Business Setups and Freezones in the UAE
The United Arab Emirates (UAE) is a popular place for foreign investors to set up a business. With its strategic location, world-class infrastructure, and business-friendly environment, the UAE provides a variety of options for companies seeking to establish a presence in the region. Choosing the right type of business setup and location is a critical consideration for companies seeking to establish themselves in the UAE. This article will provide an overview of the various kinds of business setups available in the UAE, the advantages of establishing a company in a free zone, and the best free zone in the UAE for business setup in 2023.
Types of business setups in the UAE
The UAE offers several types of business setups for entrepreneurs to choose from.
Limited Liability Companies (LCCs) are a common form of business setup in the UAE. They necessitate the participation of at least two shareholders and provide restricted liability for the company’s debts and losses. LLCs offer a great deal of flexibility in terms of the business activities they can engage in, making them an appealing choice for entrepreneurs seeking to start a business in the UAE. On the other hand, LCCs must have a UAE national who owns at least 51% of the shares. This can be a disadvantage for foreign investors seeking greater influence over their operations.
A 100%-owned Civil Liability Company (CLC) is another type of business setup in the UAE. It allows foreign investors to obtain full ownership of their business without the need for a local partner or sponsor. CLCs are typically owned by lawyers, engineers, and consultants, who must own 100% of their business in order to run a legal entity in the UAE.
A sole proprietorship is another form of business setup in the UAE. It is the most basic form of business ownership, with a single person owning and managing the business. The owner has unlimited liability for the company’s debts and liabilities, putting their personal assets at risk. Sole proprietorship is appropriate for small businesses and individuals who want to establish their own business without undergoing any complicated legal requirements.
Another form of business setup is a partnership, which requires two or more people to share ownership and attend to the responsibilities. In the UAE, there are two types of partnerships: general partnerships and limited partnerships.
In a general partnership, all partners share earnings and losses equally and have unlimited liability for the company’s debts and losses.
In a limited partnership, one or more partners have limited liability and are not involved in the general operations of the business.
Partnerships are appropriate for businesses that require more than one person to run the operations, and they provide partners with shared responsibility and accountability.
Free Zones in the UAE
In the UAE, free zones are designated areas that provide guaranteed 100% foreign ownership, tax incentives, and other exemptions to businesses. The UAE has over 67 free zones, and each has its own focus and facilities. Businesses in sectors such as finance, logistics, media, and technology prefer free zones.
Some of the most famous free zones in the UAE are:
Dubai Multi Commodities Centre (DMCC)
- Dubai Silicon Oasis (DSO)
- Abu Dhabi Global Market (ADGM)
- Jebel Ali Free Zone Authority (JAFZA)
- International Free Zone Authority (IFZA)
- Fujairah Creative City Free Zone
- Sharjah Media City Free Zone (Shams)
- and the Ras Al Khaimah Economic Zone (RAKEZ).
Businesses that establish themselves in a free zone can take advantage of world-class infrastructure, access to global marketplaces, and streamlined registration procedures.
Benefits of business setups in the UAE and free zones:
There are several benefits to setting up a business in the UAE and free zones. For instance, the UAE is strategically located between Asia, Europe, and Africa, making it ideal for businesses looking to expand globally.
Most free zones in the UAE offer tax incentives, such as zero corporate tax and zero personal income tax. This is attractive to businesses looking to save on taxes.
The UAE also has a pro-business environment, with streamlined registration processes for businesses, minimal entry barriers, and a supportive government that encourages entrepreneurship and innovation.
The UAE’s world-class infrastructure affirms its attraction to businesses as it has premium facilities, including airports, seaports, transportation systems, modern office spaces, and logistic centers.
The UAE also has an open economy and a strong dedication to free trade and globalization. This facilitates a business’s ability to import and export goods, as well as gain entry to new markets and customers.
Finally, the free zones in the UAE offer numerous benefits, as mentioned. These benefits can facilitate a business setup and make the operation more cost-effective. Each free zone has its own benefits. Thus, businesses should carefully consider which free zone suits their needs and aims for growth.
What UAE-free zone in 2023 can be considered the best to set up a business?
In 2023, the best free zone for a business setup in the UAE will depend on specific criteria consisting of the needs and requirements of the business. However, based on current trends and facilities, DMCC proves to be the most appropriate so far. DMCC has been named the world’s number one free zone by the Financial Times fDi Magazine. It is the world’s largest free zone for commodities trading, and it provides a variety of services, including serviced offices, warehouses, and trading platforms. DMCC is one of the few free zones to offer a dual license, enabling businesses to expand onshore or on the mainland. DMCC also houses over 18,000 businesses from various sectors, making it a hub for business networking and collaboration. Furthermore, DMCC provides several company incentives, such as exemptions from taxes, 100% foreign ownership, and simplified registration procedures.
IFZA is also growing in popularity as it is one of the most economically free zones in the UAE. A unique feature of IFZA is that one does not need to have a physical office space, making it ideal for those looking to start online. This is entirely suitable for the present year, as online presence is an area that is expanding each day.
Another free zone that is growing in popularity in the UAE is ADGM. ADGM is an international financial center that provides a broad range of financial services, such as banking, insurance, and asset management. ADGM is also home to several fintech firms, making it a financial innovation hotspot. ADGM provides incentives such as exemptions from taxes, 100% foreign ownership, and a regulatory framework founded on international best practices. There are also other UAE free zones to consider when setting up a business in 2023, such as Dubai South, Dubai Internet City, and Dubai Media City.
Legal Considerations for Business Setups and Free Zones
It is crucial for businesses that establish themselves in the UAE or a free zone to be conscious of the legal implications of their operations. Among these are labor laws and regulations, commercial laws, employment laws, and other legal factors such as data protection and intellectual property. For instance, the UAE Commercial Companies Law (CCL) establishes free zones in the UAE, along with the regulations surrounding them. The CCL sets out the formation of free zones, licensing, ownership, tax incentives, customs regulations, and employment regulations. Nevertheless, a business should obtain professional legal advice to guarantee compliance with applicable laws and regulations.
For foreign investors seeking to establish a presence in the region, the UAE provides a variety of business setups and free zones. Businesses can profit from tax exemptions, 100% foreign ownership, and access to global markets in free zones. The specific needs and requirements of the business determine the best free zone in the UAE for company setup in 2023. Still, the Dubai Multi Commodities Center (DMCC) and the International Free Zone Authority (IFZA) are two of the most popular and most suitable free zones in the UAE for business setups. However, Abu Dhabi Global Market (ADGM) has also grown in popularity and status due to it being a financial innovation hotspot. Businesses considering establishing a presence in the UAE should obtain professional legal counsel to guarantee compliance with all applicable laws and regulations.
It should be noted that this article should not be considered expert legal advice. If you would like to obtain any legal advice regarding business setups or financial free zones, please do not hesitate to contact us. We offer a 30-minute free consultation with the legal counsel at our firm, Al Reyami Advocates and Muhyealdeen International Legal Consultants.