Dubai is a cosmopolitan and prosperous metropolis that combines elements of both the East and the West. It's one of the world's most popular business destinations.
The foreign investor's preference for a flexible, differential profit-sharing agreement is recognized by the Inversion Law. Because 51% of legal equity is held by a local partner, this gives the international investor an advantage because he or she gets a 50 percent stake in both businesses.
What is an LLC?
An LLC, often known as a limited liability company, is one of the ways to establish a firm in Dubai. The most common form of business that is formed in Dubai is an LLC company.
It can be established by as few as two people and up to 50 shareholders each of whom have no more than 99 shares.
Because it is the only choice that provides maximum legal ownership, i.e. 49 percent, to an expatriate for a local firm, many firms opt for an LLC with a foreign partner.
The prospective investor has the option of choosing one UAE national (sponsor) as a partner in the company because it is necessary to have a UAE national shareholder with a 51 percent stake in the company.
The sponsor's role is limited to that of a shareholder and his liability is also limited to the extent of his investment in the company. The sponsor does not manage the company on a day-to-day basis and is not involved in its operations.
Advantages of an LLC Company Setup in Dubai
The major advantage of an LLC is that the liability of the shareholders is limited to the extent of their investment in the company. This is a significant advantage over a partnership where the partners are liable for any losses incurred by the business. In addition, an LLC provides greater legal protection to its members than a partnership.
Another advantage of an LLC is that it can raise capital by selling shares to new investors. This is not possible in a partnership where the partners are limited to those who have initially invested in the business.
An LLC also has greater flexibility when it comes to profit sharing. The members can agree to share profits in any proportion they wish. This is not possible in a partnership where the profits must be shared equally among the partners.
Disadvantages of an LLC Company Setup in Dubai
One of the main disadvantages of an LLC is that it is more expensive to set up than a partnership. This is because the minimum capital requirements are higher for an LLC. In addition, an LLC must have its own legal advisor and accountant which also adds to the costs.
Another disadvantage is that an LLC is more bureaucratic than a partnership. This is because there are more procedures to be followed in order to set up and operate an LLC.
The final disadvantage of an LLC is that it is not as well known as a partnership and this may make it difficult to find investors.
Despite these disadvantages, the LLC remains the most popular form of business in Dubai due to its limited liability and profit-sharing features. If you are looking to set up a business in Dubai, then an LLC is the best option.
7 Steps to Start an LLC Company in Dubai
There are a few steps you need to take in inorder to proceed with an LLC company formation in Dubai. Here is a guide to setting up a Limited Liability Company in Dubai.
1. Choose the business activity:
It is important to choose the business activity that you want to pursue before starting the Limited Liability Company in Dubai. This can be done by researching the type of business you want to establish and then registering with the relevant authority.
2. Select a trading name:
The next step is to choose a name for your LLC company and register it with the Dubai Economic Department. The name of the Limited Liability Company company must be in Arabic and English and it should not be similar to any existing LLC company.
3. Apply for a Trade license:
After the LLC company name has been registered, you will need to obtain the required licenses from the relevant authorities in Dubai. The type of business license you require will depend on the business activity you have chosen. The type of business license can be found on the website of the Department of Economic Development.
You can also make a deal with a local sponsor. Through this deal that is made with a local sponsor, it is agreed that they will take majority ownership in your LLC firm and you'll get the rest.
4. Register with the Dubai Chamber of Commerce and Industry:
The next step is the company registration with the Dubai Chamber of Commerce and Industry to receive the initial approval. This is a requirement for all businesses in Dubai. The registration can be done online or at one of the local branches. Obtain MoA or LSA Agreement because they will be required later on. Get the initial approval from the Department of Economic Development to issue visas.
5. Open a corporate bank account:
The next step is to open a corporate bank account in the name of your LLC company. This can be done at any of the major banks in Dubai. You will need to provide all the documents such as the license, MoA, and LSA Agreement.
6. Register with the Chamber of Commerce:
The final step is to register your company with the Dubai Chamber of Commerce. This can be done online or at the local chamber office. You will need to provide all the required documents such as the license, MoA, and LSA Agreement.
7. Get a business visa:
After your company has been registered and has received initial approval, you will need to get a business visa in order to start operating. This can be done by applying for a work permit through the Department of Economic Development. You will need to provide documents such as the trade license, MoA, and LSA Agreement. After you have received the work permit, you can apply for a business visa at the Immigration Department.
These are the steps you need to follow for the LLC company formation in Dubai. By following these steps, you will be able to establish a successful business in Dubai.
FAQs
What Is the Process for an LLC Company Formation in Dubai?
The first step is to visit the Department of Economic Development (DED) and choose the activity you want to register your company for. After that, you will need to select a trading name and apply for a trade license.
The next step is to register with the Dubai Chamber of Commerce and Industry and obtain the required licenses. Finally, you will need to register with the Immigration Department and get a business visa.
Can I Do Business in Dubai Without a Company?
No, it is not possible to do business in Dubai without a company. You will need to register a company and obtain the required licenses in order to start doing business in Dubai.
What Type of Company Should I Form in Dubai?
The best type of company to form in Dubai is a Limited Liability Company due to its limited liability and profit-sharing
What Is the Minimum Capital Need for an LLC Company Formation in Dubai?
There are no minimum capital requirements to form a Limited Liability Company in Dubai. However, you will need to have a bank account with a minimum balance of AED 50,000 in order to obtain the trade license.
How Many Members Must a Limited Liability Company Have?
A Limited Liability Company in Dubai must have a minimum of two members. However, there is no maximum number of members.
Can an LLC Have a Foreign Investor?
Yes, an LLC can have foreign members as long as they are legal residents in the UAE.
Is a Registered Agent Required?
No, a Registered Agent is not required for an LLC in Dubai.
What Is the LLC Company Formation Duration in Dubai?
It takes approximately 2-3 weeks to form an LLC in Dubai.
What Types of Licenses Can an LLC Hold?
An LLC can hold the following licenses in Dubai: commercial, professional, industrial, and tourism.
LLC In Dubai: Conclusion
In conclusion, the LLC company formation in Dubai is quite easy, however, you will need to follow the steps outlined in this article. By following these steps, you will be able to establish a successful business in Dubai.
