone Establishment: Owned by a single shareholder.
Free Zone Limited Liability Company: A type of company formation in Dubai owned by a number of shareholders (usually between 2 and 5).
Branch of a local or foreign company: Allows existing companies to expand their operations in the free zone.

Business forms available for foreign investors in Dubai

There are several business models available to foreign investors in Dubai, thanks to the emirate’s attractive business environment. Here are the types of company formation in Dubai:

Business Formation on the Mainland:

Limited Liability Company: This is the most common business form in Dubai. Foreign investors are now allowed up to 100% ownership in many economic sectors, with the exception of certain strategically important activities that may require a majority Emirati partner.
One-Person Limited Liability Company: A foreign investor can now establish this type of company with 100% ownership.
Civil Company: This types of Company Formation in Dubai is suitable for professionals and consultants (such as lawyers, engineers, and doctors). It allows 100% foreign ownership, but may require the appointment of a local service agent if there is no Emirati partner. The local agent does not own any stake in the company but assists with government procedures.
Branch of a Foreign Company: This types of Company Formation in Dubai allows foreign companies to establish a branch in Dubai while maintaining 100% ownership with the parent company. Representative Office: Used to promote the parent company’s products and services and is not permitted to engage in direct commercial activities. Ownership is 100% of the parent company.
Special Joint Stock Company: Requires at least three shareholders and its shares are not publicly traded. It allows up to 49% foreign ownership (the percentage may vary in some sectors).
Public Joint Stock Company: Requires a larger number of shareholders and capital, and its shares are traded on the stock exchange. It is generally not preferred by foreign investors due to the requirement for a majority local shareholding.

Company Formation in Free Zones:

Free zones offer an attractive investment environment with benefits such as:

100% foreign ownership.
Tax exemptions (such as corporate and income tax).
No restrictions on currency exchange.
Simplified registration procedures.

Here: Company Formation in Dubai | Business Setup in Dubai

Requirements for opening a limited liability company in Dubai

The requirements for establishing a limited liability company in Dubai include several key aspects. Depending on the types of company formation in Dubai, the requirements for establishing a limited liability company in Dubai can be summarized as follows:

Define the business activity:

The business activities the company will undertake must be clearly defined, as the type of activity affects the required licenses and relevant government authorities.
Under the types of company formation in Dubai, a limited liability company can engage in a wide range of business activities, with the exception of certain specifically regulated activities (such as banking and insurance).

Define partners and their shares:

Under the types of company formation in Dubai, establishing a limited liability company requires a minimum of two partners and a maximum of fifty partners.
The share of each partner in the company’s capital is determined.

Capital:

There is currently no mandatory minimum capital requirement for a limited liability company in Dubai. However, the capital must be sufficient to meet the company’s needs upon incorporation.

Appointing a Manager:

One or more managers must be appointed for the company to be responsible for its management and legal representation.

Renting an Office:

A lease agreement for a physical office in Dubai must be provided (except in some special cases that allow virtual offices). The lease agreement must be registered with the Real Estate Regulatory attorney (RERA) through the Ejari system.

Prepare the Required Documents:

Passports and copies of residence visas (for non-nationals): Clear copies of the passports of all partners and managers, and copies of valid residence visas (if they are UAE residents).
Emirates ID cards (for citizens and residents): Copies of the Emirates ID cards of all partners and managers.
Company Article of Association: A legal document specifying the company structure, the names and shares of partners, the capital, the company’s objectives, management procedures, and other important details. This agreement must be drafted and officially notarized.
Initial Approval from the Department of Economic Development: Initial approval of the business activity and trade name must be obtained before proceeding with the other procedures.
Trade Name Reservation Document: A document proving the reservation of the chosen trade name.
Notarized lease contract: A copy of the lease contract for the office registered in the Ejari system.
Recent passport photos of the partners and managers.
No-objection letter: If a partner or manager works for another entity in the UAE, they may be required to submit a no-objection letter from their employer.

Setting up sole traders and partnerships in Dubai

As a global business hub, Dubai provides an attractive environment for establishing various businesses, including sole proprietorships and partnerships. Each of these legal entities has its own characteristics, requirements, and procedures. Regarding the types of company formation in Dubai, here is an overview of establishing sole proprietorships and partnerships in Dubai:

Establishing a sole proprietorship

A sole proprietorship is a business entity owned and managed by a single person. The owner is personally liable for all debts and obligations of the company. Procedures for establishing a sole proprietorship in Dubai:

Determine the business activity: The type of business the company will engage in must be determined.
Choose a trade name: Choose a unique and appropriate trade name for the business and obtain approval from the Dubai Department of Economic Development.
Obtain initial approval: Submit an application for initial approval from the Department of Economic Development.
Appoint a local service agent: The local agent’s role is to facilitate government procedures and does not own a stake in the company.

Establishing Partnerships

A partnership is an agreement between two or more people who agree to share the profits or losses of a business venture. types of Company Formation in Dubai vary in terms of liability and management. Procedures for establishing a partnership in Dubai:

Determine the type of partnership: Choose the appropriate type of partnership based on the nature of the business and the partners’ agreement.
Determine the business activity: Determine the type of activities the partnership will engage in.
Choose a trade name: Choose an appropriate trade name and obtain approval from the Department of Economic Development. The general partnership name must end with the word “& Co.” or its equivalent.
Prepare the partnership agreement: A legal document specifying the rights and responsibilities of each partner, capital shares, profit and loss distribution mechanisms.

