An All-inclusive Guide to Formation of LLC Company in Dubai

The business-friendly environment of Dubai provides the perfect ground for setting up businesses. With the geographical advantage of its strategic location, it is the nexus of trade and commerce in the Middle East. The unsurmountable development the city has experienced and continues to do has made it the top choice for domestic and foreign investors to set up their brands. 

Given the stability of the city’s economy, it is one of the most sought-after places in the world to start a company, specifically an LLC (Limited Liability Company) due to the immense implications for longevity and revenue they have. The cosmopolitan appeal and high infrastructure of the city pave the way for unprecedented success for such companies.

In this space, we are going to present you with an all-inclusive guide to everything you possibly need to know about an LLC company formation in Dubai. We are going to dig deep into the benefits of such companies, the requirements you need to fulfil to form them, the steps you need to undergo to set them up, and the cost, time, and challenges associated with their formation. Bookmark this page because this will come in handy when you are ready to get into action for setting up an LLC company in Dubai.

What is an LLC Company in Dubai?

An LLC refers to a business entity wherein the liability of every shareholder is limited to their individual shares in the capital. In Dubai, and by extension, UAE, foreign investors get full control over their business. Due to its flexibility and adaptability to fit into diverse business activities, it is one of the preferred business models for entrepreneurs, especially small-scale or novice investors in Dubai. 

LLC provides management and taxation flexibility as well as personal liability protection. It safeguards the interests of shareholders and owners from personal liability for any business debt or other allied obligation. In Dubai, this type of business can be owned by a single person or multiple people, with the maximum number extending to 50.

Under the corporate rules of Dubai, each shareholder in an LLC is accountable for their share in the capital. As such, as an individual investor, your liability is only restricted to the extent of your capital investment in the company. 

In Dubai, the Department of Economic Development (DED) is the official authority that is tasked with the job of issuing licenses to LLCs in the city. Furthermore, it also regulates and oversees the classification of the economic activities that the LLCs participate in, thereby ensuring their compliance with the local laws and order. 

Benefits of LLC Company Formation in Dubai

The immense popularity of LLCs in Dubai is because of their multi-beneficiary aspects, with the primary benefits among them being the following.

Flexibility of Ownership

LLC offers 100% foreign ownership in varied sectors, thereby eliminating the need for procuring a UAE national sponsor. This aligns with the history of Dubai of being the ideal hub spot for foreign investors to flourish their businesses. 

Limited Liability 

As shareholders are only accountable to the extent of their capital share in the company, when you invest in an LLC, your personal assets are protected from company liability. This significantly increases the odds of mitigating risks and suffering from losses beyond your control.

Ease of Access to Local Market

An LLC in Dubai offers you direct access to the local market. This is in stark contrast to free zone companies that remain restricted to their respective zones. The ease of access to the local market gives you bigger exposure, leading to more opportunities for better revenue. 

Relaxed Taxation Policies

Dubai has always been a pioneer in formulating relaxed taxation policies and this extends to LLCs as well. You will be happy to know that there is no corporate tax for companies with taxable income up to AED 375,000, and only 9% corporate tax for companies with taxable income above AED 375,000. It gives more avenues to smaller companies to maximize their profits. Furthermore, the absence of restrictions on the repatriation of capital or profit makes it easy to manage the finances for investors. 

Quick Set Up

LLCs are quite easy to set up. Once you register your business with the DED, which takes about roughly 90 minutes, you can set up your LLC within 3-4 days. The quick and hassle-free formation process of these companies makes them extremely popular among small-scale and novice investors who are trying the learn the working mechanisms of the Dubai market. 

Absence of Minimal Capital Requirement 

The fact that there is no minimal capital requirement to form an LLC makes it more affordable, economical, and accessible to a wide pool of investors. This is especially true for those who are dipping their toes in the world of business investment for the first time. Therefore, they are the ideal business model for startups. 

Flexibility in Location

Since LLCs are not just limited to the free zones of Dubai, you can set them anywhere in the city. This heightens the flexibility for the investors as they are not restricted by limited options for their offices. You can freely pick your preferred location based on the needs and purpose of your business.

Diverse Implications

An LLC in Dubai has a plethora of implications as it can engage in over 2,000 types of business activities. Whether you want to dive into manufacturing, real estate, trading, or services, the versatility of LLC will allow you to adapt to various sectors. 

Ease of Expansion

One of the key goals of any business is to expand. LLCs are well-structured to ignite this goal as they can be expanded to other parts of the country and the Gulf Region with minimal restrictions. Opening branches in multiple areas in the said locations is of ease with LLCs. 

Residence Visa Eligibility

Setting up LLCs enables their shareholders and employees along with their families to be eligible for a UAE residency visa program. From a work visa for forming an LLC to an investor visa which allows family sponsorship, the government has initiated several steps to make it easy for foreign nationals to invest and reside in Dubai.

