What does it take to form a company in the UAE? As a new business starter not familiar with the procedures, you may face difficulties and see an unclear picture.
Although you might hear different reports on the process of forming a company in this beautiful and pro-business environment, in reality it is not that complicated. You might have talked with a friend or a relative. You might also search thousands of articles on the web, but still have questions. Our experts have prepared a short seven steps guide to help you form a company in the UAE without headache.
Step 1. - Define your business activity.
Your activity affects the type of company you should form in the UAE. We receive hundreds of requests each year without a properly defined business activity. If you are not sure what the company will be dealing with, it is no sense to form a company because in the UAE. Business licenses are attached to a specific activity. A license can combine activities as well.
Before you decide to form a company, write one to three specific products the company will be offering. If you focus on services, write one to three services you will be offering.
If your are a trader, a general trading license might sound like a good idea, because it allows you to trade any product you want. However, it will limit your chances to open a bank account for the company in today's highly regulated environment. Narrow your trading down either to industry, or to specific items.
A well-chosen business activity can positively affect the type of company, and makes your business formation clear and structured.
Step 2. - Choose the right type of company.
Once you identified the activity and have a clear business plan, you are ready to choose the type of company to register.
An important step in this is to identify you customers and their location. Generally, there are two major types of companies: onshore and offshore. If you are targeting the UAE market, you must register an onshore resident company: either a mainland company or a free zone company.
A mainland company allows you to target the local market outside of the free zones, meaning, everyday residents in the UAE. Examples are shops and restaurants.
If you plan to sell internationally and in between free zones, a free zone company is a good choice. In certain cases as a free zone company you can sell to the mainland, but with a limited access, meaning, not as retail and, you will be required to pay a duty tax.
There are 40 free zones in the UAE and 20 in Dubai.
Choosing the right one is important. You choice depends on the conditions such as physical office, the targeted emirate and once again the business activity.
International service provision and trading can be performed with an
international (offshore) company and a free zone (onshore) company.
Step 3 - If you require choose the right agent.
Depending on type of incorporation you may need an agent to register the company. For instance, all international companies require a registered agent, meaning, you cannot go directly to the authority to register. There are also free zone companies requiring an agent. A mainland company can to be formed by yourself, but using an agent significantly eases the process.
Choosing the right agent is indeed important, as you might find an agent, which will not renew its registered agent license, and you may face issues renewing your own license. There are test-agents starting forming the companies but at some point the businesses may not go well and they decide to close down the company. Now you understand the stress many businesses are having not being able to renew their entities. Another issue may be experience. New agents are still “new”. It is always good to have an experienced team to support you through out the processing. Last, the location of the agent is also important. If you are specifically looking for an agent in the UAE, make sure the company has a physical office and good team located in Dubai. Travelling to Dubai and meeting the agent in another emirate will add additional time for travel.
How to choose the right agent?
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Ask the representative to tell more about the company and ask the details. The more you know about the agent, the more confident you will be in your choice.
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Check how many years the company is operating in the UAE.
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If you are setting up an international (offshore) company, check if the company is the registered agent itself, or acts as a referral agent.
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Check if the company has a physical office and where the company is located.
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Check if the company’s employees are all English speaking. There are many experienced agents having team members speaking your native language but good English is must, as there are many international providers.
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Do not choose the agent based only on the lower rates and simple whatsapp communication. Your agent must be professional and the rates should be at the average level to ensure quality and your interests. Always expect an email after conversation with proper details mentioned during your conversation. If you personally prefer messengers, this is great but always keep records of communication via email.
Step 4. – Plan your finances well and study the UAE market.
If you choose to form the company in the UAE, you should expect to invest your business. A start-up venture is a good decision, but without good business and financial planning, the business may go to an undesired direction. If you are planning to provide services or bring products to the UAE, you should study the market well. You can do market research yourself or get a comprehensive one from your agent. They can either prepare one if qualified or connect with a good provider. Investing into market research is better rather than to an unknown market.
Step 5. – Organize your documents and provide all documents translated in English.
Keeping your documents organized allows you to forfil requirements on time. For instance, applying for a bank account requires bank statements, and your business experience. There may be different cases, but generally, you should be able to produce your CV and translate the bank statement into English with no suspicious transactions.
Step 6. – Contact your agent before you travel to the UAE.
Coming to the UAE must be prescheduled with the agent. It allows him to prepare all document and plan your meetings for signing and meeting the bankers. If you suddenly plan to come, a good agent will be always able to assist you, but you might experience interruptions in meetings. Hence, causing unnecessary stress.
Step 7. – Be positive and prepared for a good outcome.
We have been dealing with thousands of companies and being positive is the best way to ensure smooth registration. If you are ready for a good outcome, the processing will be much smoother than you expect. Being stressed and prepared for worst scenario do not help to register the company. At the end of the day, your company is formed and bank account opened, but being positive keeps you and your agent happy.
We wish you a smooth registration and good luck in all your business ventures!
Best regards,
Freemont Team
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