I see that a lot of people are interested in starting a business in UAE. It is no wonder, now that UAE has won EXPO 2020. Everyone wants to reap the profits from the economic boom!
However, before you take the plunge, know the following:
Do a complete market study before you open your business. You’ll want to study the supply and demand of the product / service that you plan to provide. What is the demand? What is current supply? How likely are you to succeed in this situation? Can you compete with your competitors for customers? What should you do to make your product /service different from competitors in order to attract customers. For example if you want to sell jewelry and you see that that there are lots of other jewelry sellers, you may decide to make custom jewelry in cultural designs and hand-paint them using strange color combinations in order to stand out from the others. But you’ll need to know how popular such jewelry will be. How likely will it be to sell?
You’ll also need to decide your business location. You’ll want to set up where there are few or no competitors but also in an area where you’re likely to get business. If you’re setting up a grocery store, then setting one up in an area with 0 or just 1 shop will be better for your business than to set up in a place with grocery shops at every step. You’ll also need to consider competition from larger supermarkets and malls.
Another thing you absolutely need to consider are legal regulations regarding business locations. Some businesses may only be set up in particular areas or zones, so you’ll want to know about such regulations in advance. For example, if you plan to start a small bookshop and are thinking of setting up somewhere near schools but away from other bookshops, then you’ll need to know whether that is allowed. It’s possible that local laws require you to set up your business in an area already loaded with bookshops, which will make the competition fiercer!
You’ll also need to be informed about UAE licensing laws. There may be educational requirements for some types of businesses (masters degree or technical degree, etc) while others don’t have any educational requirements.
There are two general types of licenses in UAE: Free zone licenses and mainland licenses. Free zone licenses can be 100% foreign-owned and don’t require a local partner or service agent. However, with a free zone license, you can only do business in the particular free zone area or through an agent. You can’t deal directly with customers in mainland UAE. Also, conducting business with mainland UAE from your free zone company is taxable. A third thing is that there may be minimum bank balance requirements in some free zone areas, so get all the information well in advance. (A benefit of free zone company formation is that you don’t need a regular office for setting up a free zone company. You can get an office desk instead and do your business from there. Some free zone license packages come with a free zone office desk included.)
As for mainland licenses, they can be of various types such as professional licenses or limited liability licenses. With some licenses, you require a local partner who has 51% share in the company (whether or not they invested anything in the company). With other business licenses, you don’t need a partner but you still need a local service agent (whose name appears in the business license). In either case, you need to sign a written agreement outlining the duties and rights of each party. This agreement is signed and notarized in UAE court and is a very important document so make sure you lay out everything you need to safeguard your rights in the company.
You will need to pay the local sponsor (partner or service agent) on an annual basis and the rate ranges from AED 5000 to AED 15000 per year so do shop around for an acceptable rate. This amount must be paid whether the business is profitable or not. (You don’t have this expense in free zone companies).
For a mainland license, you also require a regular office. You can’t use a home-office or office desk but you may be able to use someone else’s office to get your license. This depends on the size of the office. If an office is big enough, it may be used for more than one business license. Find out about your options in advance.
A business license is valid for 1 year and must be renewed annually. License fees are paid to the government. A business license allows you to get a 3-year UAE visa. You may be eligible for more than one visa: Partner(s) visas and one or more employee visas. Speak to your license provider / service agent in advance regarding work, family, and visit visas so there aren’t issues later on. It has been said that getting visas through mainland businesses is easier and quicker than getting them through free zone companies, so you need to look into this.
There are various expenses involved with visas including refundable deposits that range from AED 3000 for employee visas and AED 10000 for partner visas. Free zone visas have different costs than mainland visas.
Whatever type of business you are planning to start, get all the information you can well in advance so there are no setbacks once you’ve started your business. And good luck. If you require any information, feel free to contact us.