Dubai, one of the fastest growing business hubs of the Middle East, has emerged as a top destination for foreign investors and entrepreneurs. The primary reasons for this could be its diverse and vibrant ecosystem that offers robust support for businesses of all sizes.
But if you’re considering starting a business here and it’s your first time, then there are certain things that you need to know especially about its corporate structure and the two main jurisdictions – mainland and freezone business setup.
In this post, we’ll give you a sneak peek into the reasons that have made Dubai an attractive business destination, an overview of its corporate structure, and share basic information on its two main jurisdictions – mainland and free zone business setups.
Why Choose Dubai?
Dubai has become a global business epicenter, thanks to its business-friendly policies and support initiatives like funding and infrastructure. Here are some of the top reasons why entrepreneurs around the world are flocking to Dubai.
1. Pro-business Policies
Dubai is known for its pro-business government policies, which include low tax rates, easy access to business permits, and minimal bureaucracy. Foreign ownership laws have also been relaxed in recent years, making it easier for international entrepreneurs to own and operate a business in the UAE.
2. Expat-Friendly Lifestyle
Dubai is home to a diverse expatriate community, with over 80% of its population being foreign nationals. This makes it easier for entrepreneurs and their families to settle in, with a range of lifestyle options and a supportive international community.
3. Access to Funding and Investors
Dubai’s growing venture capital scene and access to a broad network of investors make it an attractive destination for businesses looking to scale quickly. The city is teeming with opportunities to pitch your business to potential investors or access government-backed funding initiatives.
In short, Dubai offers an unbeatable combination of strategic location, tax benefits, infrastructure, and a business ecosystem that supports both local and international entrepreneurs.
Know the Corporate Structure
When setting up a business in Dubai, understanding the corporate structure options available to foreign entrepreneurs is crucial. There are several types of corporate structures in Dubai, and the chief ones are enlisted below.
– Civil company
A professional company that offers 100% foreign ownership and access to the local market. It can be set up by investors like engineers, accountants, and consultants.
– Private shareholding company
A business entity that can be formed with a minimum of three investors. It can be used for commercial, industrial, and professional activities.
– Branch of a foreign company
A branch of a foreign company can operate in Dubai, but it is legally an extension of its parent company. It can perform all of its parent company’s activities, except for trading in mainland Dubai.
– Public joint stock company (PJSC)
A company that offers shares to the public on the stock market. This structure is suitable for large enterprises that want to raise capital.
– Joint venture
A partnership established by at least two UAE nationals. Only one partner’s name needs to be used as the business name.
Jurisdiction: Mainland and Free Zone
Now that you know about the basic corporate structures and business entities in Dubai, let’s have a look at the two main jurisdictions.
1. Mainland Setup
A Mainland business setup refers to setting up your company in the UAE’s local market, allowing you to trade directly with the UAE market and international customers. Mainland companies are regulated by the UAE government and are licensed by the Department of Economic Development (DED).
Benefits of Mainland Setup:
- Wider Market Reach: Mainland businesses can engage directly with local clients, government agencies, and companies, offering a wider customer base.
- No Restriction on Business Activities: Mainland companies typically have more freedom in terms of business activities.
- Government Contracts: Mainland businesses are eligible to bid for government contracts, which can be a lucrative source of revenue.
- Unlimited Visas: Mainland business owners can issue multiple residence visas for employees or shareholders, making it easier to scale operations.
2. Free Zone Setup
A Free Zone is a specially designated area where businesses can be established with benefits like tax exemptions, full foreign ownership, and more. Free Zones are managed by independent free zone authorities and cater to specific industries like media and manufacturing.
Benefits of Free Zone Setup:
- Tax Benefits: Most free zones offer tax exemptions for several years, including exemption from corporate tax, which can significantly reduce the cost of doing business in the early stages.
- Simple Setup Process: A free zone setup process is more straightforward, with fewer regulatory hurdles to jump through.
- Inclusive Deals: Free Zones often offer inclusive packages that include office space, business licenses, visa sponsorship, and more, often at competitive rates.
Challenges of Free Zone Setup:
- Geographical Limitations: Setting up a business in a Free Zone limits your ability to conduct business outside the zone as Free Zone companies cannot trade directly with the UAE local market without additional permissions.
- Limited Range of Activities: Free Zones are sector-specific, meaning that only certain types of businesses are allowed to operate within the zone.
Making the Right Choice for Your Business
The decision between Mainland and Free Zone depends largely on your business goals and target market. If you plan to operate directly in the local market and interact with government agencies, a Mainland setup is likely the better choice.
But, if your business is focused on a specific sector, and you are not as concerned with serving the local market, a Free Zone setup might be more suitable. Additionally, consider factors like budget, scalability and business models as that will help you to narrow down your options and help you make a better decision.
Summing Up
Dubai remains one of the most attractive destinations for foreign entrepreneurs, offering a wealth of opportunities for businesses to thrive. The key to success lies in knowing about the corporate structures and main jurisdictions, along with their advantages and disadvantages.
By understanding the benefits and challenges of both options, you can make an informed decision that aligns with your business objectives. With the right strategy and guidance, your Dubai-based venture can become a success in this dynamic and growing market.
At Nimbus Corporate Services, we have certified professionals who can help with the evaluation of business needs, targeting the right market, and an efficient and compliant setup, be it Mainland or Free Zone.