UAE is a major economic hub in the Middle East and is replete with opportunities for foreign investors to take advantage of. In fact, it’s one of the best places to start a business. Dubai also offers tremendous business and trade opportunities for foreign investors globally. With a great economic outlook, the UAE, in general, is a strategic location to start a business and allows different companies to form, such as the free zone and the mainland.
If you’re in the process of setting up your UAE company, you may have come across many steps, including types of companies, business jurisdictions, and paperwork. While all these steps are important to be sorted, it’s also necessary for you to take careful measures when deciding the type of business zone you want to select for your company. Also, it is crucial to know the different types of business entities that you can establish.
Below are the types of business entities that you can form in Dubai:
- Sole proprietorship
- Civil Company
- Limited Liability Company (LLC)
- Public Shareholding Company
- Private Shareholding Company
When you choose the type of company and business activity, it’s time to decide whether you want to go with the mainland or the free zone.
Mainland vs Freezone Company
In Dubai, there are three different types of business jurisdictions to choose from. These are free zone companies, mainland companies and offshore companies.
Free zone companies are formed in the designated free zones in Dubai. The business is allowed to carry out its business activities only within the free zone territory and not in the mainland. The shareholding needs to be 100% local or foreign, depending on the type of license.
Mainland company formation requires a 51% UAE national shareholder who owns the UAE company and has the right to nominate a maximum of five directors. The company can operate throughout Dubai and also have access to government contracts.
The offshore company is one that is established outside the mainland territory of Dubai but still falls under its jurisdiction. Therefore, it can conduct international trading activities but not trade within Dubai or with any UAE nationals.
Pros of Setting Up a Company in Mainland
The UAE mainland offers a different set-up, where there are several options available for foreign investors who want to establish their business presence in this part of the world. The mainland is not just a choice, but it also provides excellent business establishments opportunities.
There are many reasons why a foreign investor would consider setting up a company in the UAE mainland. Here are some of the benefits:
- Business expansion to all seven Emirates and beyond
- Possibility to own office space and warehouse units
- Freedom to conduct business in any part of the country, excluding free zones
- Right to apply for all residence visas, including employment visas
- Faster visa application processes compared to the free zone companies
- Lower corporate taxes
Cons
While a mainland company allows exciting business opportunities, it can have a few drawbacks depending on your business goals, ownership, and location.
- Operating in the UAE mainland requires a local sponsor holding 51% of the capital of the company, while the remaining 49% can be held by non-UAE nationals.
- Companies in the UAE mainland cannot perform most professional activities (i.e., legal, accounting and auditing) unless they are carried out by UAE nationals.
Which is Better for Foreign Investors: Mainland or Freezone?
The UAE has been a popular investment destination for years now, not only for its stable economy but also for its business-friendly policies and, in particular, the free zones within its borders. In the last couple of years, the UAE has taken measures to attract more foreign investments by offering various financial benefits and incentives to investors. The most recent of these is the expansion of free zones, which allows investors to retain 100% ownership of their companies.
These are some of the benefits that foreign investors can look forward to when they choose a Freezone company:
- 100% tax exemption on all income in UAE
- 100% ownership over your business
- 100% repatriation of capital and profits
- No import or export duties
- Zero currency restrictions
- Flexible visa rules
Expand Your Business with Future Directions
Future Directions offers complete business solutions to investors who plan to start their business in the UAE and Dubai. We allow you to connect with investors, financial advisors, and lawyers who are experts in their fields and will make your UAE company formation process easy and smooth.
Team up with Future Directions today and expand globally!
