Limited liability corporations (LLCs) are popular for foreign companies who want to start a business in UAE or Dubai. If you want to form an LLC in Dubai, it’s essential to understand how the law works concerning these LLCs.
Here’s everything you need to know about LLC company formation in Dubai.
Why Start a Business in Dubai?
Dubai is a rapidly expanding city with a healthy economy and growing market. UAE is working towards becoming a global business hub, and Dubai is the perfect place to start your business.
The country of UAE is currently ranked as the 16th best place in the world to do business, according to the World Bank’s 2020 Doing Business report. The Doing Business report measures how easy it is to start a business, pay taxes, and settle disputes for local and foreign entrepreneurs.
What makes UAE an ideal location for business is its excellent treatment of investors, with a significant level of security, stable economy and plenty of available space for companies to grow. Therefore, it is no surprise that UAE is a popular destination for entrepreneurs who want to expand their business.
What is a Limited Liability Company?
LLC is a type of legal structure that is available in most countries. It is called a limited liability company since LLC members, also called members of the limited liability company, are not liable for any debts that the LLC incurs.
The main advantage of having an LLC is the limited liability. It means it limits the member’s liability to the amount they have contributed to the business. Most countries allow only corporations as legal entities that carry legal “personhood”. LLC is one such type of legal entity available in the UAE and Dubai.
It is important to note that LLCs do not require a minimum number of members like a corporation does. The members can be one person, a couple, a family, or an LLC itself. Similarly, it does not require a minimum number of members to be recognised as a legal entity.
When a foreign company or person intends to establish a presence in UAE or Dubai, the first step is to develop a business plan. In this business plan, whether you are a sole proprietor, a partnership or a corporation, you will put down details like: When you get registered with the Department of Economic Development (DED), you will have to choose between a sole proprietorship, partnership or a limited liability company.
If you choose to form a limited liability company, you will have to pay a fee of AED 1,350. In addition, you will have to pay AED 1,600 to register your trade name.
What Laws Govern LLCs in Dubai, UAE?
In UAE, all limited liability companies are governed by the Federal Law No. 1 of 1985. This law contains all the provisions related to the formation, operation, and dissolution of limited liability companies.
In Dubai, LLCs are governed by the Dubai LLC Law No. 3 of 2004. This law contains provisions related to the formation, operation, and dissolution of an LLC and the penalties for infringement of the LLC Act 2004.
What are the Benefits of Forming an LLC in Dubai?
Forming an LLC does not have any tax benefits, but it is a more straightforward way of doing business. But for those who don’t want to pay taxes, LLCs are not easy to establish. You will have to follow many procedures and meet multiple requirements to get an LLC registered. But once you have set it up, it is a lot simpler to run a business than a corporation.
The Advantage of Starting a Business in a Free Zone in Dubai
A free zone is an area in Dubai where the laws of UAE do not apply, and instead, business is governed by the laws of that particular free zone. If you have a business or an idea that you want to start in Dubai and do not have enough capital to do it yourself, you can create a business in a free zone.
Here, you can start your business with a minimum amount of share capital. The company is not subject to the ongoing obligations of a local commercial firm. You need not follow taxation and accounting regulations as it is done in Dubai. Similarly, the labour laws in Dubai do not apply within a free zone.
You do not have to give a notice period to your employees in Dubai if you wish to terminate their services. This is why many companies prefer to set up their offices in the Free Zones.
How to Start an LLC in Dubai
When starting a business in Dubai, you will have to first apply to the Department of Economic Development. This application will include an application form, a statement that you will be the only director or member of the company, the documents required and a fee of AED 1,350.
Once your application is submitted, you have to wait for your LLC to be registered, which usually takes three working days, although it can take more if issues arise.
Once your LLC is registered, you must apply to the Dubai Chamber of Commerce and Industry. If you are a founding member of the LLC, you will have to submit an addendum to your LLC articles of association confirming that you are a founder member.
You must also submit a copy of the LLC registration certificate and a trade name registration application with a fee of AED 1,600. Once the trade name is registered, you must submit a trade name notification. This is done by submitting a notification to the government authority. You will also have to upload the notification on the LLC’s website.
