September 24, 2018
The flexibility to do business throughout the UAE under a DED License
One of the most important things that an entrepreneur must ensure when setting up a business is that they will be able to grow without restrictions. The flexibility to do business - in terms of targeting the right consumers and untapped markets means higher profitability and increased company value. In a broader context, flexibility is adaptability to inward and outward changes that occur throughout the existence of business; whether these are regulatory changes of the government laws or internal transitions.
When companies are flexible and more resilient to the changing business ecosystem in which they belong, they are therefore more competitive and have a higher likelihood of achieving long-term success. With a license that permits this type of growth, mainland company setup becomes a logical option. This is evident with startups, which have initiated their venture under a license with some restrictions around trading. They have to look for alternatives to then trade legally as they expand. This can be complicated, time consuming and expensive without the right advisors to guide you.
Regardless of where you elect to establish your trade license in the United Arab Emirates (UAE), you must transact and conduct your business within the legal terms of that jurisdiction. This may of course affect the possibility of conducting business where you choose – and will consequently require you to look for alternative options when and if lucrative trading opportunities are presented. If your business model has the potential to grow rapidly a few years after its formation, or even service Government agencies, then a Mainland Company or a trade license from the Dubai Department of Economic Development (DED) is the best option from the start.
In July 2018, the DED authority published statistics, which included a total of 24,489 transactions related to licensing and registration, of which 1,651 licenses were issued. The most popular categories included Commercial (60.5%), Professional (36.8%), Tourism (1.4%), and Industrial (1.3%). These impressive numbers demonstrate that a Mainland Dubai license represents a viable option for many startups and SMEs. Moreover, the competitiveness of Dubai as a hub for business in the UAE has ranked higher, with more foreign investment expected in the remaining months of 2018.
To give you a better view of what a DED License offers as a way of scaling up your company, here are the top five advantages:
- Flexibility to trade either within the UAE (with private, local and government authorities) or overseas. Having a DED License leverages your business to spread your services throughout the entirety of mainland Dubai. This ensures your business can cater to a diverse market without being bound by certain rules.
- No limit on the number of visas (depending on the size of the office space). With a DED License, your company’s ability to hire additional workforce when and if required, is not a hindrance, but a chance to amplify your operations to a larger scale. As a business owner, this advantage gives you the full control of your manpower. However, you must bear in mind that employing more people is interdependent to the size of your office.
- Office premises anywhere in mainland Dubai. One of the significant differences of a Free Zone license and a DED license is the flexibility to choose the location of your business. Free Zone companies are not permitted to set up a permanent office outside the premises of the Free Zone, while a DED License authorizes you to establish your business anywhere in the Dubai mainland.
- More options for business activities. Setting up a company in mainland Dubai gives you access to more business activity options. Examples of these activities are (but not limited to) Accounting and Bookkeeping, General Trading, Technical and Occupational Skills Training, Sports and Services, Investment in Commercial Enterprises, Interior Decoration, Cosmetic Trading, Restaurants, Events, Management, and many more.
- Fewer nationality restrictions in ownership and visas compared to other jurisdictions. A DED license permits the most nationalities who can set up their businesses in mainland Dubai, which makes Dubai a hub of diverse entrepreneurs from across the world. According to DED, Indians, Pakistanis, Egyptians, Chinese, British, Saudis, Jordanians, Syrians, and Kuwaitis are the top nationalities who have registered their companies in July 2018.
When setting up a DED Licensed company, equipping yourself with the necessary information via professional business setup advisors alleviates the potential stress and worry associated with the process. CREATIVE ZONE has been helping entrepreneurs establish their companies in mainland Dubai for nearly a decade. That represents thousands of business people, who trust CREATIVE ZONE to secure their trade license and manage all the formalities on their behalf. In fact, CREATIVE ZONE has the highest customer retention and customer satisfaction rate in the UAE – with many clients choosing to continue their partnership from startup and as their trade license needs have changed.
Here are the three main types of DED licenses that CREATIVE ZONE has made accessible to help clients get started with their incorporation:
1. PROFESSIONAL LICENSE
(Provision of non-physical services e.g. Consultancy)
- The establishment of entities formed under the UAE Civil Code which are restricted to carrying out "non–commercial" or civic activities. The UAE Civil Code entities (may be an Individual Establishment or a Civil Works Company) include promotion of services, skills, and expertise of the individual(s) conducting the business, as well as other related practices that involve the use or investment of intellectual faculties.
- Professional companies may be 100% foreign owned. However, it is necessary to appoint a “Local Service Agent” or “Local Sponsor.”
- To comply with the provisions of UAE law, CREATIVE ZONE proposes that one of the local partners of CREATIVE ZONE will act as the Local Service Agent. The nominated Local Service Agent will not have any management authority or financial commitment and he will only act on your behalf to facilitate the trade license and visa processes necessary to complete your trade license. The Local Service Agent Appointment Contract shall regulate the relationship between the two parties.
- Existing companies can only invest in a new Civil Company if they reflect the same business activity as the parent company.
2. COMMERCIAL LICENSE
(Provision of physical services or trading activities)
- The establishment of a Limited Liability Company (LLC) in Dubai in accordance with the Commercial Companies Law. This is the most widely used commercial entity for companies with foreign ownership wishing to conduct commercial activities and trade in the UAE.
- Each of the partners shall only be liable to the extent of their share capital in the company upon incorporation as stated in the executed Memorandum of Agreement (MOA).
- Under the UAE Companies Law, a minimum of 51% ownership must be held by a UAE National (Local Partner), and 49% ownership will be that of the foreign shareholder. However, the law permits the issuance of constitutional documents for an LLC to contain provisions designed to protect the interests of the foreign minority shareholder, including but not limited to the profits distribution, assets entitlement, appointment of directors/managers, powers of administration, and influence in decision making.
- To comply with the provisions of the UAE Companies Law, CREATIVE ZONE proposes that CREATIVE ZONE General Trading or a CREATIVE ZONE recommended UAE national act as your “Local Partner”.
3. BRANCH OR REPRESENTATIVE OFFICE
- It is stipulated under the UAE Companies Law that 100% foreign ownership is allowed provided that a local service agent is appointed.
- A Branch office is a legal extension of the parent company and is permitted to secure contracts and conduct business activities, which are similar to those of its parents' company subject to the approval of the UAE Ministry of Economy.
- A Representative office is established to promote the products and services of its parent company but may not carry out any trading activity or enter into commercial transactions and deals by itself. The number of employees allowed under this company is limited to 4.