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Types of business licenses in Dubai

In Dubai, there are various types of company formations to suit various economic activities. The following are the main types of business licenses in Dubai:

Commercial License:

This license allows companies to engage in commercial activities such as importing, exporting, buying and selling, and trading goods and services.

Professional License:

Issued to individuals and companies that provide professional services based on intellectual skills or specialized expertise.

Industrial License:

Issued to companies operating in the fields of manufacturing, production, processing of raw materials, and product assembly and packaging.

Tourism License:

Required for companies operating in the tourism and hospitality sector.

Agricultural License:

Issued to individuals and companies operating in agriculture and related activities.

Craftsman License:

Issued to individuals and companies operating in handicrafts and specialized skills.

The Company Law in Dubai

Dubai’s corporate law governs the establishment, management, and operation of companies in the emirate. The primary source of this law is the UAE Federal Commercial Companies Law No. 32 of 2021, which replaced the previous Law No. 8 of 1984. The following highlights the types of company formation in Dubai:

General Partnership: Consists of two or more partners who are jointly liable to the extent of all their assets for the company’s debts. All partners must be UAE nationals.
Limited Partnership: Consists of two categories of partners: general partners who are jointly liable to the extent of all their assets for the company’s debts, and limited partners who are liable to the extent of their capital shares and do not participate in management. General partners must be UAE nationals.
Joint Partnership: A hidden company that does not have legal personality and is not subject to registration and publication procedures.
Public Joint Stock Company: A company with capital divided into negotiable shares, with shareholders only liable to the extent of the value of their shares. Requires a minimum number of founders and capital.
Special Joint Stock Company: Similar to a Public Joint Stock Company, but its shares are not publicly offered. It requires a minimum number of shareholders and a lower capital than a Public Joint Stock Company.
Limited Liability Company (LLC): Most popular among foreign investors. It consists of two to fifty people, and each partner is liable only to the extent of their share in the capital. In most sectors, current law allows full foreign ownership of this type of company.
Limited Partnership by Shares: Consists of two categories of partners: general partners, who are liable to the full extent of their assets, and shareholders, who are liable to the extent of the value of their shares. General partners must be UAE nationals.
Single-Person Limited Liability Company: Owned by only one person, who is liable for the company’s debts to the extent of its capital.

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Advantages of POA&More in establishing companies in Dubai

There are many advantages to using POA&More Power of Attorney Dubai services for company formation in Dubai. These include about the procedures for types of Company Formation in Dubai:

Simplified company formation procedures:

Facilitating complex processes: POA&More specializes in simplifying the company formation process, which can be complicated by local laws, regulations, and licensing requirements in the UAE.
Managing legal paperwork and transactions: The company handles all paperwork, permits, and legal procedures, ensuring a smooth, efficient, and hassle-free process.
Saving time and effort: By handling red tape, POA&More allows entrepreneurs to focus on other important aspects of building and growing their businesses.

Legal compliance and expertise:

In-depth understanding of the UAE’s legal environment: The POA&More team includes legal professionals and business consultants with a deep understanding of the UAE’s business environment.
Ensuring full compliance: The company ensures that every aspect of company formation is managed meticulously, from regulatory compliance to attestation and licensing.
Efficient company registration and operation: POA&More ensures that your company is registered, operational, and ready for business with minimal delays.

Customized Solutions:

Customized Guidance: POA&More’s team of experts provides customized guidance tailored to each client’s specific needs, whether incorporating in the mainland, free zone, or offshore jurisdictions.

In short, using POA&More to set up your company in Dubai can save you time and effort, ensure legal compliance, and provide you with the expertise you need to successfully establish your business in one of the world’s most dynamic markets.

Sources

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Frequently asked questions

What is LTD vs LLC in Dubai?

According to the types of company formation in Dubai, there are two main types of limited liability companies (LLCs), differing primarily in the number of partners:

Single-Person Limited Liability Company:

Ownership: Owned by only one person. This person is considered the sole owner and the capital is provided entirely by him.
Liability: Although it is a limited liability company, there are some considerations regarding liability. In some cases, the limited liability protection may be waived if there is gross negligence or overlap between personal and company assets.

Limited Liability Company:

Ownership: Owned by two or more people (up to a maximum of 50 partners). Capital and shares are distributed among the partners.
Liability: Partners’ liability is limited to their shares in the company’s capital. This structure protects the partners’ personal assets from the company’s debts and liabilities.

What is category 3 company in Dubai?

In Dubai, the term “third category” typically refers to companies’ classification by the Ministry of Human Resources and Emiratisation (MoHRE), rather than the Dubai Department of Economic Development (DED) or Dubai Municipality. This classification is based on a company’s compliance with labor market laws and regulations, protecting workers’ rights, and adhering to a policy of promoting cultural and demographic diversity in the UAE labor market.

Types of Company Formation in Dubai | Free Zone & More