Understanding the different business structures in the UAE such as LLCs, Partnerships, PJSCs, Branch Offices, and more will help you make the right decisions. 

 From the dazzling skyscrapers of Dubai to the stunning beaches of Abu Dhabi, the United Arab Emirates (UAE) has become a beacon for foreign investors seeking new horizons. The secret behind this allure lies in the UAE’s remarkably diverse range of company types that cater to entrepreneurs of all kinds. In this comprehensive article, we embark on a journey to unravel the various business structures, guiding you toward making the best decision for your venture. 

Embracing Diversity: The UAE’s Business Ecosystem 

As the world’s attention turns towards the UAE, it’s no wonder why foreign investors flock to its shores. The country offers a business environment like no other, accommodating everything from the simplicity of sole proprietorships to the intricacies of company structures. This exceptional flexibility is one of the key reasons why entrepreneurs find the UAE an attractive destination to set up companies. 

For a complete guide to UAE business setup, see UAE Business Setup Guide: Mainland and Freezones. For a complete guide to Saudi business setup, see A Comprehensive Guide to Company Incorporation in Saudi Arabia. If you would want to incorporate a company in the UAE, Saudi Arabia, or any GCC countries, you may apply or book a free consultation.

Navigating the Choices: Unveiling the Most Common Business Structures 

The UAE offers various onshore business structures for entrepreneurs and businesses looking to establish a presence in the country. These structures are governed by federal and local laws, with each structure designed to cater to specific needs of investors, whether they are foreign or local. The UAE’s legal framework for onshore businesses is robust, supported by clear regulations that facilitate both small businesses and larger multinational corporations.

The UAE provides a diverse array of business structures for entrepreneurs and foreign investors, with each having distinct advantages and disadvantages. The most common and versatile structure for onshore businesses is the LLC, while larger enterprises may prefer the PJSC or PrJSC for access to public capital. Representative and branch offices allow foreign entities to operate in the UAE with minimal setup, while sole proprietorships are suited for individual entrepreneurs. 

The UAE’s business laws, particularly the Commercial Companies Law (Federal Decree Law No. 32 of 2021), regulate the formation and governance of these structures, ensuring a clear legal framework that encourages both local and international business activity. 

Here’s a detailed explanation of the onshore business structures available, along with their relevant legal background: 

Limited Liability Company (LLC)

The Limited Liability Company (LLC) holds a special place in the hearts of entrepreneurs in the UAE. Offering a separate legal identity, it shields shareholders from personal liabilities, making it a top choice for business setups. The best part is, there’s no minimum share capital requirement, making it accessible to all budgets. Unlike Free Zone companies, an LLC has no trading restrictions within the UAE, and there are no limitations on real estate ownership or the number of visas that can be obtained. 

The Limited Liability Company (LLC) is the most common business structure in the UAE for foreign investors wishing to set up a business in the country. It can be formed by a minimum of two shareholders and a maximum of fifty. The shareholders are liable only to the extent of their shares in the company.

Legal Articles & Background: 

• UAE Federal Decree Law No. 32 of 2021 (Commercial Companies Law) governs the establishment of LLCs. 

• The law specifies that the company is allowed for 100% foreign ownership in the company’s shares in certain sectors like technology, health, and education.

• LLCs are permitted to engage in most types of commercial activities and are not restricted to specific sectors. 

Key Features: 

• 51/49 Ownership Rule: A UAE national (or a company fully owned by UAE nationals) must own at least 51% of the LLC’s shares, while the foreign investor can hold up to 49%. 

• Liability: Liability is limited to the amount of capital invested, meaning that personal assets of the shareholders are protected. 

• Business Activities: LLCs can operate in many sectors, including trade, industry, and services, except for activities restricted to local or government-controlled entities. 

• Office Requirements: The business must have an office address in the UAE (physical or Virtual), with the rental contract registered with the Dubai Land Department (DLD).

Advantages of an LLC 

• Up to fifty shareholders, providing flexibility in ownership. 
• Shareholders’ liability is limited to their invested capital, protecting personal assets. 
• Trade freely anywhere in the UAE and the GCC region, including fifty-plus free zones. 
• Unlimited work visas, facilitating smooth workforce management. 
• Options to rent or buy office premises based on business needs. 
• 100% ownership by foreign shareholders, inviting global investments. 
• Opportunity to expand both domestically and internationally with subsidiaries in other emirates.

Sole Proprietorship (One Person Company) 

A Sole Proprietorship allows a single individual to operate a business in the UAE under their name. This is typically suitable for small businesses, such as consultancy services, retail stores, and sole traders. For solo adventurers in the business world, the Establishment structure is a perfect fit. Owned and operated by a sole proprietor, it allows diverse economic activities, from commercial to professional, industrial, agricultural, and real property endeavors. With complete control over the business, the proprietor enjoys 100% ownership and profit retention. The One Person Company includes Sole Proprietorship LLC and Sole Proprietorship Establishment.

