Understanding the Different Company Types in the UAE

Written by Arpan Ghosh

Since its earliest days, Dubai has attracted entrepreneurs and visionaries who want to set up their own business in the city. It is a relatively simple process with no red tape, there are no corporate taxes (except on banks and oil companies), and startup costs are much more agreeable than what you might expect to pay in other global cities such as London or New York.

Before you set up a company in Dubai, it is important to understand the different types of companies that you can form, and the pros and cons of each.

Company Types

Companies within the UAE, and particularly in Dubai, fall into three distinct categories. The first two - mainland and free zone - are both considered to be onshore companies and provide benefits such as residence visas and office options (including virtual offices and flexi-desks). Offshore companies do not provide residence visas as part of the company setup and do not have any physical office space.

Mainland Company

This is one of the most common company types, falling directly under the jurisdiction of the Department of Economic Development. A mainland company can legally offer its services anywhere within the city, including in free zones, and can also do business internationally. Retail outlets, restaurants, trading companies, brokerages, legal firms, any company that works with government entities, and others all fall under this category, which can be further subdivided into limited liability companies (LLC), branches of foreign companies, civil companies, and so on.

Benefits

  • Can operate anywhere, locally or internationally
  • Can open bank accounts with ease
  • Cant rent office space anywhere in the city
  • Eligibility for residence visa

Limitations

Mainland companies must have an Emirati shareholder with at least 51% ownership. It was announced last year that mainland companies would soon be able to have 100% foreign ownership, and that ruling will go into effect from the 1st of June, 2021. However, this is currently limited to certain types of companies (such as construction and manufacturing) and is yet to be applied on a larger scale.

Free Zone Company

For foreign nationals who would prefer to retain 100% ownership of their companies, free zones are an ideal option. There are 45 free zones across the UAE, with more than 30 in Dubai alone. Each free zone has its own designated authority to manage all governmental and legal processes, helping to make operations seamless. The zones are themed to allow for different activities - for example, Dubai Media City is set up for media production companies and is home to the local and regional headquarters of several TV channels, while Dubai Internet City is an IT hub where you will find the local offices of major tech companies.

Benefits

  • 100% ownership, no Emirati partner or sponsor required
  • Flexibility in renting office space, including virtual offices
  • Eligibility for residence visas
  • Excellent infrastructure within free zones for ease of operations

Limitations

  • Can only operate in their designated free zones
  • Office space must be within the free zone
  • Banks will perform more due diligence when opening an account

Offshore Company

The offshore option is great for companies that want to have a local setup without the need for a physical presence. They are perfect for acting as holding companies to protect wealth and assets, as all details are kept anonymous. Offshore companies are not considered to be operable within the UAE and can only conduct business internationally.

Benefits

  • 100% ownership, no Emirati partner or sponsor required
  • No office space needed
  • Limited liability company by default, lessening risk
  • All company and ownership details are confidential
  • Cost effective option for incorporating a company

Limitations

  • Very few banks will offer accounts to offshore companies, will mostly need to rely on online banking
  • No residence visa eligibility

Your reasons for starting a company in the UAE - for the purposes of having a local business, a regional office for a global corporate entity or as a holding company to consolidate your assets - will help to determine exactly what sort of company you need to form and, consequently, what legal frameworks you will be working with.

We have already looked at the process involved in forming an offshore company. Future blog posts will take a more in-depth look at mainland and free zone companies. If you have any questions about company formation in the UAE, please reach out to our Private Client Office, who will be happy to assist you with your queries.