Business entities in UAE in 2022
Healy Consultants Group PLC provides our Clients with expert insight on the optimum corporate structures for doing business in UAE and completes the business setup procedures on our Client’s behalf. The United Arab Emirates offers several business vehicles for entering the Arab market that could be generally classified into i) wholly foreign owned entities and ii) local entities with 51% Emirati shareholding. Foreign companies looking to establish in the UAE without registering a local company may also setup i) a branch office or ii) a representative office.
Before deciding to set up business in the UAE, it is vital to first consider i) the Emirate of choice ii) your type of business activity and products and iii) the appropriate corporate legal structure suitable for your business intentions.
Wholly foreign owned entities
Under the Commercial Companies Law regulating business setup within the 7 Emirates in the UAE, only the following entities can be 100% foreign-owned, i.e. established without an Emirati majority shareholder.
- Free zone company
- Foreign entrepreneurs can set up a free zone company in the form of a limited liability company (LLC) without the participation of a UAE national in the shareholding;
- The minimum requirements for shareholders and directors as well as minimum share capital requirements vary depending on individual Emirate and Free Zone;
- Get more insight on the requirements and pros and cons of setting up a Free Zone entity on this UAE Free Zone page;
- Best uses: A free zone company serves as the perfect regional distribution or holding center for an international trading company, the bulk of whose business is conducted outside the UAE.
- Professional services company
- Foreign investors can set up a limited liability company (LLC) to provide professional services in the UAE without having an Emirati partner;
- Although an Emirati partner is not required, this entity must appoint i) a UAE national as their local service agent and ii) a locally approved auditor before commencement of operations;
- Best uses: We recommend this type of entity for our Clients looking engage in professional services including legal and accounting firms, IT and management consultancies and marketing consultancies.
- UAE branch office
- A foreign company looking to set up operations within the UAE without registering a local company can establish a branch office to invoice UAE customers, sign local sales contracts, and receive income from local customers;
- A Branch established by a foreign entity is not considered a separate company but rather a part of the foreign entity. Thus, the foreign entity is considered to be directly doing business in the UAE and has unlimited liability for the operations of the Branch Office;
- Like the professional services company, a branch must also appoint i) a UAE national local service agent and ii) locally accredited auditor prior to kickstarting their operations in UAE;
- Best uses: This type of business entity is only recommended for Clients that are looking to set up their headquarters in the UAE.
- UAE representative office
- The UAE Commercial Companies Law also permits foreign companies to establish representative offices within the UAE. The scope of this business entity is limited to i) activities that promote the parent company and ii) market research;
- The representative office may therefore not conduct commercial activities within the UAE. However, there is no need to appoint a local service agent not auditor;
- Best uses: Representative offices are recommended for Clients that wish to promote their activities and explore the UAE market, without carrying any profit-making activity in the country.
- Offshore company
- An UAE offshore company is incorporated in one of the offshore business centres in the UAE, without a physical presence. This type of company is not permitted to conduct business within the country, including Free Zone areas. It can only conduct business activities outside of UAE;
- The companies law does not impose a minimum share capital requirement for this entity. Read to these advantages and disadvantages and preferred UAE offshore entities for more insight;
- Best uses: The offshore company is recommended for foreign entrepreneurs looking to work with the African, Middle Eastern and Asian markets without incurring any tax liability.
Entities with local shareholding
The commercial companies law provides for foreign investors and entrepreneurs looking to establish trading companies in UAE mainland. The main corporate structures include i) a limited liability company and ii) a joint stock company.
- Limited liability company (LLC)
- A UAE limited liability company requires at least 2 shareholders, one of whom must be a UAE national with 51% shareholding to be incorporated;
- There is no standard minimum share capital required, however different Emirates impose varying minimum share capital requirements between US$1 to US$50,000;
- Best uses: The Limited Liability Company is the most popular form of entity for foreign investors wishing to conduct business within the UAE mainland. According to the UAE Federal Commercial Companies Law (No. 8 of 1984), an LLC may engage in any lawful business activities except insurance, banking and investment activities.
- Joint Stock Company (JSC)
- The UAE Commercial Companies Law provides for two types of JSC namely i) Private Joint Stock Company and ii) the Public Joint Stock Company:
- A Private Joint Stock Company requires a minimum i) paid up share capital of AED 5million (approximately US$1 million) to be paid in full and ii) 3 shareholders and 51% of the company shares must belong to a UAE national ordinarily resident in the country;
- Best uses: A Private Joint Stock Company is only permitted to engage in large commercial and industrial activities in the UAE and may not provide professional services;
- A Public Joint Stock Company requires a minimum i) share capital of AED 30million (approximately US$8 million), 25% of which must be paid up at incorporation;
- It must have at least 5 founding members who are UAE nationals, owning between 30 per cent and 70 per cent of the capital shares;
- Best uses: A Public Joint Stock Company is recommended for investors looking to establish their entity for listing on the local securities exchange markets.
- Limited partnership
- A Limited Partnership can be forged by at least i) one general partner who will be liable for the partnership’s liabilities to the full extent of its assets and ii) one participating partner only liable to the extent of their individual investment and shares;
- The general partner of a limited partnership must be a UAE national ordinarily resident in the UAE;
- Best uses: The limited partnership entity is recommended for professionals in such fields as law, accounting and auditing etcetera.
- Fast solution
- For interested Clients, Healy Consultants Group PLC can establish a local company (LLC) fully owned by our UAE professional passive shareholder and director, secure the operations license and open a corporate bank account;
- Our foreign Client can then immediately use this legal entity to directly trade with customers in the UAE including signing contracts and hiring local staff;
- Over a period of 4 months, Healy Consultants will then assist our Client to i) appoint their preferred corporate structure including foreign and local shareholders and directors, and ii) appoint the bank signatory.