What, Exactly, Is an FZCO?
Dubai’s complex economic landscape is one of the major reasons that newcomers to the region initially struggle to find their footing, and it’s also part of the reason why local guidance is one of the biggest assets for businesses new to the city.
Part of the complexity stems from the various forms business registration can take, one of the most common being known as an FZCO. However, the question remains—what, exactly, is an FZCO? More importantly, how does it differ from the other forms that businesses typically take?
Let’s find out.
1: WHAT ARE FZCOS?
FZCO stands for free zone companies. Unsurprisingly, it signifies that the business in question is registered in one of Dubai’s many free zones. These are sometimes also referred to as FZ-LLCs, since, similar to traditional LLCs found throughout the world, free zone businesses labelled as such are limited liability companies.
A free zone company is one that is a distinct legal entity that offers a variety of shareholder structures. This, along with the fact that it retains the limited liability that a corporation offers, sets it apart from some of the other major business incorporation structures of Dubai such as FZEs—or free zone enterprises. Combining the best aspects of these various corporate structures, FZCOs have become one of the most popular ways to incorporate an offshore company in Dubai.
2: WHAT'S THE DIFFERENCE BETWEEN LLCS AND FZCOS?
Despite the unique existence of FZCOs, it’s important to note that businesses can continue to register as a standard LLC in Dubai. There are a few distinctions to keep in mind prior to choosing between the two, however.
While LLCs will continue to offer businesses the advantages that they’re used to elsewhere in the world, Dubai places a few unique restrictions on businesses registered as such.
First, the ownership of the LLC in question will differ slightly from an FZCO—only up to 49% of the shares of an LLC can be owned by non-residents of the UAE. Moreover, they will be forced to appoint a local sponsor prior to setting up the company who will be entitled to all of the remaining shares.
Additionally, while an LLC can still obtain a number of licenses encompassing a variety of professions and industries, their business activities will be limited in scope—they will be restricted to doing business solely across the UAE.
Free zone companies are exempt from the restrictions placed on traditional LLCs. This means that even non-residents can retain all of their corporate shares without requiring a local sponsor. In addition, they are still eligible to obtain all of the same types of licenses as an LLC without being geographically restricted to their local market. This means that they can, if they choose to, conduct business internationally.
WHERE CAN YOU SET UP AN FZCO?
While FZCOs are inherently flexible, the difficulty stems from getting one set up at all. This is because, unlike an LLC, you can’t set one up just anywhere. You can only acquire the business license in certain free zones, the most popular of which is the Jebel Ali Free Zone.
FZCOs are one of the most flexible types of companies in the UAE, and perhaps even the world. Offering a wide variety of benefits to foreign-owned businesses in Dubai with very few drawbacks, it has quickly become one of the preferred business structures for those new to the region. With a clearer understanding of precisely what an FZCO can offer, the time is ripe to take the plunge and set up one of your own.
Browse more insights into Dubai’s business scene.
Dubai is an ever-evolving business hub—that means a constantly shifting business environment with industries …