If you want to start a business from scratch in the UAE, you need to know every single aspect involved and take into account all the possible risks. It is not so much the fact of creating a company that is important, but choosing the right structure, jurisdiction, name, licence, line of business, and more.
Choose where you want to incorporate your company
You can register a company in a free economic zone, on the mainland or in an offshore zone. The choice of the type of organisation depends on where exactly you plan to operate.
If you plan to do business outside the UAE, you should open an offshore company. To work without being tied to any one zone inside or outside the UAE, you have to open a company on the mainland. And if you plan to do business outside the UAE or in one of the free economic zones, you should choose to register in a FEZ.
Read more about the types of companies in the UAE and their advantages and disadvantages in this article.
Determine the area of activity
Where you register the company will depend on the sphere of activity you have chosen. You need to choose a favourable location that has everything you need to conduct your business. For example, if you are involved in export or import, it is better to choose a free economic zone with warehouses, an airport, and a seaport, such as Hamriyah Free Zone. This will allow you to save money on logistics.
Some activities may require permits from the supervising authorities. For example, to practise medicine, you need to be certified and approved by the Ministry of Health. To work in the legal sphere, you need to certify your education and get approval from the Ministry of Justice.
Choose the correct name
In the UAE, you cannot choose just any name for your company, since there are regulations regarding that aspect. If a business owner uses a name that is restricted, they will have to choose another option.
What you need to consider:
- The name must be related to your company's business.
- The name can not be copyrighted, so make sure it is not used by other organisations.
- Avoid consonance with other brands.
- Avoid geo-linking.
- Don't use words that sound similar to government organisations, etc.
Obtain the right licence
When a business is opened in the UAE, a licence is issued for a year for that specific type of business activity. After this period, it can be extended and additional work areas can be added or replaced. It all depends on the chosen field of activity, as some are compatible and others are not.
In total, there are several types of licences, one of which must pertain to your type of business activity:
|Licence||Type of Activity|
|Commercial||Trade, logistics, car rental, real estate brokerage services, etc.|
|Industrial||Industry, production and sales, processing of raw materials, etc.|
|Professional||Shipbuilding, carpentry, publishing, consulting, repair, medical services, etc.|
Properly register your employees
It is important that your employees have authorization documents. Exactly which documents are required depends on which licence you are working under. For example, if you open a pharmacy and work under a professional licence, your employees must have received diplomas in the medical field, and have appropriate qualifications and certifications.
An entrepreneur can hire both local employees and foreigners.
According to the emiratisation program, all UAE companies must hire not only foreigners, but also Emirati citizens. The minimum amount required depends on the number of jobs available in the company:
|Number of Jobs||Minimum Number of UAE Citizens|
|150 and above||1 UAE citizen per 50 employees|
*Applies exclusively to 14 sectors such as real estate, arts and entertainment, education, construction, etc.
Each year, companies must increase the number of UAE nationals in their workforce by at least 2% until this figure reaches 10%. Fines for violating the rules can be as high as AED 500,000 (USD 136,127).
If you want to employ a UAE national in a company, you must:
- Provide them with a job
- Draw up an employment contract
- Pay them an official salary, specified in the contract
- Register them in the pension and social security system;
- Obtain a national permit from the Ministry of Human Resources and Emiratisation for them to work in the company.
Violation of the requirements may result in fines ranging from AED 50,000 (USD 13,612) to AED 200,000 (USD 54,450) per employee.
To hire a foreigner, a company must:
- Register with the Ministry of Labor
- Enter into an employment contract with the employee
- Apply for a work visa for the employee
Failure to properly register a foreign employee carries a fine of AED 50,000 (USD 13,612) for the first offence and AED 100,000 (USD 27,225) for the second offence.
Find an office
A physical office or one located in a business centre can be used to incorporate a company. Companies in free economic zones can use a virtual office.
There are several things to consider when selecting an office:
- The number of visa sponsorships should correspond to the size of the office. For example, it is impossible to obtain 20 visas for a 100 sq. ft office.
- Residential real estate, such as apartments, cannot be used as an office.
- You cannot use unsuitable premises, such as a warehouse, for office work.
- If you plan to have your employees physically work at the office, you should not choose one in remote areas with poorly developed infrastructure.
Often, entrepreneurs use fictitious office lease agreements to save money and time. If this is discovered, it may negatively impact the company.
Provide the bank with up-to-date information
To do business in the UAE, you need to open a bank account. It is essential to provide the bank with the necessary documents and up-to-date information about you and your business. You may be asked for the following:
- Office lease agreement
- Six-month bank statement
- Business plan
- Information about suppliers or buyers, etc.
If you choose to conceal any information or provide false data or documents, the bank may:
- Refuse to open the account.
- Conduct additional checks of documentation. For example, if you want to take out a business loan, banks will thoroughly double-check your transactions, the data in questionnaires, licences, etc., in order to make sure you have the right documents.
How can I avoid problems when starting a business?
When starting a business in the UAE, you need to figure out the scope of your business activity, because this will determine where you register the company and the type of licence you will need. It is important to find a suitable office, have a good relationship with the bank, prepare the required documents to hire employees, and so on. This process needs to be done carefully and step by step. Any inaccurate or false information can lead to the closure of the business.