What are the Penalties for Contravening LLC Act 2004?
If you fail to submit the application within 30 days from the commencement of the LLC or fail to submit anything, you will have to pay a fine amounting to the sum of AED 10,000.
If the LLC is not carrying on its business after six months of registration, its registration shall be cancelled by the LLC Department. If you submit false information in your LLC application, you will have to pay a fine of AED 25,000 or a risk a period of imprisonment of six months, or both.
If you don’t pay the annual fee of the LLC, you will face a fine of AED 2,500. You will also have to pay a daily fine of AED 250 until you pay the annual fee. You may also face a period of imprisonment of a month or both. The LLC shall be deregistered if you fail to submit the yearly LLC returns within the specified time.
How to Register a Trade Name in Dubai
If you wish to register your company name with the Department of Economic Development (DED), you will have to submit a trade name registration application and a fee of AED 1,000. In addition to the application, you have to attach the following documents: You will also have to submit a copy of your LLC registration certificate. You will have to upload the company’s trade name registration certificate on its website.
You will also have to send a copy of the registration certificate to all your shareholders, partners and directors.
How to Get a License for a Business in Dubai
If you want to engage in any business involving the sale, supply or distribution of alcohol, you will have to get a license from Dubai Culture and Arts Authority. You can either apply for the license or renew the license online. You will also have to pay a fee of AED 700. Here are the steps to get the license:
- Go to the Dubai Culture and Arts Authority’s website and click on the “Apply for License”.
- Enter your primary contact information, including your email address, name, phone number and a valid email address.
- Enter your business information, including the business address and the telephone number.
- Upload your documents and confirm your information and payment details.
- Confirm your application and pay the license fee.
- You will get an email notifying you about the approval of your application.
- You will have to pay a fee of AED 100 to AED 500 if you want to renew the license.
- Submit your documents and application to the Dubai Culture and Arts Authority.
- Get the license and submit it to the Dubai Municipality, Department of Economic Development, Dubai Civil Defense, Department of Tourism and Commerce Marketing, Dubai Land Department, and the bank.
- Get your license certificate.
How to Find a Business Partner
Business partners play a crucial role in the success of a business, especially in the Middle East. Business partners can help you manage your business and take it to new heights.
To find a business partner in Dubai, you should choose someone who has similar interests as yours, and that has a good understanding of the market and business environment.
You’ll also want someone who has a good track record of managing businesses. Once you find someone that meets these criteria, make sure to get the help of a consultant or lawyer to draft a business agreement.
How to Find a Business Location in Dubai
You will first have to make a list of the business requirements for your business. For example, you may want to find a location that is easily accessible, has ample parking space and is close to your targeted audience. Once you make a list, you can use the following step to find a suitable location.
You can either use the services of a real estate agent or find a location on your own. While an agent will help you find the best location, it will be expensive.
How to Raise Capital for Your Business in Dubai
Venture capital or angel investors are your two options to raise capital for your business. Angel investors will provide you with a small loan. On the other hand, venture capital companies will invest in your business and offer you a share of the profits. You should check the terms and conditions of both options and decide which one is better for your business.
How to Find the Right Business Consultant in Dubai
Finding a business consultant will help you get your business started and off the ground. While the help of a consultant will be expensive, it will be worth it in the long run.
You should also note that there are different types of business consultants in the market, including lawyers, business coaches, accountants and marketers. You should choose a business consultant based on your business needs. If you need help with contract drafting, you should find a lawyer.
However, if you need marketing help, find a business coach or marketer. Consultants help you with your business. They offer advice and help you find resources to help your business.
Most consultants are paid via a retainer or by the hour. Make sure that they have a track record of helping foreign nationals start a business in Dubai and that they’re willing to walk you through the process of dealing with various laws in the country.
Get Help With LLC Company Formation in Dubai Today
Dubai is one of the best markets for new businesses in the world. Sitting at the crossroads of Europe, the Middle East, and the Gulf Region, Dubai opens up an entire world of opportunities for your business.
Contact us today if you need help with LLC company formation in Dubai! Our team of professionals can help you with immigration services, banking, compliance, and more.