United Arab Emirates Company Formation and types of

Ownerships

1.Sole Proprietorship
As the name suggests, sole proprietorship is owned by a single individual who has control over
all its operations and holds 100% shares to any profits. This business entity is a simplest form of
corporate structure in the UAE and does not impose any special requirements other than
having a residence permit in case of a foreign citizen.
Features of a Sole Proprietorship in the UAE

 An individual of any nationality can own a professional sole proprietorship

 Only UAE and GCC nationals can own a sole proprietorship that is commercial or
industrial which must be 100% owned
 In case the owner is not a UAE national, an LSA or Local Service Agent is appointed for
opening this type of company
 The LSA is supposed to overlook license requirements and the government-related
matters for the business
 A sole proprietorship has no minimum requirement for business capital
 The name of the company must be related to the type of business activity
 A sole proprietorship can have just one manager

2.Limited Liability Company

An LLC in the UAE is the most preferred form of business entity by the individuals. The liability
of the partners in an LLC is limited to the extent of their investment in the company.
Features of an LLC in the UAE

 Professional or consultancy activities cannot be conducted by this form of company

except banking, insurance, or investment
 An LLC can conduct any industrial or commercial activity
 51% ownership should be with the UAE national and the remaining 49% can be owner-
owned
  LLC formation requires a UAE accredited auditor
 Minimum 2 and maximum 50 shareholders can invest in the company
 As an operational business structure, LLCs must appoint one to five managers which can
also be elected from the legal partners

3.Private Shareholding Company

This type of business is also called as Private Joint Shareholding Company (PJSC) in the UAE. It
can be formed through a minimum partnership of AED 5,000,000 from at least 3 investors. Such
legal structures are compatible with all sorts of commercial and industrial activities beside
professional business.
Features of a PJSC in the UAE

 An approval from Ministry of Economy must be obtained to establish a private

shareholding company.
 The company must appoint one manager
 Minimum capital required is AED 5,000,00
 The company can have more than one branch. Each may undertake one or all of the
activities included in the main business license
 At least 51% of the shares must be owned by a UAE national
 A GCC national can own upto 100% of the shares

4.Public Shareholding Company

Public Share Holding Company is defined as a legal entity whose capital is a minimum of AED
30,000,000 with transferable shares of equal value with each shareholder liable only to the
extent of their capital. A Public Shareholding Company is also called as Public Joint Stock
Company (PJSC) in the UAE. The trade name of the company must not be from any partnering
investors except if the name is a patent of a shareholder or if the name is entitled to store
belonging to the shareholder.
Features of a Public Shareholding Company in the UAE

 Partners can practice any industrial, commercial or professional business activities in

accordance with DED business regulations
  The company must have maximum 5 appointed managers as per DED business
regulations
 A Public Share Holding Company must have at least 5 founding members who are UAE
Nationals, owning between 30% and 70% of the capital shares
 The company can have more than one branch. Each may undertake one or all of the
activities included in the main business license

5.Civil Company
Recognized professions such as a doctor, accountant, engineer, and lawyer can open a civil
company in the UAE. The company can have partners owning 100% shares and the activities
allowed for the civil company can be only from professional business. More specifically, such
activities are narrated as physical or intellectual, practiced by one or more natural persons
under a defined capital. To open a civil company some rules must be followed for successful
incorporation.
Features of a Civil Company in the UAE

 If a foreign company invests as a partner in a civil company, it must be from the same
type of business activity
 Like in the case of a sole proprietorship, an LSA is required for company incorporation
process if the owner is a foreign national.
 Partners from any nationality can start this business
 If the company is involved in engineering activities, one partner should be a UAE
national who owns no less than 51 per cent of the business
 If the company is involved in consultancy activities, the firm must be owned by
professional partners practicing the same activity, with 100 per cent ownership

6.Partnership Company
Under this type of business entity, the ownership is shared by two or more partners who share
profits and losses according to the decided ratio. There are two main types of Partnerships.
They are,
1. General Partnership- The general partners, who must be UAE nationals, are liable for the
partnership’s debts
2. Limited Partnership- Partners are liable for its debts only up to the value of their contribution
in the capital. Furthermore, the limited partner can neither be part of the management nor
have his name be included in the partnership’s name.

