Is it better to set up LLC or sole establishment in UAE?
Legal rights, liabilities of the two kinds of businesses explained
Question 1: I want to do a business and establish a company in Dubai. I want to know the difference between a Limited Liability Company (LLC) and a sole establishment. Do I have the legal right to buy a property in the name of the company?
Answer 1: The differences between an LLC and a sole establishment is as follows:
- LLC company can be formed with multiple owners. The shareholders of an LLC are not liable for the company debts or financial claims in the event of the company’s failure, hence their physical assets like home, property and personal bank balance are fully protected against company debts. In the sole establishment (also known as a sole proprietorship), there is a sole owner and he is solely responsible for all the business liabilities and financial obligations of the entity. He has to bear the losses and debts. In particular, the creditors are able to go after a sole proprietor’s personal assets to compensate their debts while this may not happen in an LLC company.
- LLC company can purchase real estate in the name of the company but in the sole establishment, the real estate will be bought under the owner’s name. - LLC Company has its own entity which is independent of its partners, and has the standing to sue in front of the courts as a plaintiff or defendant independently from its partners. In the establishment, the case will be filed against the owner himself as a plaintiff or dependent.
- The paperwork required for a sole establishment is much less because its form involves only one owner. However, the LLC form includes many owners and thus, requires legal paperwork involving the registered company’s name and trade licenses.