Limited Company Dubai | Based On The UAE Company Law Of 2015
Limited company Dubai: Incorporation LLC vs. other types of company, advantages, types & steps required in forming a limited company
Limited company Dubai: When the name of a company ends with L.L.C / LLC, it is a legal form of business that is incorporated as a company and offers the benefit of restricting the liability of its shareholders.
Limited liability means that when you invest in the business and face a loss and end up owing large sums to your creditors then you are liable only to the extent of the capital invested in the company. Your personal assets are not at stake.
Please invest 2 minutes of your time to watch the limited company Dubai video below. It spells out how you can benefit. Or if you prefer to read, then feel free to skip the video and go straight to the text below:
Incorporation LLC vs. other types of incorporation
The safety of incorporating an LLC vs. other types of companies is that, in case of losses incurred by the company or when the company is being wound up, unlike for the sole trader and partnership, the personal belongings of the investor are not called upon in case where the assets of the company are fewer than its liabilities.
Sponsor of limited company Dubai
LLC type of incorporation is the safest way to invest your money and is preferred all over the world. In the UAE a Limited Liability company registered in the non-Free Zone local jurisdiction like Dubai requires a local national as the main partner who holds 51% Shares in the constitution of the company. He is called the local sponsor.
The normal practice, however, is that the local sponsor is paid an annual sponsorship fee. There is no profit sharing in most cases. However, the new law of 2015 makes it mandatory for a profit share of a minimum of 10%.
Most sponsors do not put in any money or take up losses. Their role is to lend their name to form a local LLC company.
Varal Managing Director and CEO
Types of limited company Dubai
The new Federal Commercial Company Law of UAE (2015) has made many changes in the legal provisions. A Company can take the following forms. Not all of them are limited liability companies.
- Joint liability company – Liability is personal for all partners
- Simple commandite company – Mix of personal and limited liability
- Limited liability company
- Public joint-stock company
- Private joint-stock company – up to 200 shareholders
Setting up a limited company in Dubai is simpler and quicker
Limited company Dubai has several characteristics which are enlisted below:
- Owners of the LLC are called members.
- The number of members in an LLC is limited to 50.
- A UAE National can form a limited liability company with a single shareholder.
- Members may be individuals, corporations, or other LLCs.
- The companies are required to maintain their accounting records for a period of 5 years from their year-end.
- Accounts must be certified by an auditor.
- The company appoints a board of directors with members who are not the partners.
- Directors are held responsible for violations of the law.
Advantages of a limited company Dubai
The primary advantage of incorporation LLC is the protection given to its members at the time of bankruptcy. Other advantages are listed below:
- It is a separate legal entity from its members.
- Incorporation LLC’s members cannot be held personally liable.
- Limited liability companies can adopt various forms of distribution of profit among partners. Subject to the new law.
- The members of LLC avoid double taxation on their income.
- There is no intervening structure in a limited company Dubai.
- There is no curtailing of investment of the members.
- The entire structure is comparatively informal, ensuring the smooth and easier running of the business.
- Setting up a limited company in Dubai is simpler and quicker.
- You can set up a board of directors and devolve power and responsibility to run the business to the directors.
- Instead of cash you can contribute in-kind and prove the valuation of assets contributed to the company through a certified valuer.
- You as Partners can pledge your shares as security to other partners or to banks for loans.
Forming an LLC? Be aware of the laws!
The important factor to be considered when forming an L.L.C/LLC is that this is a relatively newer form of business available to you. The basic constitution the Memorandum of Association is now stipulated by law and is available for study.
As a result of this, most countries have different rules and regulations for setting up LLC’s. Before setting up an LLC for yourself in UAE you should be aware of the laws. Please seek out legal advice or advice from professional accountants.
When looking for a lawyer, ensure that he or she has knowledge of and experience in setting up a limited liability company under the particular laws of the state or country jurisdiction where you intend to register your company.
a. Local LLC company in Dubai is free to open an office or a retail shop anywhere in Dubai. This freedom is not available to other forms of companies like a Free Zone company.
b.The range of business activities allowed for local companies is much wider than those allowed in Free Zones. Thus certain major businesses like real estate and construction are only for local companies.
Varal Team Members
Steps required in forming a limited liability company in Dubai
1. You will need to engage a consultant who is well versed in taking the process thru.
The consultant will find a good sponsor for you. Ask the consultant to confirm the annual fees and terms of engagement. The government agency in charge of the Trade License issue is called the Dubai Economic Department – DED.
2. There are 4 main stages involved
A. Initial Approval by the Dubai Economic Department- DED
B. Agreement with the local sponsor in a Dubai court to form the company
C. Submission of the agreement and office lease to Dubai Economic Department, paying the charges, and getting the license.
D. Post license operations – Establishment card, Post Box, and Labour Card
3. At first, you need to apply for initial approval giving the name of the sponsor and activity.
4. Then you must look for office space in Dubai. Finalize the terms of the lease. You may need to get the landlord to wait for 3-4 days before the lease agreement is signed since it can be signed only after the initial approval by DED has been given.
5. As the initial approval comes, you can revisit the office space landlord and conclude the tenancy contract. If the office space has not yet been found then you can continue the search. In the meanwhile
6. You need to sign an LLC agreement in the court that means the Memorandum of Association along with the local sponsor. All partners must be present.
7. You are now ready to do the final submission of the documents to the DED- Office Lease, Initial Approval, and the Court attested LLC Agreement with Sponsor.
8. Submit the set to DED and pay the license fee. The Trade License will now be issued within 4 working days.
9. You are now ready to start the business and also to get a PO Box which is a must in Dubai. It is your legal address too.
10. Get the Trade License updated with PO Box, and phone numbers allotted to you.
11. Now you are ready for applying for an establishment card with Immigration and Labour departments. These are essentially registration of your company with these agencies to enable you to apply for visas for your employees.
Varal Team Member
Does the content of this page about limited company Dubai resonate with you? If yes, please share it with your friends using one of the social media buttons or chat with us.
Go from limited company Dubai to Varal Consultancy DMCC homepage