Features of a Partnership in the UAE

 UAE nationals must be general partners in a simple limited partnership. Partners of

other nationalities must be limited partners.
 There is no restriction on share of ownership of general or limited partners.
 Limited partners should not intervene in management or administrative issues of
general partners. If they do so, they can become liable for all of the business obligations.

7.Branch of a Foreign Company

A branch of foreign company requires the company to have a UAE national. The branch is
required to conduct the same business activity as its parent company. It can lease office in the
premises, issue sales invoice to the UAE and international client and sign local legal contracts. A
branch cannot engage in manufacturing, import or export of products to/from the UAE
8.Representative Office
A representative office in the UAE is not a business structure in its own right but is a business
activity that a branch can conduct. It has its own criteria, which includes the authorization to
promote and market the parent company's business – but not conduct business operations. A
Representative Office requires a Local Service Agent (LSA), who can be a UAE National or a
company owned by one or more UAE Nationals.
It all comes down to what type of business you want to start, and where in Dubai do you want
to start a business. If you need help in choosing the right business structure, we at Business
Setup Worldwide can help you with it. Contact us today- we’d be happy to help.
Types of Business License
The types of Business Licenses issue in United Arab Emirates (UAE) are professional, commercial, industrial
and tourism. The professional license covers services offered by professionals, artisans and craftsmen; the
commercial license covers all trading and commercial activities performed with an intention of making profit ;
the industrial license covers all industrial and manufacturing activities. The tourism license covers all activities
related to hospitality & tourism. The type of license depends on the business activity of the company or
enterprise.

Mainland Company
A mainland company is an onshore company and license to establish the entity is issued by the Department
of Economic Development (DED) of the respective emirate. A mainland business is allowed to do business in
the local UAE market as well as outside UAE without any restrictions. It is necessary to understand the term
"Mainland" as per DED's definition in order for an entrepreneur to take a decision to register a Mainland
Company in UAE. Different types of license under mainland are:

 Professional license
 Commercial license
 Industrial license
 Tourism license
In commercial & industrial licenses, 51% shares is owned by an UAE National and 49% shares is for the expat
partner. In professional license, 100% shares is owned by expat partner and an UAE national is appointed as a
Local Service Agent.
Following are the facts about Mainland Companies in UAE.

1. These companies are regulated under Federal Law No. 2 of 2015 which came in to effect on 1 July
2015.
2. No expatriate can own more than 49% shares in any commercial limited liability company (LLC).
3. GCC national can own 100% shares in any company.
4. GCC companies or individual GCC national can make partnership with UAE national.
5. For certain business activities, as per law only UAE national can own 100% shares.
6. Business activities covered under professional category can be 100% owned by expat / foreigners but
it is mandatory to have UAE national as a service agent.
7. It is considered as on shore business entity in UAE
[1]
Free Zone Company
Establishing a business entity in one of the UAE's many Free trade zones (FTZs) can be an attractive option for
foreign investors. UAE has over 35 FTZs of which more than 20 are located in Dubai. The main attraction for
setting up a company in a free zone is that there is no UAE national shareholding required. All free zones in
UAE offer the following incentives:

 100% foreign ownership of the enterprises

 100% cent import and export tax exemptions
 100% repatriation of capital and profits
 No currency restrictions
 Corporate tax exemption for 15 years, renewable for an additional 15 years
 No personal income taxes
UAE Free Zone companies can only operate within the free zone boundaries and are generally limited to
performing solely those activities listed in their license(s).
It is mandatory for every company registered in the Free Zone to lease minimum office space within that
particular Free Zone. A Free Zone Company can obtain UAE residence visas for the director, shareholder and
also employees of the company through the Free Zone where it is registered.

Offshore Company

An offshore company is defined as a company that is incorporated in a jurisdiction that

is other than where the beneficial owner resides. In other words an offshore company is
simply a company that is incorporated in a country overseas, in a foreign jurisdiction.

An offshore company definition, however, is not that simple, and will have varying
definitions depending upon the circumstances. The term "offshore" is what often
appears confusing to most people and is used in contrast to traditional "onshore"
companies.

While an "onshore company" refers to a domestic company that exists and functions
within the borders of a country, an offshore company in comparison is an entity that
conducts all of its transactions outside the borders where it is incorporated. Because it is
owned and exists as a non-resident entity, it is not liable to local taxation, as all of its
financial transactions are made outside the boundaries of the jurisdiction where it is
located.

