Selecting an appropriate business structure has long-lasting implications. How you pay your liabilities, taxes, and regular governance needs are based on how you set up your business. If you want to know how to choose the best legal business structure in UAE, then simply you need to communicate with the Start Any Business consultants who will surely provide you the right guidance and also assist you in this process and make it easy for you in a dedicated manner.
One of the very crucial decisions when establishing a business is the kind of legal stature you choose for your business. The decision alone has many capitals and legal implications with an enormous effect on your business’s future. Certain legal frameworks or structures like simply limited partnerships and general partnerships are applying only to the citizens of the United Arab Emirates. Other formations are required by law to appoint a local Emirati agent.
As a result, the legal structure of the business determines the personal liability you will face, your capability to raise funds, ownership arrangement, and the documentation needed to prepare and submit.
Here are the Legal Business Structures in UAE
1. Sole Proprietorship
As the name proposes, a sole proprietorship is owned by a single person who controls all of its conductions and owns 100% stakes for any profit. This business unit is the simplest form of the corporate framework in the UAE and doesn’t levy any specific needs other than having a residence permit if you are overseas.
Features of a Sole Proprietorship
- A person of any nationality can hold a professional sole proprietorship.
- Only GCC and UAE citizens can own a sole proprietorship that is residential or commercial that should be 100% owned.
- If the owner isn’t a citizen of the UAE, a local service agent is hired to open this kind of company.
- The local service agent should ignore licensing needs and business-related matters to the government.
- There is no minimum business capital requirement for a sole proprietorship.
- The company name should be related to the kind of activity of the business.
2. Limited Liability Company
A Limited Liability Company is the most preferred form of business unit by the persons in the UAE. the liability of the partners in the limited liability company is limited to the amount of their investment in the business.
Features of an LLC
- Consultancy or professional activities can’t be operated by this company form except in investment and banking.
- LLC can operate any commercial and industrial activity.
- 51% ownership must be held by a UAE citizen and the remaining 49% can be held by the business owner.
- The formation of an LLC needs a UAE-accredited auditor.
3. Private Shareholding Company
This kind of business is also known as a private joint-stock company in the United Arab Emirates. This can be created through a minimum partnership of AED 5,000,000 from almost three investors. Such legal frameworks are suited to all types of industrial and commercial activities apart from a professional business.
Features of a Private Shareholding Company
- To set up a private shareholding company it is necessary to obtain approval from the Ministry of Economy.
- The company should hire a manager.
- Required minimum capital is AED 5,000,00
- A company can have over 1 branch. Each core business can perform one of the overall activities covered by the license.
- A GCC citizen can hold up to 100% of the stakes.
4. Public Shareholding Company
A public shareholding company is defined as a legal unit having a capital of a minimum of AED 30,000,000 with every stakeholder being liable only to extend their capital in transferable stakes of equal value. The business name shouldn’t be belonged to any participating investor, except if the name is a patent of a stakeholder or the name is entitled to the store belonging to the stakeholder.
Features of a Public Shareholding Company
- Partners may practice any professional, commercial, and industrial business activities according to the business regulation of the Department of Economic Development.
- The company should have a maximum of 5 hired managers according to the business regulation of the DED.
- This company should have 5 founding members who are citizens of the UAE, who own between 30% and 70% of the share capital.
5. Civil Company
Recognized professionals like an accountant, lawyer, doctor, and engineer can open a civil company. the company can have partners holding 100% stakes and the activities permitted for the civil company can only be through commercial business.
Features of a Civil Company
- If an overseas company invests as a partner in a civil company, this should be engaged in similar business activity.
- Just like if a sole proprietorship, the company incorporation procedure requires an LSA if the businessman is an overseas citizen.
- In case the company is included in engineering activities, a participant must be a citizen of the UAE having at least 51% of the business.