free-zone-vs-llc-6-factors-to-consider-when-setting-up-business-in-uae

Free Zone vs LLC? 6 factors to consider when setting up business in UAE

  • Admin
  • 08 Feb 2024

Setting up a business in UAE is very easy. However, there are many options. The difficulty arises in selecting which option works best for you.

In UAE there are 7 emirates, each emirate has its own mainland licensing authority (Department of Economic Development). Each emirate also has many freezone licensing authorities. There are about 45 freezone options in the UAE. There are also obviously offshore companies as an option as well. It becomes difficult for an investor to select which option works best for them.

Bottom Line
1 What kind of business activity do you intend to do?

Based on the activity you select, you might be able to rule out some options. Most free zones permit most of the business activities/operations, however, there are some activities that will require you to get a mainland license or an LLC, for which you might need to have a UAE national partner in the company. This list can get exhausting (that’s why we’re here to help)

Another factor that may affect your decision is whether you intend to do business in the UAE mainland. In that case, there are some restrictions that will need to be worked out based on the freezone you select.

Also, if you intend to take on any major government tenders having a freezone license might not be enough.

2. What is the ownership structure you are looking for?

If you select the mainland option, you need to have a UAE National (i.e. a local sponsor) who owns 51% of your company. However, UAE has rolled out a landmark law which allows 100% FDI ownership for 122 different activities. These activities have minimum capital requirements and some other conditions to be met. If your company activity is not in one of these 122 activities, you could still set up a company in the free zones with 100% ownership.

3. What kind of warehouse/factory space do you need?

Setting up a company in the mainland enables you to get access to any type of space. However, some frezones have restrictions in the type of warehouse or factory that you may choose. There are restrictions on height, ability for smoke to be emitted, etc.

4. What is your budget? UAE Free Zone vs Mainland business license fee.

In general, free zones are slightly more expensive than a mainland license. The cheaper freezone options charge a little over AED 8,000 for the license fee. While, the more expensive options can cost over AED 60,000 for the license fee.
                                                                               

The team at MSI are experts at determining the choice of license that is most suited to you. You can drop us a line on any questions you may have.

5. How easy is it to set up a UAE business bank account?

With the UAE economy maturing, there have been compliances that have been implemented which has resulted in easy bank account set up processes.

Any potential difficulties in setting this up depends on activity on the license, the licensing authority and the history of the owner itself.

6. How many visas do you need? UAE business visa requirements.

You would need to look into how many visas are allotted to your license. Some license options do not have any visas allowed, and will be a problem if you plan to move to UAE or plan to hire other staff in the company. You need to see if the allotted license is enough for your requirements.

Bonus factors to consider-
7. Do you have preference of emirate for the location of your business?

Having a business in Dubai or Abu Dhabi obviously adds on the brand value of the company. However, if this is not important to you, you setting up in any of the emirates can also be looked into.

Need Help?

 

For any advice on setting up a business here get in touch with us for a free consultation

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