Legal Articles & Background: 

• Governed under UAE Federal Decree Law No. 32 of 2021 (Commercial Companies Law). 

• The law discusses the provisions for sole proprietorships. 

Key Features: 

• Ownership: The owner has 100% control over the business. 

• Liability: Unlimited liability; the owner is personally responsible for all debts and obligations of the business. 

Advantages: 

• No shareholders, eliminating complexities of multiple stakeholders.  
• 100% ownership of the business, giving complete authority.  
• Full profit retention, reaping the rewards of success entirely.  
• Low startup cost, making it budget-friendly for entrepreneurs.  
• Quick business registration, reducing administrative hurdles.  
• No business capital requirement, easing financial burdens.
• Simple and cost-effective structure. 

Disadvantages: 

• Unlimited personal liability.
• Limited ability to raise capital. 

Free Zone Company or Free Zone Establishment 

If 100% foreign ownership, zero corporate and personal tax, and streamlined setup   procedures entice you, then free zones are the way to go. Keep in mind that each free zone comes with specific regulations and   geographical limitations. 

Key Advantages of a Free Zone entity  

• Foreign ownership of the business, breaking barriers for international investors. 
• Full profit repatriation, allowing seamless transfer of earnings. 
• Tax benefits on imports and exports, facilitating cost-effective trade. 
• A wide range of business activities, catering to diverse industries. 
• No currency restrictions, enabling smooth international transactions. 

Civil Company

Designed for professionals like doctors, lawyers, engineers, accountants, and consultants, the Civil Company offers 100% foreign ownership and full access to the UAE’s local market. 

Key Advantages of a Civil Company:  

• Exclusively designed for professionals, creating a niche for specialized services. 
• Instantly start a corporate bank account with a Professional license, streamlining financial transactions. 
• Easily sponsor dependents, ensuring a smooth relocation for your loved ones. 
• Apply for multiple visas, facilitating the hiring of skilled talent from around the world. 
• No local or corporate sponsor is required, appointing a Local Service Agent is sufficient. 
• Exceptionally low setup cost, reducing initial financial burdens. 
• Simplest business legal form, making the formation process straightforward. 
• 100% business ownership permitted to non-UAE individuals or foreign corporate bodies, providing complete control. 
• Effortless company formation, saving time and effort for entrepreneurs. 
• Possibility of having more than one shareholder, promoting collaboration. 
• Full capital repatriation, enabling the free movement of funds. 

• No currency restrictions, easing international transactions. 
• VAT & Corporate Taxes are applicable only after crossing a certain threshold, aiding growing businesses. 
• Abundance of available labor and energy supply, fostering a conducive environment for growth. 

Partnership

Whether general or simple limited, partnerships involve accountability shared among partners. General partners are jointly and severally liable, while limited partners’ liability is confined to their capital contributions. 

Key Advantages of a Partnership: 

• Allows a minimum of two partners, up to fifty, fostering teamwork and diversity. 
• Partners can invest with cash, assets, or a combination, providing flexibility in contributions. 
• Unlimited liability for partners, emphasizing responsibility for the company’s debts. 
• Partners can open corporate bank accounts and apply for visas, streamlining financial and operational processes. 
• Pooling resources and skills enables tackling larger projects and expanding the business reach. 
• Shared responsibilities and decision-making, promoting collective ownership and efficient operations. 
• Profits are distributed based on agreed-upon percentages in the Memorandum of Association (MOA). 
• Embracing adaptability, partnerships can explore new opportunities and evolve with changing markets. 

Public Joint-Stock Company (PJSC)

Overview: A Public Joint-Stock Company (PJSC) is a business structure suitable for larger companies and those that may wish to list their shares on the stock exchange. PJSCs require a minimum of 10 shareholders. 

Legal Articles & Background: 

• UAE Federal Decree Law No. 32 of 2021 (Commercial Companies Law) also governs PJSCs. 

• The law specifies the provisions relating to public joint-stock companies, including the minimum share capital and the governance of such entities. 

• The minimum capital required to establish a PJSC is typically AED 30 million, as per Article 195. 

Key Features: 

• Shareholding: Shareholders can freely transfer shares on the stock market. 

• Capital: A PJSC must have a capital of at least AED 30 million. 

• Management: Managed by a board of directors with a general assembly of shareholders. 

• Public Offering: Shares can be publicly traded, allowing the company to raise capital from the public. 

Advantages: 

• Opportunity to raise capital through public offerings. 

• Limited liability for shareholders. 

• Suitable for larger businesses with substantial capital requirements. 

Disadvantages: 

• High minimum capital requirement. 
• Complex governance and regulatory requirements.

