LLC Company Formation in UAE - LLC Company Setup in Dubai
There are 4 ways a foreign company can operate from Dubai as a branch, representative office, registered company, or through a commercial agent who will be selling its products in GCC or export them. The different types of companies are: Joint stock companies (JSC), Limited liability companies (LLC), unincorporated joint ventures and branch or representative offices of foreign or free zone companies.
There are foreign ownership limitations to an LLC Company Setup, as per the Mainland Commercial Companies Law (CCL) applicable to all LLC companies which requires at least 51% of the share capital of all mainland UAE Companies, outside free zones to be held by UAE nationals or their wholly owned companies.
The main risk is that the 51% local national shareholder has control over the Investors’ Company and its bank account. If you don’t want to trade onshore in the UAE with the local companies then a Free Zone Company should be established instead (there are almost 50 free zones) . If however, you need to trade onshore, as an LLC company in UAE Mainland with local companies then you will need a Department of Economic Development (DED)-licensed company with a 51% local shareholder, which could be done through a corporate shareholder model, to allow the other 49% foreign shareholder to maintain 100% control over the company’s activity.
We will recommend in this respect the most suitable structure, location and license type. The 49% shareholding could be structured through an offshore entity to mitigate risks linked to Sharia Law and offer more accessible and flexible vehicle to foreign investors.
Assistance can be provided in matters related to CRS (Common reporting standard or AEOI, automatic exchange of financial account information in tax matters) which is to implement automatic exchange of bank account information between the offshore bank where you are holding a bank account, directly or through a structure, to your country of residence. Please also refer to the above page, in the right top corner side of this page, called’ corporate services” for additional information.
Limited Liability Companies -LLC Company Setup Dubai
As per the law, to conduct economic activities in mainland Dubai, outside the free zones, a corporate entity licensed by the Dubai Department of Economic Development (DED) must be established. In this respect, Limited Liability Company (LLC) is the most common type of company to establish business in Dubai. Onshore LLCs are granted custom duty exemption in UAE, GCC and countries of GAFTA, (unlike UAE Free zone companies) when trading in UAE and GCC. A Mainland LLC has no restriction on real estate ownership and is not required to pay 5% customs duty on imported goods.
As previously said, the main obstacle to an LLC Company Setup in Dubai or UAE in general is the requirement to have a 51% local national shareholder; However there is a corporate sponsorship structure which allows clients to maintain 100% control over their business by having us acting as a 51% corporate nominee shareholder sponsor for and on their behalf instead of having a local national individual person as the 51% local national shareholder of their business. This will avoid latter involvement in the business, the related sponsor’s succession planning issues, sponsor’s claim of company’s dividends and the fluctuation of the sponsor fee to act as sponsor.
All the management and financial control of the business will done by the 49% shareholder for a “Fixed yearly Sponsorship Fee”.
The Corporate Shareholder can also act as the local services agent where local shareholder is not required – for example, for a Professional License, Branch or Representative Office.
An LLC can operate under the following license types:
- Commercial – (Trading Activity)
- Industrial – (Industrial or manufacturing )
– The entity can operate anywhere in the UAE, including Free zones.
– The owner is personally liable for all the entity’s liabilities which cannot be limited by shares. It has no restriction on foreign ownership but instead it is required to appoint a local service agent to assist with the local authorities.
Foreign Company Registration in Dubai
A foreign company which would like to retain full foreign ownership in the UAE should incorporate a Branch or Representative Office which will permit 100% foreign ownership by the parent company. A Branch or Representative Office do not have a separate legal identity from its parent company. There is just an extension of their foreign parent company which remains fully liable for their activities.
- A Branch is permitted to engage in commercial activities in the UAE but may only engage in activities identical to those of its foreign parent in its home country.
- A RO (Representative Office) is not permitted to conduct commercial activities within UAE but could only market or promote the products and services of its foreign parent company in the UAE.
- Branches and Ros are granted a license in the name of the foreign parent company and are required to appoint a Local Service Agent.
Disadvantages of establishing a Branch or Representative Office in UAE:
- A Branch cannot trade in the UAE mainland. If the parent company conducts trading activities, it can only establish a Representative Office to facilitate an agreement between the parent foreign company and its UAE customers. However, most service activities can be conducted through a branch.
- Approvals are required from UAE government ministries and a bank guarantee of AED 50,000 will be required by the Ministry of Economy.