Guide to Setting Up a Limited Liability Company (LLC) in Dubai

What is an LLC?

Let’s start with the basics. LLC stands for Limited Liability Company, which is a business structure that combines the limited liability protection of a corporation with the flexibility and tax benefits of a sole proprietorship or partnership.

In an LLC, the owners are called "members". Basically, these are shareholders, each having a share in the company’s capital, which is what their liability is limited to. They can be individuals, corporations, other LLCs, or foreign entities. In the UAE, an LLC can hold up to 50 shareholders.

The primary advantage of a Limited Liability Company is that its members are typically not personally liable for the company's acquired debts and liabilities. This effectively means that if the business gets sued or goes broke and cannot pay its debts, the members' personal assets are usually secured.

In addition, LLCs offer variability in management and tax structure. They can choose to be taxed as a sole proprietorship, partnership, or corporation. Additionally, the operational structure of an LLC is often less formal than that of a corporation.

Limited Liability Companies are massively popular among startups and SMEs everywhere, including the UAE, because they provide all the legal qualities and functions necessary for running a business together with liability protection without some of the formalities and restrictions associated with larger entities such as corporations.

Advantages of opening an LLC in Dubai

Some of the advantages of opening an LLC company in Dubai have to do with the specifics of the LLC as a legal entity, others – with Dubai itself and the UAE in general. The first category includes the following benefits:

1. Limited liability protection. Among the primary perks of an LLC company is providing limited liability protection to its shareholders, meaning their assets are generally secured from any business debts or liabilities.
2. Easy and straightforward formation process. As LLCs are the predominant company structure type for businesses, the formation process is streamlined and does not require much time or paperwork.
3. Multiple shareholders. As mentioned earlier, an LLC company can include up to 50 shareholders, which offers a high degree of flexibility.
4. 100% foreign ownership. While previously LLCs in the UAE required a local sponsor for company formation, today this rule applies only to companies engaged in certain business activities, while the rest enjoy 100% foreign ownership, making it a great option for foreign entrepreneurs and expats.

And here are the key advantages related to Dubai and the UAE as a whole:

1. Taxation. Dubai offers favorable tax conditions for businesses, with little to no income tax on profits and capital gains, particularly for SMEs and some 'large' enterprises that meet certain requirements. This can make it an attractive location for entrepreneurs and businesses looking to minimize their tax burden.
2. Extensive market accessibility. Dubai's geographic location provides access to emerging markets in the Middle East, Africa, and Asia. This can offer a plethora of opportunities for expansion and international trade.
3. Business-friendly climate. Dubai has a well-established infrastructure, business-friendly regulations, and a transparent legal framework that makes it easier to set up and operate a business.
4. Asset protection. By establishing an LLC company in Dubai, owners can also benefit from the asset protection provided by the jurisdiction’s legal framework.
5. No currency restrictions. As it currently stands, there are no currency restrictions in UAE/Dubai, making it easier to transact in various currencies and facilitate international trade.
6. Professional reputation. Operating from Dubai can enhance a company’s professional reputation as it is seen as a global business hub with a robust economy.
7. Residency visa. Setting up a Limited Liability Company in Dubai can also open up the potential for obtaining residency visas for owners and their families.
8. Access to free zones. There are numerous free zones in Dubai that provide additional benefits such as customs exemptions, full foreign ownership, duty-free import of raw materials and goods, etc.

However, before proceeding with setting up an LLC in Dubai, it's essential to consult with qualified business setup advisors who are knowledgeable about local regulations and customs to ensure that this is the best option for your specific business needs.

LLC company formation costs in Dubai

The total cost of forming an LLC company in the UAE includes many variables depending on such aspects as the type and size of the intended business, Investor and Employee visas required, and the specific requirements set by the government and licensing authorities.

Generally, LLC company formation in Dubai will require from AED 10,000 to AED 30,000, but the final sum is impossible to determine without a detailed outline of the future company. However, here are the most common expenses associated with setting up an LLC company in Dubai:

1. Professional and legal fees. You may need to engage the services of a local law firm or a business consultancy to assist you with the paperwork, legal documentation, and navigating through local regulations. The fees would depend on the complexities involved and the services provided.
2. Trade name reservation fee. Before registering your company, you will need to reserve a trade name for your business. This incurs a fee that depends on the duration of the reservation.
3. Initial approval certificate. This is a mandatory expense particularly applicable for LLC formation in the UAE mainland. The cost can vary with regard to your business activities and intended location.
4. License fees. The UAE demands businesses to obtain specific licenses based on their activities or operations, such as commercial trading, professional services, industrial activities, etc.
5. Registration fees. The fees associated with registering your Limited Liability Company with the Department of Economic Development or other relevant authorities.
6. Visa costs. If you plan on applying for UAE visas for yourself or any employees, these costs should be factored in as well.
7. Office space rental (optional). Most of the free zones don't require an office rental as they issue the license with a flexi-desk lease agreement. In the mainland, companies are now allowed to choose if they want to rent an office space in the first year or not. In the case that they do not proceed with an office in the first year, this would be required in the second year before the license is renewed.

