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What are the Types of Companies in the UAE?

BySakina Burhan
What-are-the-types-of-companies-in-the-UAE-7cf9c0bb

The United Arab Emirates has been among the most desired locations to work, invest and live. It is indeed a business powerhouse with abundant investment opportunities, world-class facilities, accelerating GDP, internationally accredited business-friendly laws, and economic diversification projects. Moreover, it promotes different business activities within different jurisdictions. And since every investor wants to establish a unique structure for their business idea, the UAE offers various legal forms of business in order to help them incorporate as well as grow and prosper. This blog will focus on the different types of companies in UAE that an entrepreneur can establish for their corporate project. 

Categorization of different types of companies in Dubai and UAE 

Companies in the United Arab Emirates, particularly in Dubai, usually fall under three different categories. 

Mainland Companies  

Mainland companies fall directly under the jurisdiction of the Department of Economic Development(DED). Basically, these companies can offer services anywhere legally, including free zones as well as international borders. Furthermore, companies that work with government entities, trading companies, legal firms, restaurants, retail outlets, etc. can be formed on the mainland, which can be further subdivided into LLCs, branches of companies, civil companies, and so on. 

Advantages: 

  • Easy to open bank accounts 
  • Access to rental office spaces anywhere in the city 
  • Eligibility to apply for a UAE residency visa 
  • Liberty to operate anywhere, both locally as well as internationally 

Limitations: 

  • 51% shares of the company must be held by a local partner 

Free Zone Companies 

Free Zones in Dubai, UAE is widely popular due to the 100% foreign ownership facility it offers to foreign investors and business people. So, basically, there are around 45 free zones across the UAE, out of which 30 are in Dubai alone. The designated authority in each free zone manages all governmental and legal processes, making company incorporation as well as operations seamless. 

Additionally, each free zone is allocated to practice a specific activity. For example, Dubai Media City is home to several media production companies and the headquarters of several TV channels, whereas Dubai Internet City is an Information Technology hub, focusing on the setup and growth of major tech companies. 

Advantages: 

  • Full ownership of the company 
  • No involvement of local partner 
  • Offers corporate facilities, such as virtual offices
  • Excellent infrastructure 
  • Ease of operations 
  • Eligibility for UAE residency visas 

Limitations: 

  • Allows to operate only in the designated free zones
  • Office space must be within the designated free zone area 
  • Robust and loyal banking services 

Offshore Companies 

Offshore is a great option for those businesses that want to have a local setup but without the need for a physical presence. However, they cannot operate within the UAE but only internationally. They mostly act as holding companies in order to protect the wealth and assets of their firm. Furthermore, the details and personal information of offshore companies remain confidential and anonymous, which is a major advantage. 

Advantages: 

  • Allows complete ownership of the business 
  • No requirement for office space 
  • The lesser risk with LLC formation 
  • Confidentiality of the company and its owners 
  • Cost-effective incorporation option 

Limitations: 

  • Limited bank services 
  • Need to rely mostly on online banking services 
  • No eligibility for a residence visa 

Types of companies in UAE 

For business incorporation in UAE, prospective investors and entrepreneurs have to choose from among the different types of companies in Dubai. The list of various types of companies in UAE is as follows – 

  • Partnership 

A Partnership firm can have two or more partners. However, these firms are categorized into two – 

General partnership 

  • Formed by UAE nationals
  • Partners are liable for all the partnership’s debts. 
  • Partners’ can involve in the management operations, and also their names can be included in the company name. 

Limited Partnership   

  • Formed by foreign nationals 
  • Partners are liable for debts only up to the value of their contribution
  • Partners’ names won’t be included in the management operations or the company name. 
  • Public Shareholding Company 

A Public Shareholding Company is formed through a minimum partnership of AED 10,000,000 with transferable shares of equal value. Moreover, the shareholders are liable only to the extent of their invested capital. Furthermore, the firm must have “Public Shareholding Company” in its trade name, just like LLC. 

  • The minimum number of investors can be 10 or less than 10, but with the permission of the respective authority of the jurisdiction.
  • Any investor or partner who signs the Memorandum and Articles of the Association and claims liability will be considered a founder. 
  • The number of Directors in the company, their designations, and term of service in the company will be decided as per the Articles of Association. 
  • The board of directors including the chairman of the company should be UAE Nationals. 
  • Private Shareholding Company 

A Private Shareholding Company or a Private Joint-Stock Company is established through a minimum partnership of AED 2,000,000 from at least 3 partners. This kind of firm can practice all sorts of commercial and industrial activities, except professional ones. 

