How to set up your own business in Dubai
 There are
plenty of obstacles to consider when setting up your own business.
Setting up your own business can be one of the most challenging times of
your life. In the UAE, would-be entrepreneurs often face a number of
obstacles once they have decided to take the leap. So whether it’s deciding
between free zone or onshore licensing, or navigating all the legal
loopholes, here is a guide to setting up a UAE business.
- Plan and research
Many first-time entrepreneurs worry about the financial investment and the
time they will have to dedicate to their business. Once those issues are
dealt with, they reach the next stage - they are full of energy and want
to get started straight away. This often results in rushing into the
venture without adequate planning and then having to pay the price when
things have to be ‘fixed’ later on. Slow down, do some research and then
make a plan.
- Licensing
While time is dedicated to researching the business model, investment
requirements, consumer demand and all the other factors necessary,
business licensing often drop to the bottom of list. Licensing should be
prioritised and you must ensure it is done legally. Choosing the correct
option at the start will save you time and money later on. There is
nothing to be gained from setting up in one licensing authority or free
zone, only to discover further down the line it doesn’t serve your
company’s needs and won’t allow you to carry out specific activities.
- Location
Location isn’t simply about where you would like to set up an office,
shop, or factory but more about licensing jurisdiction. There are a number
options available, from onshore, licensed by the Department of Economic
Development (DED) in each emirate, to a growing number of free zones,
often themed around particular industries or segments. Some licensing
authorities allow you to set up as a freelancer or professional services
provider. Others will limit your scope of activities so if you plan to
expand your services in the future, make sure you are licensed in a zone
or authority that allows you to do so.
- Onshore Licensing
Onshore licensing means you are licensed in DED (Department of Economic
Development) and is best suited to all types of commercial enterprises
that would benefit from being set up as a limited liability company (LLC).
Examples of this might be a trading company, a logistics company, or a
manufacturing company. Local laws require that a minimum of 51 per cent of
the shares in such companies must be held by a UAE national. The company
must also take up physical office space, and may be subject to further
requirements or approvals from government departments that regulate
specific industries. Offshore means you are licensed in a free zone.
- Free Zones
Free zones can offer a suitable alternative to start-ups within specific
sectors. A start-up looking to set up a manufacturing facility and export
their products may consider Jebel Ali Free Zone. Other options include
Hamriyah and Ras Al Khaimah free zones. Themed free zones such as Dubai
internet City, Dubai Media City, or Dubai Design District can help
start-ups within those sectors become part of the business community.
- Local partner vs local service agent
If you decide to license onshore, everyone will tell you to find a local
partner. This is not necessarily the case. Onshore professional licenses
are available for activities such as consulting and other services, and
may be owned 100 per cent by a suitably qualified foreign national,
although he or she must appoint a Local Service Agent (LSA). The LSA
provides government registration services for a fixed annual fee and has
no shareholding or involvement in the business. Such licensing also
requires a physical office location.
- Office space
Because you must have office space, research rents in your chosen location
and ensure it is right for your needs. Start-up media entrepreneurs, for
example, don’t realise they can’t rent an office in Dubai Media City if
their licensing is with the DED. Media City is a free zone and you must be
licensed to operate in that specific free zone to rent space there. This
works the other way round too: if you are licensed in the Media City free
zone, then you are required by law to rent an office space in Media City,
it is illegal for you to rent an onshore office.
- Overheads
Although initial set-up costs can be lower with a free zone, there can be
restrictions and higher transactional costs associated with visas and
permits that require government approval. Free zones also offer licensing
with a flexi-desk or even freelancer options, but limitations on the
business activity and number of visas that can be issued. Another
consideration is your monthly power bills, rent and human resources cost.
You might not have any staff yet, but you will have to pay someone when
your computer breaks down and may need a receptionist or cleaner. Add up
all these costs and work out the real monthly cost. Renting a serviced
office may be more cost-effective in some cases as it’s a fixed monthly
cost that includes rent, bills and secretarial services.
Prajit Arora is the managing director of Sentinel Business Centres, a
consultancy that guides entrepreneurs, as well as multinationals, on setting
up a business in the UAE
Oct 22, 15
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