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Procedure to open a small business in the Emirates

What should be the steps to follow and the documentation to present

A friend of Spanish nationality wants to open a small company in the Emirates. Currently lives in Colombia. What should be the procedure and documentation to follow?

The main characteristics of the corporate vehicles available in Dubai are the following:

• Local company

– A local company allows non-commercial or civil activities or commercial activities in Dubai.

– In the case of commercial activities (Limited Liability Company or LLC), 51% of the company’s shares must be owned by a UAE national. Despite the possible risks that such political power could create, we highlight that there are very effective ways to minimize the risks that the existence of a local partner could in principle entail.

– In the case of carrying out a professional activity (professional license or branch of a foreign company), instead of a local partner, the figure of the local agent will be required. While he is not a member of the entity, this figure should be the link with the government of the Emirate and the UAE.

– Both the local partner and the agent usually receive an agreed remuneration, but it is important to establish other mechanisms to minimize any unexpected change of position, especially in the case of LLCs.

– One difference to keep in mind is that while LLCs have limited liability, branches or local professional companies do not have it.

– The implantation of a branch requires the deposit of AED 50,000.00 with the authorities until the closing of the company.

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• Companies in one of the multiple free zones (free zone company):

– 100% foreign ownership is allowed, allowing commercial activities to be carried out without the participation of a UAE national.

– There are several types of licenses: commercial (trading license); of services (service license); and manufacturing or industrialization (manufacturing / industrial license).

– They can carry out their activity in the free zone and outside the UAE.

– Many service companies take the risk of operating in the UAE through companies established in free zones. It is a common practice, not necessarily legal.

Free zone companies are subject to the regulations of the free zone in question, as well as the respective provisions of the Dubai emirate and federal laws. The DIFC (Dubai International Financial Center) free zone has its own laws and regulations – complemented by the UAE legal framework.

An alternative to the aforementioned physical presence options is the possibility of signing a cooperation and/or representation agreement with a local entity through a commercial agency relationship. In evaluating this possibility, the impact of registering the relationship with the authorities should be considered, since its registration (only allowed to companies that are 100% owned by UAE nationals) may make it difficult to leave in case of dissatisfaction with the service of the agent.

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