One of the most important decisions you'll ever make as an entrepreneur is choosing where your company will be located. The location you choose influences your access to key business drivers, such as trade connections, markets for your product or service, and the type of business environment in which you will operate.
If you are a foreigner thinking about starting a business in the United Arab Emirates (UAE), you are on the right track. As you may already know, the UAE is a popular business destination because of its strong capital flow, stable political system, liberal trade restrictions, and business-friendly taxation policies.
Moreover, establishing a business in the UAE is relatively simple.
However, just like in your home country, starting a company in the UAE entails meeting certain requirements and getting specific licences before you can confidently operate your business as a legal entity.
To help you out, here is a guide designed to answer some of your questions about establishing a business in the UAE, as well as discuss the best practices to help you succeed.
Who is Eligible to Start a Business in the UAE?
If you are a professional in your field with entrepreneurial experience, you are eligible to start a business in the UAE.
You are considered a qualified entrepreneur if you have successfully established a business at some point in your career and are looking to establish a company in the UAE.
In order to get a business visa and licence in the UAE, you must provide proof of your experience as an entrepreneur in the role of a company’s senior management or as the majority shareholder.
You must also have a ready business plan and be willing to relocate to the UAE in order to start your own business. Finally, you must pass the Federal Authority for Identity and Citizenship requirements, which include a health assessment and background check.
The Business Culture in the UAE
The UAE is known as a welcoming country that makes doing business as a foreigner easy. From being home to several long-term businesses owned by expats to a favourable tax regime, it is safe to say that the business culture here is open and dynamic.
Furthermore, the UAE business environment has become even more investor friendly because of changes made by the UAE government to the law on foreign ownership for onshore mainland companies. The new regulations allow investors to have 100 percent foreign ownership in 10 sectors.
Regardless, it is important to note that each emirate has the authority to impose its own restrictions. Overall, the UAE’s local business culture is relatively simple to understand. So if you act appropriately, you can certainly succeed as a businessperson here.
Legal Structures for Businesses in the UAE
The UAE has the same legal corporate structure for businesses as almost any other country. The laws that govern each framework are where these structures may differ from those that apply in your home country.
In the UAE, there are six main legal business structures:
- Sole Proprietorship
This type of business entity is owned by a single person who owns all the company’s shares and has complete control over its operations. Foreigners must have a residency permit to operate a sole proprietorship, but they will be limited to professional and consultancy services.
Only Gulf Cooperation Council (GCC) and UAE nationals can operate a commercial or industrial company.
- Limited Liability Company
As a result of the restrictions on sole proprietorship, most foreigners who want to run commercial or trade businesses in the UAE establish limited liability companies, and there are strict rules governing their formation. Most notably, you will need to engage the services of a UAE-accredited auditor to set one up.
- Civil Company
A civil company is a type of business entity formed by professionals in specialised fields, such as medicine, law, accounting, engineering, and others who wish to establish a practice or consulting firm in the UAE. Civil companies, like the others on this list, are subject to certain restrictions.
- Branch of a Foreign Company
Any company with a headquarters in another country and wishes to expand into the UAE market while remaining a legally dependent part of the parent company can establish this type of business entity; that is, a branch of a foreign company.
Businesses engaged in manufacturing, export, and import services are the only exceptions.
- Public Shareholding Companies
A public shareholding company can be formed in the UAE for any professional, commercial, or industrial business with a minimum of five founders and five appointed managers.
On average, the minimum investment capital required to establish this type of business entity is AED 30,000,000 in transferable shares of equal value, with each shareholder liable only to the extent of their capital.
- Private Shareholdings
In the UAE, a private shareholding company can only be formed for commercial or industrial businesses with at least three investors and a minimum total capital investment of AED 5,000,000.
Of Licenses and Certifications
Most businesses in the UAE, regardless of their legal structure, fall into four categories: industrial, commercial, professional, and hospitality, with specific regulations governing business operations in each category.
That being said, regardless of which category your business falls into, you will need to register and obtain the necessary licences and permits before you can begin operations. For example, if you are planning to open a commercial business in the UAE, you will need to obtain a commercial licence. Each emirate determines other regulatory compliance permits.
To ensure that your official documents comply with the local governments of the state your business is located, you will need to work with a certified agency that specializes in professional English-to-Arabic translation. That's because not all agencies providing Arabic translation services are ISO-certified and internationally accepted by private and public institutions like those in the UAE. Having your document certified by an Arabic translation agency assures those examining your papers that they are authentic. Usually, these agencies offer a certificate of translation accuracy, guaranteeing that your translated official documents are up to standards.
A good example is if you want your business to be eligible to submit a bid to the Abu Dhabi National Oil Company (ADNOC) In-Country Value Program as a third party supplier. In this case, you should also consider obtaining an ICV certificate. The ADNOC bidding process includes ICV certification as a deciding factor in the selection process.
Work With an Accredited UAE Corporate Service Provider
While this guide provides an overview of everything you need to know about establishing a business in the UAE, it may not cover all the details and information that are relevant to your specific business plans and objectives.
Therefore, you should consider hiring an accredited UAE corporate service firm that has a thorough understanding of the business landscape in the country and the regulations that govern it, including emirate-specific requirements, and can provide you with expert advice as you establish your business.