Private Joint-Stock Company (PrJSC)

Overview: A Private Joint-Stock Company (PrJSC) is a structure suited for mid-sized businesses. It allows for private ownership and does not require a public offering of shares. This structure is similar to a Public Joint-Stock Company but on a smaller scale. With a minimum of three founders, a Private Joint Stock Company cannot offer shares to the public. However, it offers flexibility and the possibility of conversion into a Public Joint Stock Company. 

Legal Articles & Background: 

• UAE Federal Decree Law No. 32 of 2021 (Commercial Companies Law) regulates PrJSCs. 

• Article 257 provides the rules on the establishment, governance, and ownership of Private Joint-Stock Companies. 

• Minimum capital requirements for PrJSCs are typically lower than those for PJSCs, and they are set by the local authorities. 

Key Features: 

• Ownership: Limited to a small group of shareholders. 

• Liability: Shareholders have limited liability. 

• Capital: Minimum capital requirements for PrJSCs are typically lower than those for PJSCs, to be AED 5 million.

Advantages: 

• Limited liability protects shareholders from personal responsibility for the company’s debts and judgments.
• Potential for raising additional capital by selling company shares to investors.
• Corporate deductions for benefits provided to employees and executives.
• Eligibility for corporation status, reducing tax obligations on specific gains and passive income.
• Flexibility in ownership and control compared to an LLC. 

Disadvantages: 

• High capital requirements compared to LLCs. 
• Restrictions on the transfer of shares. 

Branch Office of a Foreign Company 

A branch office is an extension of a foreign company and allows it to conduct business directly in the UAE. However, the activities of a branch office are generally limited to those of its parent company and cannot engage in independent business activities. 

Legal Articles & Background: 

• Federal Decree Law No. 32 of 2021 (Commercial Companies Law) governs branch office operations. 

• Article 337 discusses the requirements for foreign companies wishing to open branch offices in the UAE. 

• The parent company must hold 100% of the branch’s shares. 

Key Features: 

• Ownership: 100% foreign ownership allowed, as the branch is an extension of the parent company. 

• Activities: The branch can only carry out activities related to the parent company’s business. 

• Liability: The parent company is fully liable for the branch’s activities. 

Advantages: 

• 100% foreign ownership is possible.
• Can directly represent the parent company in the UAE. 
• Ease of access to a corporate bank account.
• Strict workplace confidentiality.
• Safe exploration of the MENA region from a secure base.
• Zero personal taxes.
• Strategic location in a geographically significant area.
• Cost-effectiveness for business operations.

Disadvantages: 

• Limited to the activities of the parent company. 

• Cannot carry out independent business operations or offer services outside the scope of the parent company’s business. 

Representative Office of a Foreign Company

A representative office is a business structure that allows a foreign company to establish a presence in the UAE without engaging in direct commercial or trading activities. Its primary role is to promote the parent company’s business interests and provide marketing or support services. 

Legal Articles & Background: 

• UAE Federal Decree Law No. 32 of 2021 (Commercial Companies Law) also applies to representative offices. 

• Commercial Companies Law outlines the provisions related to representative offices. 

Key Features: 

• Ownership: 100% foreign ownership. 

• Activities: Cannot engage in direct business activities, such as sales or profit-making activities. 

• Role: Primarily for marketing, research, and promotional purposes. 

Advantages: 

• 100% foreign ownership. 
• Low cost and minimal legal requirements for operation.
• Established by dual-interested shareholders alongside several others, limited to a maximum of fifty. 
• No requirement for share capital, providing flexibility for operations.

Disadvantages: 

• Cannot engage in commercial or revenue-generating activities.

Consult to Secure the Right Licenses

As you contemplate the best business setup for your goals, company size, and budget, seeking guidance from a business setup consultant, such as ATB Legal, can be invaluable. Our expertise can pave the way to informed decisions and propel your venture to success in the UAE’s dynamic market. 

Before embarking on your chosen business structure, ensure you possess the required business licenses for your economic activities. The UAE Department of Economic Development oversees Commercial, Professional, Industrial, and Tourism licenses, each tailored to specific business endeavors. 

The UAE’s regulatory landscape may appear complex, but with the right support and understanding, you can navigate the waters with ease. A business setup consultant can assist you in identifying the necessary licenses and complying with the regulations relevant to your industry. 

In conclusion, the UAE’s business landscape offers a treasure trove of opportunities for entrepreneurs. By understanding the nuances of each structure and obtaining the right licenses, you can confidently navigate this vibrant market and unlock boundless possibilities for your venture. Embrace the country’s cultural diversity, leverage expert advice, and strategize for success to make your mark in the UAE’s dynamic business ecosystem. With determination, innovation, and resilience, your business can thrive and contribute to the growth and prosperity of this captivating nation.