Dubai holds several advantages for modern businesses. The developed banking and economic sectors have attracted investors to set up business in Dubai and the UAE. LLC company formation in Dubai is an effortless task if one abides by the law. One of the most important aspects while setting a corporation in Dubai is to decide upon the type of legal entity you want to establish. It may depend upon the product, location, strategic objectives, and where you are going to operate your business – locally or internationally. In the UAE, a company can be formed under 3 jurisdictions, namely, Mainland, Free Zone, and Offshore. This blog is dedicated to providing information on how to form a Limited Liability Company (LLC) in Dubai, which is a standard type of company in the UAE mainland.
What is an LLC?
A limited liability company formation in Dubai is one of the most common forms of entities preferred by a businessman while setting up a company. It can be defined as a company in which the liability of its partners is limited only to the extent of their shares in the capital. It is a separate and distinct legal entity. This means that an LLC can get a tax identification number (TIN), open a bank account and do business, all under its own name.
Limited Liability Company in The UAE
The LLC company formation in Dubai is one of the more predominant types of business structure in the UAE. Forming an LLC company in Dubai requires a minimum of two and a maximum of 50 shareholders.
Ownership of shares within the company is dependent on type of investor. A Local sponsor in Dubai must own at least 51% of the firm’s equity is the minimum for UAE national while a foreign investor must not own more than 49%.
The required capital to form an LLC in Dubai is AED 300,000 (US$ 81,744) and can be contributed in either cash or in kind. However, the required capital in the other Emirates is AED 150,000 (US$ 40,872).
The distribution of profit or loss can be agreed upon while the responsibility of managing of LLC can either be vested on the national or foreign partners or even a third party. Shares of LLC are neither open for public subscription nor can they be issued as negotiable.
An LLC is not allowed to offer insurance, business banking or money investment services on behalf of others. In addition, these shares cannot be represented as negotiable instruments.
If the purpose of your company is to make a sale within the region, then it is recommended you opt for an LLC company in Dubai. A mainland LLC company in Dubai can trade anywhere within the UAE and/or the extended Gulf Cooperation Council (GCC) states. However, it should be noted that the company should have one Local sponsor in Dubai who holds about 51% of the total shares in the company, according to the UAE Commercial Companies Law (CCL). Unlike a free zone and an offshore company, an LLC in mainland does not allow 100% foreign ownership to an investor. They are accountable for the remaining 49% shares of the company. Recent amendments removed the requirement for minimum shares (previously AED 300,000 in Dubai) allowing the shareholders to decide the limit which could be less than earlier prescribed bottom line. Additionally, an LLC can be formed with a minimum of 2 and a maximum of 50 shareholders, whose liability is limited to their share in the business capital.
The following are the fundamentals aspects of forming a limited liability company in the UAE
- Though foreign equity in the company does not exceed 49%, profit and losses can be shared at a ratio different from the share capital
- Any legal commercial activity can be setup as a mainland company formation in Dubai.
- Branches of an LLC can be opened within the same emirate or in other jurisdictions
- Day-to-day operations including banking operations can be managed by the manager appointed in MOA which is notarized in public notary. In most cases, the actual investor becomes the manager of the company.
- A Limited Liability Company can enjoy credit facilities from banks and other money-lending institutions upon approval from that financial institution.
- There are also special licenses issued by Department of economic development. An approval from relevant authorities may be required for certain activities. These bodies include the DHA, KHDA, RTA, DTCM and Dubai municipalities among others.
- It is mandatory to rent an office and obtain Ejari in order to incorporate an LLC. However, the Dubai DED has recently approved instant licenses where renting an office was not required. The rental requirement is replaced by paying an additional fee of AED 10,000 for the first year of incorporation. Under instant licenses, it is not possible to obtain employment visas.
- Trading LLCs are allowed to conduct business within the emirate as well as export and import freely.
- The UAE national shareholder can be an individual shareholder or can be a corporate company fully owned by UAE national. If the expatriate investor who is 49% shareholder of the company is making 100% of the investment in the company then his investment rights with regards to assets and profits can be protected through a side agreement among shareholders signed with two witnesses.
DIFC company formation
The DIFC goals to provide a platform for DIFC company formation and especially financial institutions to conduct business with the emerging markets of the region. It was established with the dream of generating an background for growth, progress and economic development in the UAE, while accessing the area’s markets by providing globally recognized legal and business practice, as well as the appropriate structure keeping up with international standards.
It is an international financial center advantageously located in the middle of the Dubai. it is bounded by a area that is fast emerging and rich in natural resources and petro dollars. Joint with the tax friendly government and the unrestrictive attitude on the subject of capital repatriation and movement of funds, it offers a financial target and center that is matchless. Umm al quwain free zone