How to start a Business in Dubai's Mainland and Free Zones

Coming to Dubai for the first time will leave you thrilled and overwhelmed at once. Especially for (potential) investors, entrepreneurs and business owners, Dubai offers a tremendous range of opportunities to dive into.

To most, Dubai seems like a mysterious distant place that people who haven’t yet lived here can hardly grasp. It is known to be a haven for those who seek for an environment that supports them in their growth due to its favorable tax regulations and the lack of income tax. Which is why an increasing amount of individuals and companies take the chance and transfer or expand a part of their business operations to the UAE.

But how do you start and enter a new and yet unknown market? Especially as a foreigner and not speaking the local language can be a challenge. But it is in fact not that difficult, if you choose to work with the right partner.

There’s multiple options on why and how entrepreneurs and companies can set stone in the pulsing metropole of the Gulf region. When starting a company, opening a branch or importing products to Dubai it is important to precisely point out the major framework, background and goals of you and your company.

Determining the right company form and the matching business activities that are required when establishing a company is essential for guaranteeing a solid base for legal validation and future successful operation.

Generally, there are two major options to choose from, depending on the direction and focus you want the business to have. Choosing between a mainland and a free zone company.

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starting a business in Dubai's Mainland.

A mainland company is founded in Dubai’s mainland, specifically by Dubai’s DED (Department of Economic Development). Meaning the laws and regulations of the emirate Dubai apply and set the framework for the company’s operations.

There are various company forms to choose from ranging from a Sole Establishment up to a Holding or Stock Company. We’ll take a closer look into two of the most common ones - the L.L.C (Limited Liability Company) and the Civil Company.

UAE Limited Liability Company (L.L.C)

A L.L.C acts as a separate legal entity and offers, as the name already implies, limited liability to its shareholders. A UAE L.L.C is comparable to i.e. the German GmbH and can be owned by private individuals or foreign companies.

For most business activities, a L.L.C does not require a local partner or local service agent, due to the 2020 amendment of the Federal Decree-Law that grants 100% ownership to foreign investors.

However when founding a L.L.C it is necessary to declare a General Manager with a UAE residency who will be listed on the license of the company and, if not stated otherwise, responsible for legal and operational duties.

Generally, L.L.Cs have a higher reputation particularly in terms of banking and are a must for those who want to do regular business with local (UAE) clients or firms.

UAE Civil Company

The second company form within Dubai’s mainland is the Civil Company that is owned by two or more individuals who provide professional services. The major difference between these two is that a Civil Company does not demand a deposit of share capital and consequently does not grant limited liability. Therefore shareholders of a Civil Company are liable with their private assets, which makes it comparable to I.e. a German GbR. A Civil Company additionally requires the involvement of a local partner or local service agent who acts as an arbiter between you and the government departments in order to fulfill work permits, visa applications etc.

Both mainland company forms, L.L.C and Civil Company demand a mandatory physical office in Dubai’s mainland while granting unlimited visa applications for future employees.

So if you’re looking to sell products in the UAE, trade locally or for example rent apartments or cars, a mainland company is the right choice.

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starting a business in Dubai's Free Zones.

Free zone companies offer a great alternative for foreigners to enter the UAE market. Free zone companies are a bit broader and less regulated in terms of the requirements and frameworks during the formation process, so let's look closer into what they are about.

A free zone is a special economic zone with its own regulations and jurisdictional structure where goods and services can be traded. Free zones offer customs duty and tax benefits along with a 100% import and export tax exemption. Free zone companies are ideal for those who do not plan to directly trade within the UAE and mainly operate within the specific free zone or outside the UAE.

There are currently more than 40 multidisciplinary free zones across the UAE which offer different solutions and opportunities, depending on the focus, background and aim of you and your company. Some free zones are specialized on certain international clients and offer a better organizational framework and support. The IFZA, as part of Dubai‘s Silicon Oasis, is an outstanding example and is continuously growing its network of partners.

Free zones do not exchange data with foreign authorities which makes them very attractive for foreign investors who want to do business internationally without the public disclosure or transfer of their company’s ownership details.

Furthermore some free zones offer convenient office solutions like "smart-" or "flexidesks" that are an alternative to a physical office space. Contrary to a mainland company though, free zone companies are limited in terms of visa eligibility and issuance for future employees.

Overall, free zone companies are a great option to benefit from the advantageous tax situation for international business transactions, especially for those who can work remotely and are not bound to a specific location like traders, engineers, marketers or consultants.

To ensure long-term success, is important to precisely consolidate on the business activities that will be associated within the company formation process in order to facilitate the subsequent opening of a local bank account.

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Be aware that due to the favorable tax situation, the UAE had to set up a regulatory framework to ensure international trade relationships and legal eminence.

While setting up a company as a foreign investor is rather unproblematic, the determining factor for a solid and operable business is based in the opening of a local bank account.

That is where most providers of business setup services fail, because they sell quick and poorly advised company formation concepts that don’t withstand the compliance processes of the banks and lack the necessary network of local bankers.

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NICHE has specialized in helping European and Russian clients, brands and companies to enter the UAE market and finding the ideal business solution and company structure for each individual case. With our international and local network of partners, we are able to offer outstanding service and know-how in order to contribute to your success. Don’t hesitate to get in touch with us in order to scale your business and make the most of the opportunities the Gulf region is offering.