Wednesday, 5 March 2014

Decision Needs to be taken Before Registering a Business in Dubai | Business setup | Company formation | Free Zone Formation | Offshore formation |

While Dubai was always favorably seen as an investment destination, the interest amongst foreign entrepreneurs in entering the Dubai market seems to be rising and a number of foreign companies apply for setting up a business in the country each year. There are a number of advantages when it comes to doing business in Dubai, but there are a few important decisions to be taken as well that could create problems or ease things for the company in the future. Some of these decisions are as follows:

1) Foreign entrepreneurs should decide whether they want to register a Dubai Limited Liability Company or an offshore company. They may also choose to register a branch office in Dubai. The pros and cons of each type of company vary significantly and would also depend upon the business activity in the country. While most foreign companies would register a Dubai Limited Liability Company, this comes with a rider that at least 51 per cent of the shares must be owned by local Dubai residents. The foreign company or entrepreneur must spend a significant amount of time trying to engage the best suited partners for their Dubai business. Without providing minimum 51 per cent stake to the Dubai based partners, foreign companies cannot go ahead with company registration in the country.

2) If the foreign entrepreneur would like to retain 100 per cent ownership in their Dubai Company, then they have the choice of registering their business in one of the many free zones in the country. However, this comes with several riders as well. The two most important of these are the fact that companies registered in a free zone in Dubai are mainly export oriented companies and are not allowed to have full access to the Dubai market. At the same time, your company needs to be in the same business activity as the purpose for which that particular free zone was created. Unfortunately if the foreign entrepreneur wants to cater to the local population of Dubai and United Arab Emirates, they have no choice but to incorporate a standard Dubai LLC and give away 51 per cent shares to local Dubai based partners.

3) While it is mandatory for providing majority stake to Dubai residents, the profit and loss treatment of the company can be different from the percentage of shares held. Foreign entrepreneurs must decide upon this and negotiate with their Dubai partners before company registration.

Vithul V Murali MBA
Al Zaeim Corporate Services
Dubai Mobile : +971 50 55 73 538
Email  :
Skype : Vithul.murali

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