09 Nov Ready to set up an onshore company in the UAE?
When setting up in the UAE, entrepreneurs are usually faced with two options. Some choose to set up in one of the nation’s free zones, meanwhile others opt to set up an onshore business – usually to trade with the local UAE market, something which free zone companies cannot do directly.
The most common type of onshore business is the limited liability company – or LLC. Defined as an independent legal entity owned by multiple shareholders, LLCs allow foreign entrepreneurs to set up in the UAE mainland with the assistance of a local partner. While this local partner officially holds a 51% stake in the business, they have no say in day-to-day company decision making and you’ll keep 100% of the profits – simply paying your sponsor an annual fee for their service.
A key reason for the popularity of LLCs in the UAE – aside from allowing for direct trade with the local market – is that they afford entrepreneurs limited liability. For example, should the business get into any legal or financial trouble, your liability is capped at the amount you have invested in the business.
Why opt for onshore?
So if you’re ready to do business in the UAE and looking for a straightforward and affordable way to trade from and with the mainland, then setting up an onshore business is likely your best bet. Below is everything you need to know to help you get started.
1. Simple setup: Setting up an onshore company in the UAE is incredibly straightforward – and often less arduous than forming a free zone company. To establish an LLC, you simply need to register online with the Department of Economic Development (DED) to apply for your licence. New DED initiatives have made the setup process so easy that, providing you meet the entry criteria, you could be registered within just 90 minutes, without having to commit to a lease agreement.
2. Affordable option: As well as being simple to set up, launching an onshore company in the UAE is also incredibly affordable: licensing costs are comparable to popular free zones such as Dubai Multi Commodities Centre (DMCC), starting at around AED 20,000. What’s more, with no requirement for paid upfront share capital, total startup costs are low.
3. Trade from anywhere: When setting up an onshore company as an LLC, you can take on office space, set up your business and trade from anywhere in the UAE mainland.
4. Multiple sponsorship options: While you will be required to work with a local partner to set up in and trade with the UAE mainland, there are multiple ways of doing this. Either work with a UAE national – who must be a professional, business owner or a government employee – or seek out the services of a local agent or company formation specialist who can act as your sponsor.
5. Trade directly with the local market: Once you’ve found a sponsor and established your onshore business, you’ll be able to trade with the entire UAE market directly – something that is not possible from a free zone. What’s more, mainland LLCs can also bid for lucrative government tenders – a huge opportunity in the UAE where such contracts run into the billions of dollars each year.
6. Trade in a wide variety of business activities: When setting up onshore, it’s possible to trade in a broad and extensive range of business activities. The DED lists over 2,000 that you’re permitted to undertake in industries as varied as finance and agriculture.
7. Cover more ground with branch offices: LLCs are not the only option when it comes to setting up an onshore company in the UAE. It’s also possible to gain a greater market share and build a presence in the mainland by opening branches of your existing company throughout the Emirates.
8. Plenty of visa options: A major plus of setting up an onshore company in the UAE is that it allows you to apply for multiple visas for your employees. In fact, there is no upper limit on the number you can apply for – though this is linked directly to the size of your premises. The general rule of thumb is 100 sq. ft. of office or warehouse space per visa. Having said that, in some cases, this may be negotiable with the DED. For example, a domestic cleaning company may have 500+ employees working remotely – and therefore will not be required to take 50,000 sq. ft. of office space.
9. It’s easy to sponsor dependants: As the owner of an onshore company in the UAE, not only can you apply for visas for your employees, you are also eligible for an investor visa. As well as allowing you to stay as a resident in the UAE for up to three years, it also means you can sponsor family members and domestic staff for their visas too. Whether you require a visa for a spouse, child, maid or driver, the process is straightforward: entry permit, status adjustment, a medical fitness test, then Emirates ID registration and visa stamping. As this is such an important process, it’s a good idea to get advice from an expert in setting up UAE free zone businesses to ensure that before starting an application, both you and those you are hoping to sponsor meet the entry criteria.
10. Set up with multiple shareholders: An LLC must be established with at least two shareholders – but it’s also possible to do so with plenty more. While there is no official upper limit, the generally accepted shareholder cap is 50 – these can be either individuals or corporate entities.
How to set up an onshore company in the UAE
If you’re sold on the idea of forming an onshore company in the UAE – and wish to establish an LLC – the next question is how?
As I’ve mentioned above, the first thing to do is find a local sponsor. As this process can be complex, it is advisable to engage the services of a company formation specialist at this stage.
Once your sponsor is in place, you can apply for your licence. This begins by choosing your business activity from the DED list – again, a company formation specialist can help you decide on the most suitable.
Next up you need to choose and reserve your company name. There are a few things to keep in mind here: offensive language is forbidden, company names cannot contain religious references, or indeed references to any known organisations (anything from ‘FBI’ to ‘Mafia’). Only full personal names can be included in your company name – meaning both first name and last name are required if you are using your personal name for your company name. When it comes to your company name in different languages, all names must be written as they are sounded out, rather than translated.
Once your name is registered, you are ready to apply for your licence. To do this, you’ll need to provide the DED with certain documents, including your licence application, memorandum of association detailing sponsor arrangements and ownership percentage among all partners, a certificate of incorporation (if one or more shareholders are corporates), the board resolution approving the LLC, plus copies of shareholder passports and visas. You can also apply for your immigration card and any additional visas that may be required at the same time.
And it’s as simple as that. Once your application has been reviewed, you’ll usually receive your licence in a matter of weeks. All that’s left to do is open your corporate bank account and you’re ready to set up your business and trade from anywhere in the UAE.