Who wouldn’t want to open a business in Dubai? It is a place where businesses have been thriving. It wouldn’t be wrong to say that Dubai is the business hub in 2024. The United Arab Emirates is one of the most business-forward countries in the world. UAE offers unique opportunities for foreign national entrepreneurs and investors to set up the businesses of their dreams.
Mainly you will find 2 business structures in the UAE: Sole establishment and LLC.
A sole establishment is also known as a sole proprietorship. It is considered to be one of the most popular business structures in the UAE, but you may be wondering what the differences are when compared with an LLC (Limited Liability Company) in the UAE.
Don’t worry – we are here to clear everything, so let’s get started!
What is Meant by UAE Sole Establishment?
Sole Establishment is also known as a Sole Proprietorship. It is a business owned and run by a single individual. This means that a company or corporate organization cannot own the business. This structure is available only to UAE nationals and GCC citizens. Foreign investors can set up a Sole Establishment but need to appoint a local service agent and get a professional trade license.
What is a Limited Liability Company (LLC)?
An LLC in Dubai allows foreign investors to have some ownership of the business, around 49%.
However, the remaining 51% is owned by a UAE national or a company wholly owned by UAE nationals. This structure is suitable for most types of business activities, except for certain restricted sectors such as banking and insurance.
Pros and Cons of Sole Establishment or Proprietorship in the UAE:
Advantages
- Full Ownership: The owner has 100% ownership of the business.
- Simplicity: The setup process for a Sole Establishment is simpler and faster compared to an LLC in Dubai.
- Direct Control: The owner has direct control over all business operations and decision-making processes.
Disadvantages
- Unlimited Liability: The owner’s personal assets are at risk if the business faces any debts or legal issues.
- Limited Activities: Certain business activities may not be permissible under a Sole Establishment.
- Local Service Agent: Foreign investors must appoint a local service agent, which can add to the operational costs.
Also Read: Dubai: A New Era of 100% Foreign Ownership Beckons Investors
Pros and Cons of an LLC Company in the UAE:
Advantages
- Credibility: An LLC is often viewed as a more credible and stable business structure compared to other forms of entities.
- Operational Freedom: LLCs have the freedom to operate anywhere in Dubai, including mainland areas.
- Variety of Activities: LLCs can participate in a broader range of business activities.
Disadvantages
- Local Partner Requirement: The requirement for a UAE national to hold 51% of the shares can be seen as a limitation.
- Formation Process: Setting up an LLC can be more complex and time-consuming compared to a Sole Establishment.
What is the LLC Setup Cost?
All-Inclusive Commercial License Package: AED 25,500
This package includes:
- Trade license
- Name and initial approval fees
- Tasheel fee
- Service charge
- Company stamp
- Memorandum of association/notary fee
- Immigration card
- Investor visa
- Emirates ID
- Medical test
- Change of status
- Visa stamping
- Office sustainability contract
- Office solution
- Employment visa quota
- Bank account assistance
- Free VAT registration
- Tax consultation
Sole Proprietorship Setup Cost
Service-Oriented Company Setup: AED 14,500
This package includes:
- Trade license
- Name approval
- Initial approval
- LSA notary fee
- Company stamp
- Tasheel fee
- Service fee
- Complete documentation
- Free business setup consultation
- Dedicated consultant
UAE Investor Visa Package: Additional AED 4,000
This package includes:
- UAE investor visa for life
- Immigration card
- Change of status
- Emirates ID
- Visa stamping
- Office solution
- Employment visa quota
- Bank account assistance
- Free VAT registration
- Tax consultation
Choosing the Right Structure
Choosing between an LLC in Dubai and a Sole Establishment depends on various factors, including the nature of the business, the level of control desired, liability considerations, and capital requirements.
Factors to Consider
- Ownership and Control: If you want to have full ownership and control over your business, a Sole Establishment might be the better option. But if you think you can share ownership with a local partner, an LLC might be the best option for you.
- Liability: Do keep in mind whether you can tolerate risks or not. An LLC offers limited liability protection, protecting personal assets, whereas a Sole Establishment exposes the owner to unlimited liability.
- Business Activities: Consider the types of business activities you plan to undertake. Some activities may require the flexibility and credibility of an LLC, while others might be feasible through a Sole Establishment.
- Setup Process: If you prefer a simpler and quicker setup, a Sole Establishment is easier to establish. On the other hand, an LLC might take longer but provides a more robust structure for larger or more complex operations.
Conclusion:
LLCs and Sole Establishments each have their own benefits and drawbacks in Dubai. Knowing the differences will help you a lot depending on your business goals, ownership needs, and liability concerns. LLCs offer credibility and flexibility, while Sole Establishments provide simplicity and full control. No matter which you choose, Dubai is a great place for your business to grow.
DXB-VIP is a service provider that can help you with every aspect of setting up your business in Dubai. Whether you want to form an LLC or a Sole Establishment, DXB-VIP offers expert guidance throughout the entire process. They help with company formation, acquiring the necessary licenses, and obtaining visas. Additionally, they provide bookkeeping and accounting services to ensure your business runs smoothly and complies with all regulations. With DXB-VIP, you can be confident in an efficient business setup that fits all your needs.