All these costs can add up, so it’s vital to understand all the financial implications involved. Also, forming an LLC company in one of Dubai's many free zones will have different associated costs compared to forming an LLC outside of these zones.

Step-by-step process of LLC company formation in Dubai

As with any other legal structure type, the process of forming an LLC company in the UAE involves several steps. While the specific requirements and procedures may be different with regard to the type of business activity, the location (mainland or free zone), and certain other factors, here is a general step-by-step process for setting up an LLC in Dubai:

1. Decide on the type of business activity. Determine the type of business activity you intend to conduct. This will influence various aspects including licensing requirements and the jurisdiction in which you can operate.
2. Pick a name for your company. Come up with a unique name for your company, following the naming conventions and regulations set by the authorities.
3. Engage with a local consultant or law firm. Seek out a UAE-based consultancy or a law firm that specializes in business setup services in Dubai to assist you with the LLC formation process. They can guide you through legal requirements, paperwork, and compliance aspects based on your specific needs.
4. Determine the jurisdiction. Decide whether you want to set up your company in a mainland area or within one of Dubai's many free zones. Each jurisdiction has its own regulations and benefits.
5. Prepare necessary documents. Gather all required documents such as passport copies of shareholders, proof of initial approval from relevant authorities, and application forms as per the guidelines provided by your chosen jurisdiction.
6. Submit the documentation. Bring in all the mandatory documentation collected beforehand including application forms, legal documents, and approvals to the Department of Economic Development (DED) if setting up on the mainland or to the relevant free zone authority if having chosen a free zone for your LLC formation.
7. Acquire an Initial Approval Certificate. Once your documentation is processed and approved, you will be granted an Initial Approval Certificate from the DED (for mainland businesses) or the corresponding free zone authority.
8. Rental agreement (mainland). If setting up in mainland Dubai, secure office space as per requirements; this often involves drafting lease agreements for office premises.
9. Payments and final submission. Pay applicable fees including license fees, registration fees, and visa costs for any employees/shareholders if required, and then make final submissions of all required documents as per guidelines provided by authorities.
10. Receive trade license. Upon completing all these steps and meeting all regulatory requirements, you will receive your LLC license which signifies that your Limited Liability Company is now officially registered and operational.

Documents required for LLC company formation in Dubai

When starting an LLC company in Dubai, there is an array of necessary documents to be prepared and submitted in the process. These documents may slightly vary depending on the specific requirements of the licensing authority guidelines, the company’s business activity, structure, etc. However, here is a list of common documents needed to start an LLC in Dubai:

1. Passport copies and residence visa copies of the shareholders
2. Proposed trade name reservation certificate
3. Application form for company registration, filled out and signed by the shareholders
4. Attested power of attorney if there is a legal representative acting on behalf of any shareholder(s)
5. No Objection Certificate (NOC) from the current sponsor or employer if any shareholder is holding a resident visa in the UAE (requested on a case-by-case basis, depending on the jurisdiction)
6. Tenancy contract or Ejari certificate for a valid business address in Dubai (for mainland LLCs that intend to have an office in the first year)
7. Any additional documents required by specific regulatory bodies based on the nature of your business activity

As mentioned, the exact list of documents you may need will depend on several factors, so it's recommended to consult with a local business setup expert who can provide accurate information based on your specific situation and ensure compliance with all UAE regulations.

LLC company formation with Emirabiz

At Emirabiz, we provide a full range of company formation and follow-up support services in the UAE. We can aid you in starting and managing an LLC company in Dubai or guide you in the aspects of daily business operations, laws and regulations, and the local business climate.

Our experts provide a range of related services:

• Company setup and registration
• Business licenses
• Corporate support
• Legal advice
• Taxes and accounting
• VAT-related services
• Consultancy on all business-related issues
• And more

We can provide you with advice on numerous topics regarding LLC setup in Dubai and help you get your company up and running in no time.

Contact our team today and get a free consultation!