Dubai: Have you been thinking of setting up a business in the UAE but have no idea how much of an investment it will be? Whether you are working in the UAE and want to start a business on the side, or want to run a business as a full-time entrepreneur, the UAE has a thriving business community, and many people are interested in starting their own enterprise.
In Dubai alone, the first half of this year saw over 45,000 new business licences being, according to Dubai Economy and Tourism (DET).
From starting a sole establishment to a small LLC, there are multiple ways in which you could embark on your journey towards entrepreneurship.
While there are several options available for entrepreneurs, an LLC or a Limited Liability Company on the mainland is a popular option in the UAE as it offers more operational flexibility, according to business set up experts in the UAE.
It allows the business owner or shareholders to have 100 per cent ownership of the company, lets you conduct business anywhere in the UAE and also a long list of business activities that can be conducted through the licence.
The factors that can change your business set up costs
Gulf News spoke with company formation specialists in the UAE to find out exactly how much setting up an LLC on the mainland can cost. While there are some mandatory costs that you need to budget for, there are also some factors that can increase your total expense.
1. Company’s legal type and shareholders
According to the experts who spoke with Gulf News, one of the factors that can affect set-up costs is the type of company you wish to set up, as well as whether the company is being opened up by an individual or a corporation is opening a branch.
“The key issue when it comes to the complexity of the costs of setting up a business in the UAE is that it varies depending on the activity you want to do, and, secondly, who owns that business,” Nazar Musa, CEO of PRO Partner group, a business set up consultancy in the UAE.
He added that companies wishing to set up a branch office in the UAE, for example, would need to complete many more documentation procedures, compared to when a business is being set up by an individual.
“If you are a resident and all of the shareholders of the company are going to be individuals, then the business set up process is easier and cheaper compared to a corporate business. So, a business that is onshore and is started by individuals has a relatively straightforward set-up process, with some fixed and variable costs,” he said.
A business that is onshore and is started by individuals has a relatively straightforward set-up process, with some fixed and variable costs.
2. Your business activity/activities
According to Gary Thompson, Sales Team Manager and Corporate Structuring Consultant at VirtuZone, a business set up consultancy in the UAE, another important factor that affects set up costs is the business activity or activities that your business will conduct.
“Depending on your business activity, you would need special approvals from relevant authorities, like the municipality, civil defence or other bodies,” Thompson said.
If you are starting a nursery or play school, for example, you would need several approvals from the education authorities as well as inspections and audits to ensure you comply with the infrastructure, health and safety requirements. If you are setting up a clothes shop or a content management consultancy, on the other hand, there are no major additional approvals you would need for the licence registration.
Depending on your business activity, you would need special approvals from relevant authorities, like the municipality, civil defence or other bodies.
The jurisdiction, when it comes to setting up a business, refers to where you will be setting up a company: Will it be in a special economic zone or free zone? Will it be on the mainland? Which Emirate will you be setting up in?
Each Emirate or free zone will have its own economic regulations, which you would need to comply with. The cost can also vary a little, from one free zone and Emirate to another.
“Abu Dhabi, for example, gives a two-year licence at the time of setting up the business, which means that you will not have to pay for licence renewal the next year,” Thompson added.
Cost of setting up a mainland LLC
Keeping the factors mentioned above in mind, here is a breakdown of some of the mandatory and variable costs you will need to pay at each step of the way when you are setting up an LLC on the mainland:
Step 1: Submit your trade name and get an initial approval – Dh1,000
As an LLC on the mainland would fall under the jurisdiction of the economic department in an Emirate, you would first need to visit the economic department of the Emirate in which you wish to start the business. Here, you will apply for the initial approvals to receive your business licence. This includes submitting your trade name – where the trade name should comply with the guidelines set out by the economic authority – and getting an initial approval. Once you have completed the process, you will receive the approval certificate and a provisional trade licence number.
Step 2: Get MOA, other documents notarised and attested – Dh2,000
One of the most important documents for your business would be a Memorandum of Association (MOA), which outlines the business activities you will conduct as well as the shareholders agreements, among other aspects of the business operations. This document, as well as any other document that your company needs, would need to be notraised and attested. This can be done at a notary in the UAE. In Abu Dhabi, there is also the option of completing this process online.
Step 3: Find an office location. Ejari – Dh210
From starting your business through a ‘virtual office’, to finding a flexi desk at a business centre or setting up your own brick and mortar office, there are multiple options for business owners in the UAE, depending on their operational needs and budget. Regardless of which option you choose, the document that you need to continue your set up process is the Ejari, which is a registered lease agreement. This costs approximately Dh210.
Step 4: Get any additional approvals needed
As mentioned earlier, this step can vary significantly, depending on the type of business you are setting up. For sectors like education, health or food, for example, you would need special approvals from the municipality or regulatory authority within the industry; a sports centre or club would require additional approvals from the sport body in the Emirate.
The cost for these additional approvals approvals can range from Dh10,000 to Dh30,000.
Step 4: Get your trade licence – Dh20,000
Once you have all the documents in place, you would then need to visit the economic department once again to apply for the trade licence. Provided that all the documents are in order, the trade licence will then be issued.
Step 5: Get your establishment card and immigration card – Dh2,500 + Dh5,500
The next step is to register as an establishment with the Ministry of Human Resources and Emiratisation (MOHRE) as well as the General Directorate of Residency and Foreigners Affairs (GDRFA) of the Emirate.
With MOHRE, you would need to apply for the establishment card and with GDRFA, you need to apply for the immigration card. With both these cards, you will be able to apply for work permits and visas as a company.
The total cost of the establishment card issued by MOHRE is Dh2,500 and the Immigration card can cost you approximately Dh5,500.
Total cost – Approximately Dh31,000
For a fully owned LLC in the mainland, you would need to keep a budget of at least this amount for the set up and registration process.
Additional fees to consider
Here are some of the additional costs that you would need to budget for, depending on your operational needs:
• Additional approvals – This cost can significantly increase your required budget, depending on how many authorities you need approvals from. It is advisable to speak with business set up consultants to find out exactly how many approvals you would need for your business idea, and how much they would cost.
• Rent – Depending on the size and location of your office, you would also need to factor in the rent.
• Utility deposit – If you are setting up your own office, you would also need to pay an initial security deposit to the water and electricity authority of the Emirate. This refundable deposit is approximately Dh2,000. You would also need to keep in mind the utility cost every month for your operations.
• Visa costs – If you are planning to apply for an investor visa, you would need to separately budget for the visa costs, which is approximately Dh6,000.
• Business set up service fees – As the process for setting up a business requires all the steps listed above, you may wish to hire a company formation specialist to ensure that you fulfill all the requirements in terms of documents and approvals. Each business set up consultancy will charge you a certain fee for their service.