UAE Offshore company registration is a very popular method of doing business in the Middle East region. In
UAE there are three offshore jurisdictions – Dubai (Jebel Ali Offshore Company) Ras Al Khaimah and Ajman.
They offer similar services but serve different strategic goals of offshore company registration. The Jebel Ali
Offshore Company is an International Business Crown/holds the only offshore vehicle that is permitted to
own / hold real estate in the Emirate of Dubai. JAFZA Offshore operated under JAFZA Free zone.
The RAK Offshore and the RAK International Company (RAKICC) are International Business Companies. They
provide a flexible and credible option for foreign investors to register an offshore company in UAE without
the need to establish a physical presence in the UAE. RAKICC is also allowed to hold the freehold property in
Dubai.[2]
UAE Offshore companies offer the following benefits:

 No Corporate tax
 100% foreign ownership
 100% Capital and Profit Repatriation
 UAE Bank Account
 International Invoicing
 Limited Liability Company
 No TIEAs
 Absolute Privacy and Confidentiality
 Ability to maintain multi-currency Bank accounts in the UAE
 Virtual office facilities available in the UAE

Legal Forms of Business

The common legal forms of business in Mainland, Free zone and Offshore formation in the UAE are:

 Sole proprietorship
 Civil Company
 Limited Liability Company (LLC)
 Partnership
 Private Share Holding Company
 Public Share Holding Company
 Branch of Foreign Companies/Representative Office
 Branch of GCC companies
 Branch of Free zone company
 Branch of Dubai based companies
 Branch of UAE based companies
Under Law of UAE, there are five types of business establishments applicable to foreign entities interested in
establishing their presence in the UAE. UAE government has implemented wide range of economic and
administrative policies which has made UAE an attractive business destination.
A company can create a permanent establishment, create an entity in any of the UAE free zone, enter into a
commercial agency agreement, establish a branch office, create a civil company (currently possible to
establish a company in Dubai, Sharjah and Ajman).

Limited Liability Company

A Limited Liability Company (LLC) is the most common type of registration in the UAE and is recommended
where the purpose of the entity is to make sales within the region. However, 100% foreign ownership of such
an entity is not permitted. Under the UAE Commercial Companies Law (CCL), foreign investors are permitted
to hold up to 49 per cent equity ownership in UAE companies and 51 per cent of the equity must be held at
all times by one or more UAE nationals.
In accordance with Article (218) of the CCL a Limited Liability Company can be formed by a minimum of 1 (as
per Article 8 of the Federal Commercial Company Law of 2015) and a maximum of 50 shareholders whose
liability is limited to their shares in the capital of the company. Recent amendments to Article (217) of the
CCL that came into force in June 2009 removed the requirement for minimum share capital (previously AED
300,000 in Dubai and AED 150,000 in other Emirates) allowing founders of a limited liability company the
freedom to determine the company’s share capital which could be less than the earlier prescribed bottom
line.
A LLC must appoint a minimum of one manager and up to a maximum of five managers for the business.
Managers must be appointed by a Memorandum of Association or by a management contract, for a fixed
term or an unlimited term. Unless the Memorandum of Association states otherwise, the manager has full
powers of administration and management of the LLC. LLC is not allowed to practice its activities in the UAE
without a Trade License and Commercial Registration Certificate.

Branch / Representative Office

A branch office has the same legal identity as its parent company and conducts business under the name of
its parent company. A branch office may only be engaged in activities similar to those of its parent company
but it is not permitted to carry on the business of importing the products of its parent company, a function
reserved for local trade agents. In some cases the Branch of a foreign company are required to obtain an
additional license from UAE Ministry of Economy.
Representative office, on the other hand, is limited to promoting its parent company’s activities i.e. gathering
information and soliciting orders and projects to be performed by the company’s head office.
A UAE national must be appointed as a ‘service agent’ for the branch or representative office.

Civil Company
A civil company is a business partnership for professionals like doctors, lawyers, engineers and accountants. A
civil company is 100% owned by the professional partners (except for engineering civil company), however, a
UAE National Local Service Agent is normally required. A foreign company can be a partner in a civil company,
as long as the foreign company is in the same field as the civil company.