Setting up in business is an ambition for many people – why be an employee for someone else when you can work for yourself and reap all the rewards of your hard work? Meanwhile others have a great idea for a business or have spotted a gap in the market.
Many people want to go out on their own, and Dubai, UAE is a place that many people look to start their business in, thanks to the favourable tax regime and plentiful help for businesses that is available. But what do you need to do to form an establishment or sole proprietorship in Dubai, UAE? This article will break this down how into easy steps. It covers:
- What is an establishment or sole proprietorship?
- Steps to set up an establishment or sole proprietorship in Dubai, UAE
- Documents required for an establishment or sole proprietorship in Dubai, UAE
- Cost of setting up an establishment or sole proprietorship in Dubai, UAE
- Advantages and disadvantages of establishment or sole proprietorship
- Why work with Worldwide Formations?
What is an establishment or sole proprietorship in the UAE?
A UAE-based business that is owned by a single person, who has a trade licence issued in their own name, is known as a sole proprietorship or an establishment.
In this form of a business, the person who owns the business takes on all its financial responsibilities and liabilities.
If the company is established to practice any kind of professional service, rather than a commercially focused business, it doesn’t have to comply with Commercial Companies Law, but they do need a license from the Department of Economic Development.
Non-UAE nationals can only form sole establishments to practise certain professional services including medicine, IT consulting, engineering and others. But the person who establishes the sole proprietorship is allowed to own 100% of it.
However, if a non-UAE national does own an establishment, they must hire a National Service Agent (NSA) to help obtain the necessary licences, visas etc., although the agent does not get directly involved in how the business is run.
Steps to set up an establishment or sole proprietorship in Dubai, UAE
Setting up an establishment or sole proprietorship in Dubai includes the following steps:
Step 1
One of the first things that needs to be decided is the activities the company plans to do. It is vital all of these are listed as any that are missed at this point could bring problems later when the business is up and running. Activities that are listed also influence how the company is structured.
Step 2
A company name must be decided on, but note that entrepreneurs who want to use their own name in the business name must use their full name – first and surname – rather than any abbreviations. In addition, the establishment or sole proprietorship must have an address in Dubai. There are many types of workspaces available in Dubai to fit all business needs.
Step 3
Non-UAE nationals have to employ an NSA, who can be a native of the UAE or a business that is owned by people who are UAE nationals. Business formation specialists like Worldwide Formations can help with finding an appropriate NSA – contact us for more information.
Step 4
Apply for a licence. Various documents are required in this process, which are covered below. There are a variety of licences that can be applied for in Dubai, depending on what the sole proprietorship or establishment plans to do.
The licence application process can get complicated, and while an entrepreneur can choose to do it by themselves, it can be easier to engage the services of a company formation specialist such as Worldwide Formations, which can ensure the form is filled in correctly and all relevant documents are included before it is sent.
Step 5
After this, a bank account will have to be set up for the business, which can be done at any bank in the UAE.
Documents required for an establishment or sole proprietorship in Dubai, UAE
There are a variety of documents that are needed by someone forming an establishment or sole proprietorship in Dubai, UAE. These include:
- Licence application form
- Copies of the entrepreneur’s passport and UAE residence visa (if applicable)
- A No Objection Certificate from the entrepreneur’s UAE residence visa sponsor (if applicable)
- Information about the NSA
- Proof of registered address.
Other documents, such as proof of qualifications, could also be asked for, but that depends on what activities the establishment or sole proprietorship will be undertaking.
Please note that all documents must be translated into Arabic by an official translator before they are given to the Dubai authorities.
Cost of setting up an establishment or sole proprietorship in Dubai, UAE
The cost of setting up an establishment or sole proprietorship in Dubai, UAE is usually between AED 17,000 – AED 25,000.
The cost is generally less than for other types of company formations, as the entrepreneur doesn’t have to produce a memorandum or articles of association.
However, the cost depends on several things, such as the licences, permits and visas required. Other costs include the workspace, furnishing it and any equipment or stock the business might need.
For more information on the potential costs involved, contact Worldwide Formations for a personalised quote.
Advantages and disadvantages of establishment or sole proprietorship
As with all forms of business entities, there are advantages and disadvantages to establishments and sole proprietorships, which need to be considered carefully before the entrepreneur forms the business.
The advantages include that a non-UAE national can own 100% of the business, which can’t be done with limited liability companies (LLCs) which stipulate that at least 51% of the share capital of the company has to be registered to a UAE national sponsor.
In addition, the entrepreneur can practice professional services all over Dubai, including free zones. Likewise, there are no rules on where the business can rent or buy a workspace.
Finally, paid up capital requirements have been waived permanently by the government.
But there are disadvantages too, such as owners being personally liable for all the debts and financial obligations of the business. In businesses such as LLCs, liability is limited by shares.
In addition, a physical workspace is necessary to complete the incorporation process – the Department for Economic Development, in general, doesn’t recognise virtual workspaces.
The time it takes to get an establishment or sole proprietorship up and running is usually eight to 10 weeks, which is longer than for some other types of business.
Why work with Worldwide Formations?
As this article has shown, setting up an establishment or sole proprietorship is a process that can be complex, which can trip up an entrepreneur who is not familiar with the regulations and law. Therefore, company formation specialists such as Worldwide Formations can be crucial to entrepreneurs in helping them to set up their establishment or sole proprietorship correctly and quickly.
Worldwide Formations’ team has been involved in setting up businesses for many years in the UAE and can negotiate the complexities of the local regulations with skill to allow an entrepreneur to focus on what they are good at – making money.
To find out more about business setup in Dubai and to receive a personalised quote, please contact Worldwide Formations today.
