Factors Affecting Costs

Ramapati Singhania

Setting Up A Small Business Dubai | Reduce Your Initial Costs

Setting up a small business Dubai: Types of companies, features, benefits & criteria to consider that influence costs

Setting up a small business Dubai: There are 2,000+ activity licenses and 28+ jurisdictions to choose from.

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Sharjah, Ras Al Khaimah, Fujairah, Ajman, Umm Al Quwain, Abu Dhabi, and Dubai, in the United Arab Emirates [UAE], each have their own local registration jurisdiction plus multiple free zones.

Many jurisdictions have bundled packages of visas, activity & office space.

So it is complicated to make a choice.

3 Types of companies

1. Offshore

2. Locally registered

3. Free zone

Each type has its own advantages and disadvantages. If your objectives are clear, you may be able to decide on the least cost option, with help.

Costs vary by jurisdiction, company, license type, activity, and office size.

For example:

  • If you only want a single man operation, Umm Al Quwain may be the least cost option
  • If you don’t want a physical United Arab Emirates presence, but only need to do banking and invoicing, an offshore company may be the least cost one
  • If you propose to do cross-border trading only and not sell in the local market, a free zone company may be best. Maybe in Sharjah.
  • If you want to operate a restaurant, a local company is the only option
  • If you must be in Dubai, then you know you have to pay Dubai prices
  • If your business depends on sea freight, Jebel Ali maybe the best but higher initial cost option
  • There are 2,000+ activity licenses and 28+ jurisdictions to choose from.

Setting Up A Small Business Dubai | Reduce Your Initial Costs

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Free Zone features & benefits

  • You own 100% of your company for all activities
  • Ease of formation of your company
  • Custom duty exempt international trade, but payable within the Oman, Bahrain, Saudi Arabia, UAE, Qatar, and Kuwait [GCC] countries
  • Physical products sold within the UAE only via locally registered agents
  • Service business transactions allowed within the UAE

Setting up a small business Dubai: Local Jurisdiction features & benefits

  • Sell your products anywhere in the UAE or GCC
  • To do business with government entities, a local jurisdiction may be essential
  • Trading and Commercial activity licenses require you to have a UAE national as a ‘sponsor’ who will own 51% of your company on paper
  • Professional licenses require you to have a UAE national as a ‘service agent’. You can own 100% of the business
  • In both cases, a court agreement outlining your arrangement with the UAE national is required
  • You will only need to pay an annual fee, not a percentage of the profits
  • You can have your office anywhere the Emirate of registration

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4 criteria to consider that influence overall costs

Here are other insights about how most clients make their selection

1. Location

a. Do you need your company to be registered and located in Dubai or will Sharjah, Ajman, Umm Al Quwain, Fujairah, or Ras Al Khaimah do for you?
b. This decision narrows down the selection of the free zone
c. Dubai free zones are more expensive, but you may want to be in Dubai for business reasons.

2. Activity

Some business activity licenses are available only in certain free zones or for a local company

If you are clear about the type of license you need that will narrow down your choice further.

3. Visa requirement

If the initial number of employment visas required is certain, then that will determine the amount of office space you will be required by law to have.

Please note that the cost of living for your employees will be less in Ajman, Sharjah, Ras Al Khaimah, Umm Al Quwain, and Fujairah when compared to Dubai.

4. Office space

Authorities generally require 10 sq meters [~100 sq ft] of office space per employee visa
Naturally, office space doesn’t come in straight multiples of 10 sq meters

So the office space you rent will be dependent on the next largest size available
Ask about any special free zone deals that are being offered currently.

Setting Up A Small Business Dubai | Reduce Your Initial Costs

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Setting up a Small Business Dubai

Finnie Samuel

Setting up a Small Business Dubai | You Don’t Need to be a Sole Trader

Setting up a small business Dubai: Sole Trader is the most common form of small business in the world

The costs of a small business incorporation are insignificant compared to the wealth you will protect! And you can even think about incorporation offshore, regardless of your size.

