Dubai, the most vibrant, modern, and technologically advanced business hub in the Emirates, is a desired destination for investors and business owners who wish to expand their business operations globally. In addition to benefits like easier access to prominent national and international markets, a strong and stable economy, pro-business policies, and excellent infrastructure, freezone companies in Dubai are a major reason that makes it popular among global investors.
If you wish to establish a business setup in UAE free zone, you must know that these tax-profit offering zones have two common company structure options: FZE and FZCO. Both offer quite similar benefits, but some key differences must be in your knowledge if you want to make the right investment choice. Continue reading and learn more about these two structures and the benefits of freezone company formation in Dubai, UAE.
What is FZE (Free Zone Establishment) in Dubai?
FZE is a type of freezone company established within the designated free zones in Dubai that are only owned and operated by a single shareholder, which can be an individual or a company. This freezone company structure is suitable for those who wish to take full control of their business setup in UAE free zone.
The personal assets of FZE owners are protected from the business’s financial obligations. If you choose this company structure for freezone company formation in UAE, you will benefit from regulatory and tax incentives provided within the specific free zone; however, you will be limited to operating independently only within that zone, and for legal operations in the mainland, you will have to partner with a local agent.
What is an FZCO (Free Zone Company) in Dubai?
FZCO is another common type of freezone companies in Dubai, but unlike FZE, they are owned and managed by more than two shareholders, which can be individuals and companies. Like FZEs, with FZCO formation, you can take advantage of all the benefits offered by free zones.
However, your legal operations in the Emirates will be limited within the specific zone unless you partner with a local partner to conduct operations in the mainland. A minimum of 2 and a maximum of 50 shareholders can divide the shares of an FZCO among themselves. As the number of shareholders of the freezone company with FZCO company structure varies, the freezone offers different price packages for its formation.
FZE vs FZCO: Key Differences
Although both FZE and FZCO are the company structures of freezone companies in Dubai, there are some key differences between them that anyone planning to establish a freezone company must know.
Here are the key differences between these two freezone company structures:
1. Ownership: As discussed above, the most basic difference between the freezone company structures is ownership. If you establish an FZE, you’ll secure complete ownership of your business; however, if you establish an FZCO, you’ll receive a portion of the company’s shares that are divided after mutual agreements among all the shareholders.
2. Management: In the case of the FZE business setup in UAE free zone, the management process is simple, as a single person or company is responsible for business-related decision-making. However, in the FZCO case, the management is complex, as a single decision is taken after a detailed discussion among shareholders.
3. Flexibility: If you talk about decision-making power and operational power, FZE offers more flexibility. However, if you consider future expansion, an FZCO with multiple shareholders offers more flexibility.
4. Cost: As FZE is managed by a single owner, it features a simple structure and setup procedure, and thus its setup cost is less compared to FZCO, with a more complex setup procedure.
5. Suitability: FZE freezone company formation in UAE is more suitable for you if you are a solo entrepreneur, own a small business, and wish to have complete control of your business. However, the other option’s suitability is more for those who own large businesses operated by multiple partners.
Additional Considerations of FZE & FZCO
Establishing freezone companies in Dubai and UAE offers many lucrative benefits, like 100% ownership even if you are a foreign investor and don’t have a local partner, enjoy corporate tax and VAT tax benefits, secure quick and hassle-free company registration, 100% profit repatriations without restrictions, etc. However, there are some additional considerations that you must know about the two most common and popular company structures of FZE and FZCO.
1. Conversion Between FZE & FZCO
If a freezone business registered within designated free zones in Dubai and UAE confirms compliance with all necessary regulations set by the authority, it can easily switch from FZE to FZCO and vice versa.
2. Flexible Financial Year-End
Anyone owning a business set up in a UAE free zone can select when they want to end a particular financial year of their business, which is not possible with mainland businesses, as they can only end a financial year when 12 months after the date of incorporation are completed.
3. Trade Restrictions
Another consideration that owners of freezone companies in Dubai and the UAE must know is the related trade restrictions. With a freezone company formation, you can be involved with international trade and trade within the specific zone; however, to be involved with mainland businesses, you have to partner with an Emirati partner.
Conclusion
Now that you know the key differences and some basic considerations associated with FZE and FZCO, the most common company structures of freezone companies in Dubai, don’t waste time and secure your dream of establishing your freezone business setup. However, if you are still confused and need help with the right company structure selection, contact a trusted business setup consultant.
Start Any Business, UAE has years of experience and a reputation for delivering excellent business setup assistance and consultancy solutions to foreign investors who wish to establish a freezone company across the country’s diverse sectors. Worried about unnecessary delays, hassle-free paperwork, legal compliance issues, location selection, visa issuance, etc.? Make us your trusted freezone business setup partner and get the best solutions for every step, as our experts can help you with everything.