License Requirements for LLC Company Formation in Dubai

As we stated earlier, the DED supervises and regulates the economic activities of LLCs in Dubai. It is also responsible for issuing an LLC license to these companies to allow them to operate their businesses legally in Dubai. Licensing helps make sure the LLCs are meeting the regulatory requirements of the city, which, in turn, helps in making Dubai a safe, conducive, and well-regulated environment for both entrepreneurs and their customers. 

The type of licensing one needs to obtain will depend on the business activity of their LLC. Broadly speaking, there are four major types of LLC licensing in Dubai. They are as follows.

Industrial License for LLC 

Industrial license is for those businesses that are dealing with manufacturing and industrial operations. This may include the production of goods, assembly, and processing.

Commercial License for LLC

Companies engaged in commercial activities of selling goods and services or trading activities such as import and export of goods need to obtain a commercial license. 

Professional License for LLC

Professional licensing is for LLCs that are involved with businesses which offer professional services such as healthcare, education, consulting, or legal, among others. 

Tourism License for LLC

LLCs engaged with the tourism and hospitality sector, including hotel services, tour operators, and travel agencies, among others, need to obtain a tourism LLC license to operate their businesses. 

Steps to Set Up an LLC Company in Dubai

Even though the setting up process of an LLC in Dubai is quite easy and quick, you need to ensure that you are complying with the business guidelines and legal framework of Dubai, and the UAE, by extension. This is why we are providing you with a step-by-step guide that will help you follow the linear path to make the entire process a hassle-free one. 

Here are the steps you need to follow to set up an LLC in Dubai.

Selecting the Activities of Your Business

The first order of business in setting up your LLC in Dubai requires you to determine the type of business activity you will engage in. The city offers plenty of diversity in the type of activities your LLC can get involved in but you need to remember that engaging in certain businesses might be easier than others as some may require special approvals.

Trading, manufacturing, real estate, tourism, and professional services are some of the many sectors you can get into. This will help you in structuring your company in fulfilling the apt license requirements. We recommend you research the market thoroughly beforehand to analyse which sector you have expertise in and which will bring you maximum returns. 

Finding a Location for Your Company

Next up, you have to scout a location for your company. You need to take into account the ease of accessibility to the concerned market, transit availability, and the suitability of the nature of your business to the location. These considerations will help you make the most out of the location.

You can choose between Dubai Mainland or a free zone in the city. Once decided, you have to procure a tenancy contract for your office space that can take up to 1-2 weeks depending on the availability of the concerned office space. Dubai Mainland will allow you to operate anywhere in Dubai and the UAE. Free zones are restricted to dedicated spaces in the city. Many companies are registered without requiring an office space for the first year. This feature is handy for those foreign nationals who are settling in and trying to grasp the nuances of the market. 

Reserving a Name for Your Business

Coming up with the name of your company and reserving it is the next step in the process. Reserving the name will help you avoid any breaches of the naming convention law in the city. Make a list of potential names for your company keeping in mind the type of business activity you are engaged in, the location, target audience, objective, and other allied factors.

The name you select must be unique, appropriate, inoffensive, not misleading, reflect the nature of your business, and should not conflict with other businesses. You also need to adhere to public morals and regulations while selecting the name of your LLC. 

Submitting Required Documents

Once you have selected the business activity, location, and name of your company, you need to assemble and submit all relevant documents to DED to issue approval for the same. The documents will help the official authority in examining the authenticity of your business and verifying your identity.

You can also take the assistance of an agent to help you assemble all the paperwork. This process essentially helps in making sure you are complying with the law, order, and regulations for operating businesses in the country. 

Drafting an MOA to Seek Approval for Business Activities

The next order of business is drafting the MOA (Memorandum of Association) of your company. It essentially outlines the ownership, structure, and operations of your business. It has to be notarized as well as signed by all the shareholders. This document helps in governing the internal mechanisms of the company and also defines the relationships between the shareholders.

Additionally, prepare the Local Service Agent (LSA) agreement as well. These documents will help you in seeking approval from the concerned authorities to carry on with your business operations. As these documents help define the company's legal standing, they are the primary requirements for obtaining approvals. 

Obtaining a Trade Licence

Once the concerned authorities have verified and approved the documents you have submitted, your company will be registered and you will be provided with a trade license. This can take up to a couple of weeks depending on the completeness of the documentation. The authorities make sure that your company is complying with the regulatory and legal standards of Dubai.

This is the final step that officiates the establishment of your LLC and you are given the authorization to commence the operations of your business activities. After this, you can proceed to open a corporate bank account for your LLC in Dubai and start applying for labour cards and residency visas. Don’t forget to timely renew your LLC license to continue operating in the city. 

