Understanding Types Of Companies In Dubai, UAE.

This Article is authored by Ms. Shweta Tewari (Managing Partner) & Ms. Nidhi Bohra (Associate Partner) at SGT
Associates (Lawyers & Advocates) | May 17, 2023 at IST 16:05 P.M.

Dubai, one of the seven emirates of the United Arab Emirates (UAE), is a fast-expanding center for international enterprises and investors. Its favorable economic climate and strategic location between Europe, Asia, and Africa make it an appealing destination for entrepreneurs and investors seeking to build a presence in the area. It is one of the most vibrant and business-friendly cities in the world, drawing international entrepreneurs and investors. The procedure of forming a company in Dubai is pretty simple, and there are a variety of choices to accommodate various sorts of organizations. It is on a surge driven by the growing business opportunities in the region.

MAINLAND COMPANY	FREE-ZONE COMPANY	OFF-SHORE COMPANY
Mainland companies (or onshore companies) benefit by having access to the local market as well as outside the UAE	Free zones are economic areas where investors can trade goods and services with preferential tax and customs rates	Offshore companies cannot directly operate any business activity in the UAE.
As of December 1st, 2020, the UAE passed a new law permitting 100% foreign ownership to mainland companies.	Free zone companies enjoy 100% ownership of their businesses.	An offshore company can have 100% ownership of the company but cannot have a physical presence in the UAE.
A mainland company is free to do business anywhere in the UAE, including inside any free zone in the emirates without any restrictions.	Free zone companies are not entitled to do business in the mainland, subject to certain exceptions.	An offshore company can do business in the mainland and any of the free zones across the UAE. They can be a shareholder of any UAE mainland or free zone company, enabling them to enter the UAE market and conduct business activities through such subsidiary companies.
The initial setup costs that mainland business owners can expect are very high.	The cost to set up and run your business is different in each free zone.	Setting up an offshore company is the cheapest option because there are no minimum requirements for capital deposits before incorporation and there are no costs associated with office space or obtaining a visa.

Dubai offers several types of companies that can be established depending on the business activity, legal structure, and ownership requirements. Some of the most common types of companies in Dubai are:

Limited Liability Company (LLC): The LLC is a prominent form of company structure in the UAE, providing its stockholders with limited liability protection. On the mainland, a limited liability company must have at least two and no more than fifty shareholders. There is no minimum share capital requirement, but a physical address is essential. Nonetheless, LLCs are prohibited from providing banking, insurance, and other financial services. In the free zones, a limited liability company can have a minimum of one shareholder and a maximum of five shareholders, with each free zone authority establishing the share capital requirements. Free zone LLCs can also be managed digitally, and each free zone authority determines the permitted activities.
Sole Proprietorship: A sole proprietorship is a business entity held by a person of any nationality. UAE or GCC nationals may hold a sole proprietorship in its entirety, however non-UAE/GCC nationals must designate a Local Service Agent. (LSA). There is no minimum required business capital, but the company’s name must be relevant to the type of business activity. Proof of residence is required for Dubai citizens, while a residence permit is necessary for foreign nationals.
Private Shareholding Company/Private Joint Shareholding Company (PJSC): PJSC is a business structure that permits commercial and trading operations. The minimum required capital is 50,000,000 AED, and there must be a minimum of three shareholders (or founding members). The maximum number of stockholders at any given moment cannot exceed 200, and compliance with Ministry of Economy regulations is required.
Public Shareholding Company/Public Joint Stock Company (PJSC): A PJSC is a business form that permits commercial, trading, and professional endeavors. A public shareholding company must be created for banking, insurance, and other financial activities. The minimum necessary capital is AED 10,000,000, and there must be a minimum of ten shareholders (or founding members) owning at least 35% of the share capital. The remaining shares must be offered to the general public, with 51% held by UAE nationals. Minimum of three and maximum of fifteen directors are required, with the majority of directors and the chairman being UAE nationals. Securities and Commodities Authority regulation and compliance must be met. (SCA).
Partnership: A partnership is a corporation structure that permits two or more participants, with UAE nationals being required for general partnerships. Each partner’s liability is limitless, and a management must be selected according to DED requirements. The names of the partners should be included in the company’s name. One partner is a limited partner and the other is a general partner. The limited partner’s liability is limited to the amount contributed, and the partners’ names should not appear in the company’s name.
Civil Company: A civil company is an appropriate corporate structure for professional service providers such as accountants, lawyers, doctors, and engineers. It permits individuals to create partnerships and engage in professional endeavors in the UAE. A civil company’s primary characteristic is that it restricts the responsibility of its partners, meaning that their personal assets are not at risk in the event of business-related complications. Non-UAE nationals can own up to 100% of a civil company’s shares, but they must hire a local service agent.
Branch Office: A branch office is an extension of its parent corporation and must perform the same functions. It can be established on both UAE mainland and free zone regions. However, the branch office is required to have a UAE national as a sponsor. The job of the sponsor is to assist the company in getting the relevant UAE licenses, visas, and operating permits.
Subsidiary: A subsidiary is a form of corporate structure that provides greater flexibility regarding the projected activities. It is a separate legal entity from its parent firm, which owns it along with a group of investors. Similar to a branch office, a subsidiary, can be established in mainland and free zone UAE. A subsidiary does not need a UAE sponsor. The subsidiary can manufacture, import/export, trade, and provide services.

Conclusion: Dubai offers a conducive environment for businesses to thrive. However, it is essential to understand the process of company incorporation and the types of companies that can be established in the emirate. By choosing the right legal structure and company type, businesses can benefit from tax exemptions, 100% foreign ownership, and other benefits. With the right guidance and support, entrepreneurs can successfully establish and grow their businesses in Dubai