Sole trader is the most common form of small business in the world. It has many advantages, but the disadvantages are far too great.

Increasingly, entrepreneurs are opting to incorporate a business instead of keeping it as an unlimited liability sole trader firm or a partnership entity.

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Setting up a Small Business Dubai: Some advantages of incorporation even if you are small are as follows:

Limited liability:

Unlike partnerships and sole trading firms, your liability will be limited to the net worth of your business. Your personal belongings are not at risk due to your business.

Corporate Tax Treatment:

If you are doing business internationally, by incorporating in tax haven jurisdictions like Seychelles and Dubai your corporate bodies will be exempt from tax. So after incorporating a business your Setting up a Small Business Dubai can be tax free and you can earn more income.

Easy Attraction of Investors:

Incorporating small businesses have manifold advantages. An incorporated business can attract more investors and your company can grow, through easy access of funds. Sky is the limit!

Setting up a Small Business Dubai: Attract More Investors and Your Company Can Grow

Transfer of Shares:

You can transfer your share in the business to any person you want, thus selling your business in chunks and raising money to fulfill your needs becomes easier.

Separate Legal Entity:

A company incorporation has a separate legal entity from its owners, which means it can sue and can be sued in its own name. So if your company is sued in the course of your business, your personal assets will not be a subject of contention.

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Perpetual Succession:

This is a critical issue for many of us. Often we build businesses and then in the later years worry about succession and whether we can hand it to our heirs.

The major advantage of incorporating small businesses is perpetual succession. So, unlike the sole trader and partnership firms your incorporated business will remain alive after your death, ensuring maximum benefit to your descendants.

Credit Worthiness

Banks like to see Balance Sheets and Income Statements. They like to discuss Cash Flows and profitability calculated into the future. The love stability and predictability in management.

And so they too prefer to lend to incorporated limited liability companies for all the reasons we mentioned earlier.

By forming a small business incorporation you will have many advantages over other modes of small business. The blood and life of a business is cash and capital.

Sometimes a timely capital influx can ensure prolonged benefits and at other times this capital influx is necessary for the growth of the business or to take sudden market opportunities.

In both cases if you have the necessary resources, you can always put the required capital into your business as and when required.

But in tight monetary situations, the creation of this influx by you might be impossible and so help and investment of others may be needed.

Investors are not usually interested in loosely structured unlimited liability businesses. But they may be eager to invest in strongly structured, limited liability businesses. Your Setting up a Small Business Dubai can edge the sole trader in this regard too.

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Rules and Regulations framed by most countries encourage the formation of incorporations.

The focus is on turning small businesses into small business incorporations. Thus reporting requirements for incorporations, especially setting up a Small Business Dubai are deliberately made simpler and easier to comply with.

Here too there is only a small increased hassle created by the process of company incorporating.

Reduction of Taxation and even its negation in some countries is a substantial advantage for incorporating businesses.

Countries like Seychelles and Dubai are called tax havens as there is no income or corporate taxes in existence in these countries especially for offshore incorporations.

This has been done to promote investment and attract investors.

However, if you don’t want to spend the time creating a new company, you could easily buy incorporation! Read here for more information.

In summary, incorporating your small business may bring with it a little more paper work and some minor cost increases, but it will surely go a long way towards protecting your wealth, your children’s inheritance, and your ability to raise required funds while limiting your liabilities!

How can you know, when or even if, you should incorporate your business? Straight talk about business entities – how to make the right choice.

What’s involved and what are the benefits? Learn the answers quickly and in easy-to-understand language with this multi-media program designed specifically for entrepreneurs.

Are you looking for lawyer quality article of incorporation documents? Or perhaps you want to know more about how to decide on whether you should incorporate at all?

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Do you want to know, when or even if, you should incorporate your business?

Straight talk about business entities – how to make the right choice.

What’s involved and what are the benefits? Learn the answers quickly and in easy-to-understand language with this multi-media program designed specifically for entrepreneurs.

Do you need help in doing your incorporation? Consult Easy Contracts.

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