Time Required for LLC Company Formation in Dubai

Overall, it can take anywhere between 4-8 weeks for the complete LLC company formation in Dubai. A lot of this time depends on the complexity of the documents, the nature of your business activity, and the time taken to seek approvals to commence business operations. Timely planning and taking the assistance of a business consultant can help you avoid unnecessary delays.

Here is a breakdown of the time required to form an LLC in Dubai.

Documents Required to Open an LLC in Dubai

To successfully start an LLC in Dubai, you need to assemble and submit a set of documents to the DED. Here are all the documents you need to provide to seek the necessary approvals.

• Passport copies of all the shareholders.
• MOA for the LLC Company (Must be notarized by a public notary).
• NOC (No Objection Certificate) for all the shareholders.
• Tenancy Contract for the office premises, if any.
• Emirates ID copy, if any. 
• Visa copies for all shareholders who are UAE residents.
• Bank reference letter for shareholders, if any. 
• Passport-sized photo of all shareholders.

Cost of LLC Company Formation in Dubai

The cost of forming an LLC in Dubai heavily depends on the type of business activity and business location. Typically, the cost can range between AED 20,000 to AED 30,000. Proper planning of the company formation and analyzing market trends can help you plan your budget accordingly. 

Here is a breakdown of the cost involved in the formation of an LLC in Dubai.

Please note that it is a smart practice to consider other additional expenses, such as operational costs, utility costs, administrative charges, and visa fees for employees, beforehand. Renewal of a trade license can cost you around AED 10,000 to AED 15,000. Also, note that selecting a premium name for your LLC can cost you an additional fee. 

Challenges and Considerations

While the process of forming an LLC in Dubai is a pretty straightforward one, you might face some challenges in the process. There are certain considerations that you need to bear in mind while setting up these companies. Here are the challenges and considerations you have to take note of during an LLC formation in the emirate.

Business Location

If you are opting to register your business in Dubai Mainland, you need to have a commercial facility or an office space. This means there are additional operating costs to bear. Free zones exempt you from this expense. 

Share Capital Requirements

Although there is no minimum capital requirement for forming an LLC, certain specific business activities can require a minimum capital requirement of AED 50,000 to AED 350,000. On top of that, in specific cases, a UAE national has to hold 51% of the ownership of the company. Therefore, carefully selecting the type of business activity for your LLC is pivotal. 

Licensing Requirements

Certain business activities may require specific licensing and approvals from the government bodies. This can add up to the time required to form the company. Additionally, for certain activities, you would need to rely on Emirati partnerships or ownerships as well. 

Corporate Taxes 

The taxation policies are relaxed for LLCs as there is no corporate tax for those whose taxable income is up to AED 375,000. However, there is a 9% corporate tax levied on those companies whose taxable income is more than AED 375,000. Keeping up with the tax regimes, filing returns, and claiming refunds can be overwhelming for a foreign investor.

Compliance

Complying and staying updated with the guidelines of trade licensing, taxation, accounting, and visas can be challenging. The city has strict law and order, and without a thorough study of the market, foreign investors can be in tricky situations.

To Conclude

LLCs are popular investment options in Dubai as the strategic location and business-friendly environment of the city offer opportunities for unprecedented profit for shareholders. Since every shareholder is accountable for their own share of the capital, the risk of suffering from company losses is mitigated efficiently. This makes LLCs a desirable option for shareholders. 

The process of setting up these businesses is also pretty straightforward. As long as you fulfil the legalities and are following the linear pattern mentioned above, you will be able to set it up with no problem. 

The fact that foreign investors can get complete ownership of the companies and there is no minimum capital requirement for forming LLCs, makes them even more relevant and ideal choices for small-scale businesses or beginner investors. 

FAQs

More about the Formation of an LLC Company in Dubai

What is the cost of LLC company formation in Dubai?

It can cost you around AED 20,000 to AED 30,000 to form an LLC in Dubai. This includes registration fees, license fees, notary fees, approval and permit fees, among others. 

Can a foreigner open an LLC in Dubai?

Foreigners can open LLCs in Dubai with complete ownership in most cases. Additionally, you don’t need a UAE national sponsor to start an LLC in the city. 

Can I own 100% of a company in Dubai?

You can own 100% of a company in Dubai as per the UAE legislation. As long as you comply with government regulations and laws and operate within the permitted business activities, you can fully own a company in the city. 

Do I need a local sponsor for an LLC in Dubai?

You do not need a local sponsor to form an LLC in Dubai. This means that foreign entrepreneurs and investors can establish and own companies in most of the sectors in the city. 

What is the minimum capital requirement for an LLC in the UAE?

There is no minimum capital requirement to form an LLC in the UAE. As such, as an owner, you can decide on the minimum capital requirement depending on the objectives of your business.