6 Hurdles Of Company Formation In Dubai That No one Tells You About

With numerous free zones, no taxes, low import duties, excellent infrastructure, and a strategic location, it is no surprise that entrepreneurs from around the world rush to Dubai to reap its numerous business opportunities. Even though company formation in Dubai is easier than anywhere else in the world, there are still tons of paperwork and technicalities involved. This is why it is important to familiarize yourself with the various facets and challenges involved with company formation in in Dubai, in order to avoid the problems encountered while launching a profitable enterprise in the UAE.

Choosing The Right Location

Choosing the right location for company formation in Dubai is more important that you can imagine. Firstly, because different free zones allow or prohibit different commercial activities, so you need to define the nature and long-term activities of your new company before choosing the free zone to operate in. If you are thinking of company formation in Dubai, it is advisable to look for areas which are subject to offshore legislations. These define the permitted radius of action of a company located within that area, the possibility to import goods, the permissible activities of that business, as well as the ease of applying for residence and work permits. If you are thinking of company formation in a free zone, your choice of a free zone should be based on the predominant focus of that free zone, the requirements for office and warehouse space, your budget, as well as connectivity to seaports and airports. Look into the advantages and cons of each free zone before finalizing your choice.

Selecting A Local Sponsor

Dubai is brimming with potentially lucrative business opportunities, but if you are really interested in launching a mainland business in the UAE, you need a locally registered LLC business. According to the UAE law, your chosen sponsor must be a registered national and be made a partner with at least 51% of company shares, in the case of an LLC (Limited Liability Company). Having a local sponsor gives you the liberty to set up a company anywhere in the city. However, the prospect of finding a trustworthy local partner in the UAE who would own the major stake in the company, while giving you the freedom to deal with business on your terms, could be daunting. Given how much is at stake, it makes sense to dig deep into your future partner’s background and expertise before signing a binding agreement. There are a few other considerations that you should keep in mind when working with a local sponsor, such as drawing up a comprehensive contract as soon as possible, delineating ownership, the costs involved, continuity in the events of death of a sponsor, and other legal matters.

Compilation Of All Required Documents

Once you have finalized your company location, you should get down to finalizing all the documentation for company formation in Dubai that needs to be processed. Make sure all your paperwork is complete to avoid any delay in the establishment process. Especially the key formation documents, such as the articles of association of a legal entity that acts as a shareholder and the extract of memorandum and commercial register, should be duly notarized and legalized. Not to mention, care has to be taken that the correct formal procedures and requirements are followed. Furthermore, you need to ensure that all the submitted documents are in the language specified by the respective authority. Generally, documents when to be submitted in Arabic when setting up a company in the mainland, while free zones allow document submission in both English and Arabic.

Finding The Right Information

Although every licensing authority has a website, listing comprehensive information about regulations, fees, and incorporations, a lot of entrepreneurs say that there is a lack of clarity of the set-up process, which makes this information rather ambiguous and hard to follow. Most entrepreneurs who try to do things themselves to get the hang of the market and minimize the initial investment by finding out whether there is a viable market for their services, find it an uphill task to find out the correct procedure of doing so. 

Adhering To The Local Culture And Language

If you have never lived in UAE before, chances are you are totally unaware of the local traditions and customs. First, you need to know that their local cultured is steeped in Islamic traditions. In Dubai, courtesy is highly prized and business communication follows a very formal approach. Men and women are also addressed in different tones. The people of Dubai are generally very friendly and welcoming, and the society is rated as one of the safest in the world. While you are free to practice your own religion freely, you are expected to show respect for their traditions and customs as well. Arabic is the official language, but transactions and business meetings are often conducted in English. However, employers are expected to keep all employment records, including contracts, and other documents, in Arabic.

Opening A Company Bank Account

The opening of a company bank account often poses a hurdle that no one talks about. Dubai has generally stricter requirements on banking transaction, not to mention the UAE central bank has also issued several new rules that needs to be complied with when opening a new company bank account. For instance, the ultimate beneficial owner of the newly established company has to be revealed in front of the bank, and some banks also demand to be presented with the legalized and duly notarized documents of each legal entity interposed between the UBO and the new company. All in all, opening a bank account for your new company can be quite a time-consuming process, and much more document intensive than opening a company in the first place. To save yourself the hassle, do your research to choose the best bank to open your company account in. You can seek the services of a company formation expert in UAE to ease the process for you.