There are certain key questions to ask from the beginning and these answers will dictate how to set up a company in UAE:
- What is your activity and where is your target market?
- Do you need a physical presence to sell your product or services?
- Do you want to deal with Government Companies or Oil and Gas Sector?
Should I set up in a Free Zone?
This question is a key issue that new companies in the UAE often deliberate.
The Free Zones are a very popular route to market for many foreign companies wanting to operate in the UAE. These dedicated areas offer a foreign company 100% ownership. However, Free Zone companies can only operate within that Free Zone, and they cannot legally trade with Onshore companies or government entities.
If you are undertaking services outside of the Free Zone – for example providing services at a client’s place of work, selling products or services to UAE companies and if you want to target government or quasi-government organizations, then you need to be registered as an Onshore company, such as an LLC (Limited Liability Company) or a Foreign Branch.
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is the most commonly used form for setting up in the UAE as a foreign investor and is often the only choice for many business activities.
An LLC can be formed by a minimum of one and a maximum of 50 shareholders whose liability is limited to their shares in the company’s capital. At least 51% of the share capital of the company should be owned by UAE national(s) or a 100% owned UAE National Company.
With the approval of the local partner, it is possible for the legal documents of an LLC to contain the following provisions designed to protect the interests of a foreign shareholder; appoint all directors, appoint the general manager and through a power of attorney the entire business operations of the company and company bank account operations can be exclusively managed and controlled by the foreign shareholder(s).
Setting up a branch office of a foreign company in Abu Dhabi or Dubai is an attractive prospect for clients in that it can be 100% foreign owned. A branch office is not a separate legal entity, but rather an extension of the parent company abroad. As such, a branch office will, when conducting business in the UAE, be acting on behalf of the foreign parent and as such be linked to all contracts entered into in the UAE. Depending on the parent companies tax jurisdiction, profits earned by the branch will be taxable in the home country.
In order to establish a branch office, a National Service Agent (NSA) will need to be appointed. The NSA must be a UAE national (or a 100% UAE owned company). The NSA is normally in charge of dealing with local, and federal authorities for the purposes of obtaining necessary documentation for the branch office and its staff; such as approvals, licenses, labor cards, and visas.
The NSA is not a shareholder and does not have any rights in the company. The NSA will enter into a service agreement with the branch office, under which the agent will provide services in consideration of the payment of a fixed annual fee or percentage of the profits or transactions undertaken by the branch office. This is a matter for negotiation.
The Branch can only undertake certain business activities. The business activities have to fall within its main objectives and scope of business, as outlined in the foreign company’s articles of association, to ensure that the business activities that the foreign company is intending to carry out are competent in the UAE. Also, branch companies could not Trade their product directly in the market as LLCs do.
To work directly with the UAE’s national Oil and Gas companies, it is necessary to be registered, onshore in Abu Dhabi with a Trade License issued by the Department of Economic Development (DED) and to have a special approval from the Supreme Petroleum Council (SPC).
Plus UAE is one of the leading company formation specialists in the UAE dedicated to helping foreign companies set up their UAE businesses correctly and cost-effectively. We help you with how to set up a company in UAE
We provide an efficient, professional and dedicated corporate sponsorship platform for onshore companies with a focus on providing the foreign party with security, control and 100% of the profits. We can also manage the incorporation process to ensure a smooth setup and following establishment of the trade licence we can assist with Resident Permits, Family Visa, Offshore Passes and all other Government Liaison, PRO and HR Services.