Company formation in Dubai is governed by the UAE commercial law, just like any other country having their own exclusive commercial laws. Foreign nationals wanting to form a company in the region and engage in commercial activity have to partner with a UAE national as per the UAE commercial law.
The UAE commercial law states that businesses owned by foreign entities must partner with a UAE national who will own 51 percent of the capital in the company. On the other hand, companies that seek sole ownership can also start a service-oriented business in mainland or a company in free zone or offshore jurisdictions. The law can be overwhelming at times to foreign entities. Yet, a large number of business owners opt for this type of company structure – that is limited liability company (LLC) or joint stock company (public and private).
So, what makes entrepreneurs opt this type of company structure? And how exactly should one partner with a UAE national for company formation in Dubai cost & requirements of the same?
Here are the two reasons why entrepreneurs opt for Joint Stock or LLC company setups:
The limited liability company (LLC) or a joint stock company (public and private) with LLCs are common legal structures for company formation in Dubai. A Joint Stock or LLC company formation in Dubai mainland can be extremely advantageous compared to other available legal structures. Joint Stock or LLC company formation in Dubai do not only offer liberty to trade freely and reap maximum profits, but also is easy to setup. Moreover, such companies can conduct any type of activity except for insurance, banking or investment. An LLC or a joint stock company can trade freely in the UAE and anywhere outside the country – including free zones and offshores.
Side Agreement –
Foreign entrepreneurs can secure themselves through a side agreement also known as an investor’s agreement contract. The investor’s agreement contract is a standard contract that is drafted on mutual grounds and conditions offering all parties involved to be benefited. The contract provides financial protection to the foreign entrepreneurs and ensures that the share structure is agreed on appropriately. At times, foreign entrepreneurs choose UAE owned companies to be their local partners, which is also referred as UAE company sponsorship services. This basically means that a business setup service provider company or any other type of company that is 100% owned by a UAE local can sponsor the foreign company. This agreement is yet again drafted on mutual terms. The agreements states that the 51 percent of the company capital is retuned to the foreign entrepreneur in exchange of an annual fees.
Here’s how an entrepreneur should partner with an UAE national for company formation in Dubai:
Regardless of a welcoming approach and easy-to-understand business setup procedures, it could be difficult for foreign entities to partner with a UAE national for company formation in Dubai. Hence, the best option is to partner with a business setup service providers company that is 100% owned by a UAE national. Business setup service providers do not only take care of all the complications related to company formation in Dubai, but they also safeguard the interests of the foreign entrepreneur.
In Dubai, most establishments require UAE sponsorship services. But you can outflow this condition and establish a collaboration on mutual terms with the help of business setup service providers. These business setup service providers unite foreign entrepreneur with a reliable UAE business partner – a UAE national or a UAE owned company. They also draft the company’s Memorandum of Association that ensures the safety of the foreign investor. The Memorandum of Association is drafted on mutual terms agreed by the shareholders of the company (including the UAE national). with a team of in-house legal expert offered by business setup service providers, so that the company is efficiently formed and legalized.
Want to know more about UAE local sponsorship and learn different ways of partnering securely with a UAE national? Book a free consultation with DBS Business Setup! Know how to choose a local business partner in Dubai or anywhere across the UAE.
DBS Business Setup is the best business setup company in the UAE. We offer A to Z solutions related to company formation in Dubai and various other Emirates.
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