Types of Business Entities in the UAE

The United Arab Emirates, with its timely strategized economic diversification projects, increasing FDI inflows, accelerating GDP, and internationally accredited business friendly company setup laws has made the country the talk of every foreign investor today. As a business powerhouse abundant with investment opportunities and world-class facilities, UAE fosters distinct business activities within in its specialized jurisdictions. Since every business needs a unique structure to incorporate, UAE facilitates different legal forms to help companies establish, grow and prosper.

In this blog, we are going to discuss about the different corporate structures offered by the Emirates to its entrepreneurs for doing business in the UAE. Let us go through them one by one.

1.Sole Proprietorship

As the name suggests, sole proprietorship is owned by a single individual who has control over all its operations and holds 100% shares to any profits. This business entity is a simplest form of corporate structure in the UAE and does not impose any special requirements other than having a residence permit in case of a foreign citizen.

Features of a Sole Proprietorship in the UAE

• An individual of any nationality can own a professional sole proprietorship
• Only UAE and GCC nationals can own a sole proprietorship that is commercial or industrial which must be 100% owned
• In case the owner is not a UAE national, an LSA or Local Service Agent is appointed for opening this type of company
• The LSA is supposed to overlook license requirements and the government-related matters for the business
• A sole proprietorship has no minimum requirement for business capital
• The name of the company must be related to the type of business activity
• A sole proprietorship can have just one manager

2.Limited Liability Company

An LLC in the UAE is the most preferred form of business entity by the individuals. The liability of the partners in an LLC is limited to the extent of their investment in the company.

Features of an LLC in the UAE

• Professional or consultancy activities cannot be conducted by this form of company except banking, insurance, or investment
• An LLC can conduct any industrial or commercial activity
• 51% ownership should be with the UAE national and the remaining 49% can be owner-owned
• LLC formation requires a UAE accredited auditor
• Minimum 2 and maximum 50 shareholders can invest in the company
• As an operational business structure, LLCs must appoint one to five managers which can also be elected from the legal partners

3.Private Shareholding Company

This type of business is also called as Private Joint Shareholding Company (PJSC) in the UAE. It can be formed through a minimum partnership of AED 5,000,000 from at least 3 investors. Such legal structures are compatible with all sorts of commercial and industrial activities beside professional business.

Features of a PJSC in the UAE

• An approval from Ministry of Economy must be obtained to establish a private shareholding company.
• The company must appoint one manager
• Minimum capital required is AED 5,000,00
• The company can have more than one branch. Each may undertake one or all of the activities included in the main business license
• At least 51% of the shares must be owned by a UAE national
• A GCC national can own upto 100% of the shares

4.Public Shareholding Company

Public Share Holding Company is defined as a legal entity whose capital is a minimum of AED 30,000,000 with transferable shares of equal value with each shareholder liable only to the extent of their capital. A Public Shareholding Company is also called as Public Joint Stock Company (PJSC) in the UAE. The trade name of the company must not be from any partnering investors except if the name is a patent of a shareholder or if the name is entitled to store belonging to the shareholder.

Features of a Public Shareholding Company in the UAE

• Partners can practice any industrial, commercial or professional business activities in accordance with DED business regulations
• The company must have maximum 5 appointed managers as per DED business regulations
• A Public Share Holding Company must have at least 5 founding members who are UAE Nationals, owning between 30% and 70% of the capital shares
• The company can have more than one branch. Each may undertake one or all of the activities included in the main business license

5.Civil Company

Recognized professions such as a doctor, accountant, engineer, and lawyer can open a civil company in the UAE. The company can have partners owning 100% shares and the activities allowed for the civil company can be only from professional business. More specifically, such activities are narrated as physical or intellectual, practiced by one or more natural persons under a defined capital. To open a civil company some rules must be followed for successful incorporation.

Features of a Civil Company in the UAE

• If a foreign company invests as a partner in a civil company, it must be from the same type of business activity
• Like in the case of a sole proprietorship, an LSA is required for company incorporation process if the owner is a foreign national.
• Partners from any nationality can start this business
• If the company is involved in engineering activities, one partner should be a UAE national who owns no less than 51 per cent of the business
• If the company is involved in consultancy activities, the firm must be owned by professional partners practicing the same activity, with 100 per cent ownership

6.Partnership Company

Under this type of business entity, the ownership is shared by two or more partners who share profits and losses according to the decided ratio. There are two main types of Partnerships. They are,

1. General Partnership- The general partners, who must be UAE nationals, are liable for the partnership’s debts
2. Limited Partnership- Partners are liable for its debts only up to the value of their contribution in the capital. Furthermore, the limited partner can neither be part of the management nor have his name be included in the partnership’s name.

Features of a Partnership in the UAE

• UAE nationals must be general partners in a simple limited partnership. Partners of other nationalities must be limited partners.
• There is no restriction on share of ownership of general or limited partners.
• Limited partners should not intervene in management or administrative issues of general partners. If they do so, they can become liable for all of the business obligations.

7.Branch of a Foreign Company

A branch of foreign company requires the company to have a UAE national. The branch is required to conduct the same business activity as its parent company. It can lease office in the premises, issue sales invoice to the UAE and international client and sign local legal contracts. A branch cannot engage in manufacturing, import or export of products to/from the UAE

8.Representative Office

A representative office in the UAE is not a business structure in its own right but is a business activity that a branch can conduct. It has its own criteria, which includes the authorization to promote and market the parent company's business – but not conduct business operations. A Representative Office requires a Local Service Agent (LSA), who can be a UAE National or a company owned by one or more UAE Nationals.

It all comes down to what type of business you want to start, and where in Dubai do you want to start a business. If you need help in choosing the right business structure, we at Business Setup Worldwide can help you with it. Contact us today- we’d be happy to help.