License and Partnership Rules for a Business Setup in the UAE

SMEs make up 95% of all businesses in Dubai and employ 42% of the workforce, according to an article published in The Wall Street Journal in January 2014. Small business ideas in the UAE are considered to be one of the profitable avenues for investing your money.

How to Start a Business in the UAE

But before you invest your money in any business idea and set up shop, it is essential to understand the procedures and rules that might govern your business. Under UAE law, any foreign entity interested in establishing a formal presence in the country can do any one of the five:

  1. Create a permanent establishment
  2. Establish a branch office
  3. Create an entity in one of the free zones
  4. Create a civil company (only in Dubai and Sharjah)
  5. Enter into a commercial agency agreement.

Whatever the type of business, you intend to start; you need to get a license for your business. There are three types of licenses given out:

  1. Commercial licenses (all kinds of trading)
  2. Industrial license (manufacturing or industrial)
  3. Professional licenses (professions, services and craftsmen)

It is mandatory under the UAE Commercial Companies Law (CCL) that every company must have a minimum stake of 51 percent under the name of a UAE national. Exemption from a minimum 51 percent stake by a UAE national is made for companies that are involved in certain activities, such as the oil industry, production of electricity and gas, treatment of water and distribution, and companies that are established in the free zones. Except for providing UAE nationality, the provisions of the CCL do not apply to Free Zone Licenses.

Under partnership ownership, you can look at three popular options:

  1. Public and Private Shareholding Companies – By the UAE law, insurance, banking and financial activities should be setup as public shareholding companies. Foreign entities in this category can setup a presence by opening a branch or a representative office. The minimum capital requirement for a public shareholding company is Dhs 10 million, while that for a private shareholding company is Dhs 2 million. This type of company requires the chairman and majority of directors to be UAE nationals.
  2. Joint Venture – It is a contract between a UAE party and a foreign party. The UAE party must have a minimum of 51% stake in the company. There is no need to license the joint venture or publish the agreement.
  3. Limited Liability Companies (LLC) – In a limited liability company, a person’s liability is limited to his shares. It can be formed with a minimum of 2 and a maximum of 50 members.

You can seek professional advice from a business consultant. Some small business ideas in the UAE that you can look at are childcare facilities, job agencies, travel and tour agency and more.

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