Navigating Business Set-up in the UAE: Mistakes to avoid for entrepreneurs

The UAE has cemented its place regionally and globally to establish new and exciting businesses because of its tax-friendly policies, centralised location, and business-friendly environment. It has consistently focused on maintaining the right environment and infrastructure to ensure ease of set-up and growth, thus facilitating long-term interest and investment. Entrepreneurs have everything they need to thrive in the UAE and updated policies and procedures make sure they keep up with the times.

These, however, don’t prevent hundreds of newcomers and first-timers from making common and often expensive mistakes when setting up their businesses in the UAE. It is critical that budding entrepreneurs commit to extensive research beforehand.

“One common mistake new entrepreneurs make is rushing into company formation without understanding the right structure or long-term implications,” says Venkatesh Santhanam, Managing Partner, MCA Management Consultants.

“For instance, in the UAE, choosing between mainland, free zone, or offshore set-up affects compliance and growth,” he adds.

While free zones are ideal for businesses that focus on international markets with full foreign ownership and tax breaks, mainland businesses may need local sponsors. Offshore jurisdiction is great for holding companies that don’t need physical offices in the country. Understanding these demarcations can influence a company’s trading ability, the profit it retains, and its long-term growth prospects.

Licensing is yet another common mistake that new business owners make in the UAE. “Entrepreneurs frequently choose the incorrect license category in their hasty set-up decisions,” says Preethu M.C, Branch Manager Dubai, Start Any Business (SAB).

“We place a strong emphasis on openness right from the beginning, aligning banking, compliance, and structure with the founder’s actual business plan so that 80 per cent of future problems can be avoided.”

Since every business in the UAE must obtain the specific license pertaining to the business, it is important that entrepreneurs consult with licensing and business classification experts before applying to the Department of Economic Development or the appropriate free zone. Incorrect licensing will lead to fines or even cancellation of the license.

Most importantly, though, a lot of first-time businesses tend to rush into the set-up process without adequate market surveys, long-term planning regarding scalability, and proper financial preparation that can absorb hidden and sudden costs.

“A common mistake is building the business around immediate needs instead of the growth plan ahead,” says Mahima Sharma, Managing Partner, Smart Zone. “Many founders rush into licences, jurisdictions and team choices without considering how these decisions impact expansion or investment. The early stage should be treated as a strategy exercise. Clarifying markets, funding goals, talent needs and long-term positioning before making structural decisions create a strong foundation.”

The set-up process doesn’t just stop at the right paperwork. It also involves hiring the right people, understanding and evolving with consumer demand and preferences, and respecting the cultural framework in all forms of marketing and communications. If the promotional strategy is weak at the outset, it will affect how the business grows down the line. So, it is critical that any new business is digital first in advertising, savvy in forming growth partnerships, and intentional in networking for long-term progress.

“Seek professional guidance early, think beyond the license, and review your structure as the business evolves,” says Santhanam. “Formation is not a formality; it is the foundation of sustainable success.”