Legal Forms of Companies in Dubai ( Definition & Ownership Rules )

Sole Proprietorship

Definition: A Sole Proprietorship is a business owned by an individual, not a company. This person will own 100% of the business, control all of its operations and keep 100% of any profits. He or she will also be 100% responsible for business debts and any other financial obligations.

Ownership Rules: A professional-type Sole Proprietorship can be owned by an individual of any nationality. If the owner is a National of a country other than the UAE or GCC, they require a Local Service Agent (LSA).

An industrial or commercial type Sole Proprietorship can be owned only by UAE Nationals or GCC Nationals.

Activity–based exception:

A sole proprietorship that offers legal services — known as a legal consultancy — does not require a local service agent.

Civil Company

Definition: A Civil Company is a business partnership for professionals in recognized fields such as doctors, lawyers, engineers and accountants. A Civil Company can only practice professional business and is 100% owned by professional partners.

Ownership Rules: A Civil Company can be owned by professional partners of any nationality. If the owner is a National of a country other than the UAE or GCC, they require local Service Agent (LSA).

A foreign company can be a partner in a Civil Company, as long as the foreign company is in the same profession as the civil company.

Activity-based Exceptions:

An engineering Civil Company must have one partner who is a UAE National, who owns no less than 51% of the business and who must be an engineer of the same business activity. A Civil Company that offers legal services does not require a local service agent.

Limited Liability Company:

Definition: A Limited Liability Company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. An LLC must have between 2 - 50 shareholders, each of whom is liable only to the extent of his or her share in the capital of the company.

LLCs can conduct any industrial or commercial business, but not professional – except banking, insurance or investment. LLCs cannot practice law, auditing, accountancy or any other type of consulting service.

The business name should be the same as the trade name or contain the names of one or more of its partners. The phrase “Limited Liability Company” must also be added to the business name. LLCs must appoint between 1 - 5 managers for the business. The managers may be selected from the partners. Unless the Memorandum of Association states otherwise, the manager has full powers of administration. Within the scope of his or her powers, the manager’s actions and commitments are binding to the business.

LLCs must appoint a UAE-accredited auditor. In case of the death of any partner, his or her shares are transferred to the heirs mentioned in the will.

Ownership Rules: At least 51% of LLCs must be owned by UAE Nationals, and can be owed by GCC nationals by up to 100%. The Memorandum of Association can distribute profits in a different ratio.

Shares of an LLC cannot be offered to the public. The company may not resort to public subscription to establish or increase its capital or secure loans, and it may not issue any negotiable stocks or shares.

Private Shareholding Company:

Definition: A Private Shareholding Company (Private Joint-Stock Company) is a partnership of at least three individuals. The partners must invest a minimum capital of AED 2,000,000 in the business. A Private Joint-Stock Company can be created for any commercial or industrial type of business. Professional activities are not allowed under this legal form.

The company must have an appointed manager.

Ownership Rules: At least 51% of a Private Shareholding Company (Private Joint-Stock Company) must be owned by UAE Nationals, and can be owed by GCC nationals by up to 100%.

While the shares of a Private Shareholding Company (Private Joint-Stock Company) cannot be offered to the public, the business can be converted to a public company two years or more after its creation, given certain conditions

Public Shareholding Company:

Definition: A Public Share Holding Company is a company whose capital is divided into transferable shares of equal value. It must have a minimum capital of AED 10,000,000.

The business name cannot include the name of any of the shareholders, with the exception of patents registered in the name of a shareholder or if the business uses a store that has the name of a shareholder. The phrase “Public Shareholding Company” must be included in the business name.

Ownership Rules:  A Public Share Holding Company must have at least ten founding members who are UAE Nationals, owning between 20% and 40% of the capital shares.

Simple Limited Partnership:

Definition:  A Simple Limited Partnership is formed between a minimum of two partners – one general partner and one limited partner. The general partners are liable for the company’s liabilities to the extent of all their personal and business assets; the limited partners are liable for a share of company liabilities equal to their share of the company capital.

Each general partner and limited partner can own any share of the business. There is no minimum or maximum ownership level for any partner.

A limited partner may not intervene in management or administrative issues related to the other partners. If he or she does so, that limited partner shall be responsible for all the business’s obligations.

The name of the company should be that of one or more of the general partners, with an addition noting that this is a company name. The company can also have a special trade name. The name of any limited partner should not be mentioned in the name of the company.

Ownership Rules:   A Simple Limited Partnership must have UAE Nationals as general partners; Nationals of other countries can be limited partners.