  • A Private Shareholding firm must have a manager who will oversee the operations and financial affairs of the company. 
  • If the owner is a foreigner, then a UAE national will own 51% of the total shares, whereas if the owner is a GCC national, then the full ownership rest with the owner itself. 
  • After a minimum time of 2 years, the owner of a private shareholding firm can convert it to a public company under certain conditions, but without making the stocks open to the public. 
  • Limited Liability Company 

Indeed, one of the most popular forms of company registration in the United Arab Emirates. An LLC requires a minimum of 2 or a maximum of 50 shareholders for its establishment. In addition, each shareholder is liable for only to extent of their shares individually. Nonetheless, they will equally share the profits and losses. Furthermore, LLCs can carry out any commercial or industrial business activity within their jurisdiction. 

  • If a foreign investor opens an LLC in UAE, then they must find a UAE National who will own 50% of the total company shares, wherein rest 49% stays with the foreign investor. 
  • On the contrary, GCC nationals can own 100% shares of their LLC business in the UAE. 
  • While reserving a trading name, the owner must also add “Limited Liability Company” as an abbreviation to the trade name. 
  • LLCs need to appoint one to five managers from among the legal partners, who can practice full discretion on company administration affairs as per the MOA of the company. 
  • The company must hire a UAE-accredited auditor who will manage financials and the transference of shares to the rightful heir.
  • If the LLC has more than 7 partners, then three of them will establish a board for supervision.

Also read the post: Starting A Business in Dubai: Your Step-by-Step Guide in 2022

  • Sole Proprietorship 

A sole proprietorship company, also known as a sole establishment, is fully owned by an individual. In other words, the proprietor holds 100% of the company shares as well as controls all its operations. Similarly, the owner itself would be liable for all the debts and financial duties.   

Additionally, there are some general rules that a sole establishment might have to follow – 

  • An individual from any country or nationality can own a sole establishment, however, it has to be professional.
  • If the owner of the sole proprietorship is a non-UAE citizen, then they have to appoint an LSA or Local Service Agent, who will look after the license requirements and other government-related matters for the business. 
  • On the other hand, only UAE and GCC Nationals can own a commercial or industrial sole proprietorship. 
  • The owner of the sole proprietorship must ensure to attest and certify the agreement between the owner and the LSA by a Notary Public/Court within the UAE. 
  • Civil Company 

Unlike a sole proprietorship, a civil company can have partners. However, they must belong to professional business backgrounds, such as surgeons, doctors, accountants, engineers, lawyers, etc. And therefore, the activities carried out in the civil company must also be related to professional businesses. 

Furthermore, for the successful incorporation of a civil company, the owners need to follow certain rules. For instance, 

  • There is no such restriction on the nationality of the owners of the civil company. However, for an engineering company, one of the partners must be an Emirati National owning a minimum of 51% shares as well as a qualified engineer in the same type of business activity. 
  • Similarly, a foreign company with the same type of business activity can invest in a civil company as a partner. 
  • Lastly, just like a sole proprietorship, if the owner of the civil company is a foreigner, then they must hire an LSA for company incorporation. 
  • Branch Offices 

A branch office is basically a dedicated outlet or a subdivision of an established company, formed with the intention to expand and grow business reach across countries. Hence, they are not constituted as separate legal entities. Instead, they serve as operational vessels to establish a business presence in new regions, thus increasing prospects of sales and revenue. 

  • To establish a branch, the parent company must apply to the Ministry of Economics and Commerce. 
  • Then, the Ministry of Economics and Commerce will issue a permission letter regarding the business activity. 
  • Further, the DED of the respective emirate will approve and register the branch as well as issue the business license to conduct operations legally. 
  • Branch offices can be of the following types – Foreign Company Branch, UAE company Branch, Free Zone Company Branch, and GCC Company Branch 
  • Free Zone Company 

This legal structure comprises 2 to 5 shareholders. Free Zones are special economic jurisdictions across the UAE providing exclusive benefits, specialized incentives, and pro-trading policies to various industries. A Free Zone company must have at least 2 Directors and a Secretary. 

  • A single person can be both the Director and Secretary of the company. 
  • Free Zone companies cannot trade directly within the UAE market. But they can do so with the help of a locally appointed distributor. 

To learn more about the types of companies in UAE, visit the official page of Shuraa Business Setup at www.shuraa.com.