Doing business in Dubai

If I have some worldly wise advice to those of you considering setting up a business in Dubai it would be to share my own personal experience in setting up an LLC here in Dubai. Firstly there are two types of company you can set up in Dubai, LLC (Limited Liability Company) and FZE (Free Zone Company)

Setting up a Dubai Limited Liability LLC

Generally you can set up an LLC company as a foreigner with either a local partner who will be a UAE national who will either own 51% of your company or will act as your service agent. Companies will be pleased to act as your service agent and give you full power of attorney over your business dealings in Dubai. There are some things you need to know about services agents:

You can swap or change your service agent at any time (It's your company) Your service agent doesn't necessarily act as your PRO
A service agent will generally charge you a fixed fee per year
Make sure you get a full breakdown of your service agent's charges

We have had both good and bad experience with service agents in Dubai, we had one that was charging us 500% margin on the simplest of transactions, subsequently we changed service agent after a lot of time in the courts (Standard process in Dubai for company matters) and now we have a great one. So if you are going to use a service agent don't get caught out.

LLC companies are good because they have no reporting requirement; the fees are slightly higher than in Free Zones but generally the cost of the office that you will need to register an LLC is less than that of Free Zone Companies. Technically you can't trade outside of a free zone if you are an FZE company (everyone does) but with an LLC you can trade with anyone.

There are multiple licence types; the two that you will probably get to know are general trading licences - buying and selling stuff and a professional services licence which covers you for providing services within a general category of operations. You will need one or the other depending on the business you are setting up.

Don't get caught out by charges - if you are using a service agent they may place a fee on standard transactions, most of them are good but some make a fortune on the odd 2000 or 3000 AED here or there. Here are the rough charges you should be paying for LLC services.

Company formation 15,000.00
Service agency fee 5,000 and 15,000.00 AED
Staff Employment Visa 7000 - 8000
Cancellation of licence 1800

You can always get a breakdown of charges from the Chamber of Commerce in Dubai. You should not need to give a local UAE partner 51% of your business unless you feel they are delivering significant value to your business or unless they are investing capital.

If you want to be your own boss, go down the service agent route, get your full power of attorney documents and ensure you get a full breakdown of all charges in writing BEFORE you sign the contract. Really we can't stress this enough, we were charged some 80,000 USD more than we would have done by getting our own PRO. Our suggestion is to ask around and get introduced to a trusted partner as your service agent.

FREE ZONE COMPANIES

There are a number of free zones in the UAE all focused on different activities, Media City, Internet City and JAFZA are just a few. Generally you can form a free zone company quickly - keep an eye on the cost of your real estate and ensure you understand what you're reporting and real estate contracting commitments are.

You can be a 100% owner of an FZE company, rules and regulations vary depending on your FZE formation. Transaction costs are cheaper and generally less stressful although you don't benefit from the flexibility of office movement and will be strictly limited to the number of employees based on your contract and size of real estate contract. Telecommunications and internet charges also tend to be more expensive in FZE zones.

SUGGESTIONS

Our suggestions would be to form a Free Zone company if you are an international business wishing to set up in Dubai - if you are starting your own business find cheap office space in Dubai and set up your LLC. You will need 500 Square feet of office space to get an LLC licence. There are other options including hot desks which will allow you to operate as a one man band and have a visa with an FZE but if you intend to grow and scale your business find the right local partner, ask around existing business owners for recommendations (Don't just thumb through the paper) and get yourself set up with an LLC company rather than go through the hassle of changing your licence or getting hit with a big rental bill later.

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