Why LLC Company Formation is the Most Favorable Business Entity in Dubai?
Dubai is an important global hub for business, trade, and finance. One of the main attractions business in Dubai for business is the absence of the corporate and personal tax. That’s why most of the investors are likely to start the business or to invest in UAE.
There are generally two main options for investors setting up a business and establishing a legal presence in Dubai. A foreign investor can choose to setup up their corporation on the mainland (otherwise known as ‘onshore’ companies) or in one of the many economic UAE zones in Dubai. It is also possible to set up an offshore company in Dubai, but this is irrelevant if you plan on conducting business in Dubai.
Why Setting up the Main Land business is more attractive?
When you set up a company on the mainland, you have the option of doing business in any part of UAE and internationally which depends upon the activity of your license. If you start your company in UAE free zone, you can do business only in that specific free zone and internationally.
One of the main limitations of setting up an onshore company in Dubai is that a foreign investor can only own up to 49% of the company, and a UAE national acting as a sponsor must own at least 51% of the company. But we recommend our client to opt for corporate sponsor instead of an individual sponsor. Also, the corporate sponsor will give the side agreement mentioning, they do not have any rights in your company. This is not a limitation of companies operating within a free zone, where foreign investors can own 100% of the company. But finding a local sponsor will not stop investors from forming or setting up a company in the Dubai mainland.
In the normal case, the rule is as per the land the profit-sharing ratios, such as 80% for the foreign investor and 20% for the local sponsor. But as we mentioned the corporate sponsor, we have to pay him an annual fee which will be fixed at the time of company formation. But there are some other profit-sharing arrangements with the sponsor such as a fixed annual fee, a percentage of sales or a percentage of profits. It is also not mandatory to disclose the books of accounts to the local or corporate sponsors.
What type of Legal Entities are there in the Mainland?
In the mainland, there are various legal entities like.
- Limited Liability Company
- Private Joint Stock Company
- Public Joint Stock Company
- Limited Partnership
- Joint Liability Company
- Opening a branch office
Limited Liability Companies (LLCs)
From the above-mentioned legal entities, most of the investors are interested to opt for LLC Company Formation. As we mentioned an LLC can engage in all the activities as the rule of the land. Some activities are excepted like banking, insurance and the investment of money for third parties according to the UAE’s Federal Commercial Companies Law.
To form an LLC there should a minimum of two shareholders and a maximum of fifty shareholders, with at least 51% of the shareholding to be held by a UAE national. A single partner LLC can only be formed by a UAE national or GCC nationals. The liability of all shareholders in an LLC is limited to their share capital amount only. Below mentioned are the main reasons why investors are interested to form LLC in Dubai or UAE.
- Access of Whole UAE local market and Internationally
An LLC can conduct business all over UAE and Internationally, whereas a company in a free zone, which is restricted to operating only within that free zone and internationally.
- Large Number of Business Activity
There are no restrictions on the type of business activity that can be carried out by an LLC. But some activities like banking, finance and investment on behalf of third parties etc. are excepted.
- Share capital amount
To set up an LLC company no minimum capital is required. But in some free zones, we require minimum share capital to form the company. Also, to set up a public joint-stock company as well as a private stock company also require a minimum share capital requirement.
- Managing the company.
Even though the investor is having only a 49% share in an LLC company, Investor has the full power to manage the entire activities in the business includes the day to day activities. As mentioned earlier we always recommend corporate sponsor as they are giving all the powers to the investors including the borrowing powers. An investor can also appoint a manager to conduct the day to day activities of the company.
- Investor Visa
Being an investor in an LLC company, they can have an investor visa or resident permit. They can also sponsor their family for a resident visa.
There is no limitation for the number of visas in LLC companies. Setting up a business in the UAE is an excellent way to rightfully gain international profits.
Emirates Chartered Accountants Group provides clients with licensing support for Company Formation in Dubai, UAE by providing strategic recommendations and negotiations with local stakeholder along with documentation formalities. For Company Formation in UAE please click below links.
To set up an initial consultation for LLC Company Formation, please contact
Mr. Ragesh Mattummal, Partner
+971 50 3578031
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