Partnership Company:

Definition:   A Partnership Company is a single business where two or more people share ownership. Each partner contributes to all aspects of the business and must administer the company unless a contract assigns administration to one partner or to another party.

The owners of the partnership company are jointly and severally responsible for the company’s liabilities. This means that if the business is unable to pay its debts with the proceeds of its operations, the personal and business assets of one or all of the partners can be used to pay creditors. No agreement to the contrary can be made against third parties.

The name of the business must contain the name of one or more of the partners, with the addition of a word signifying that it is the name of a business. If a non-partner is named in the business name, with his or her knowledge, that individual is jointly responsible for the business’s debts. The business can also have a commercial name.

Ownership Rules:   A Partnership Company’s shares must be 100% owned by UAE Nationals and cannot be offered to the public or represented in negotiable certificates.

Branch of a Foreign Company Branch or Representative Office:

Definition:    A Branch of a Foreign Company must have a manager to represent the company and to open the branch, appointed by the Board of Directors.

The branch will become the company’s Dubai headquarters, and its business shall be subject to the provisions of the laws of Dubai and the UAE.

The branch can conduct selected commercial and professional activities, but cannot import goods into Dubai; this will be managed by a local trade or commercial agency. The branch office must have an independent budget, its own profit/loss statements and must appoint a UAE-accredited auditor. A Branch of Foreign Company also requires a Local Service Agent (LSA), who can be a UAE National or a company owned by one or more UAE Nationals.

A Representative Office for Commercial Activities is not a business structure in its own right but it is a business activity that a branch can conduct. It has its own criteria, which includes the authorization to promote and market the parent company’s business – but not conduct business operations. A Representative Office requires a Local Service Agent (LSA), who can be a UAE National or a company owned by one or more UAE Nationals.

Ownership Rules:   A Branch of a Foreign Company or a Representative Office is 100% owned by the parent company. It must operate under the same name, conduct the same business as the managing firm, and must have operated at least two years in order to open a branch in Dubai

Branch of a Dubai-based Company:

Definition:    A Branch of a Dubai-based Company must undertake one or all of the activities included in the main company license. For a company with multiple branches, each branch can undertake different activities as long as they were all included in the original license for the main company.

Ownership Rules:    A Branch Of A Dubai-Based Company must be 100% owned by the parent company

Branch of a UAE-based Company:

Definition:     A Branch of a UAE-based Company must undertake one or all of the activities included in the main company license. For a company with multiple branches, each branch can undertake different activities, as long as they were all included in the original license for the main company.

Ownership Rules:     A branch of a UAE-Based Company must be 100% owned by the parent company

Branch of a GCC-based Company:

Definition:      A Branch of a GCC-based Company must undertake one or all of the activities included in the main company license. For a company with multiple branches, each branch can undertake different activities, as long as they were all included in the original license for the main company.

While other GCC countries may follow different rules in terms of combining activities, for Dubai branch licenses, only activities of the same group will be accepted, even if other activities are registered in the GCC main company.

Ownership Rules:      A Branch of a GCC-based Company must be 100% owned by the parent company

Branch of a Free zone Company:

Definition:       A Branch of a Free zone Company can carry out commercial, industrial and professional business as long as the activity of the main company is authorized in mainland Dubai. If you have a company whose main license was issued in a UAE free zone, (not as a branch of a foreign company), you can obtain a branch license from DED to expand your operations to mainland Dubai.

Ownership Rules:      For a Branch of Free zone Company, if there is no local shareholder in the main company, or the local shareholder in the main company owns less than 51% of the shares, you will need a Local Service Agent. A local service agent is not required if the branch performs professional activities.

Intalaq – Home-based business for UAE Nationals:

Definition:       An Intalaq License Company can only be set up by UAE Nationals. It is a home-based business that can conduct almost any type of professional, trade or artisan business. The business must be reasonable for operation in a residential environment. The business must not harm the environment or the health of any person, and should not generate noise or other irritants that could negatively impact neighbors. It can take the following legal forms: Sole Establishment, LLC, Civil Company and Partnership. Intalaq license holders cannot sponsor employees.

Each person can have only one trade or professional Intelaq license but can operate more than one related activity under this license. An Intelaq license does not allow the business owner to hire staff but may engage contractors.

Ownership Rules:       100% UAE National owned.

SME License:

Definition:        An SME license can be given to businesses owned 100% by UAE Nationals and can take any legal form. The license is valid for three years and allows the owners to sponsor employees.

Ownership Rules:        100% UAE National owned

Kind Regards,

Vithul V Murali
Al Zaeim Corporate Services
Dubai Mobile : +971 50 55 73 538

Email  : Vithul@a2zconsultus.com

Skype : Vithul.murali