Business Setup in Dubai – A Complete Guide

Dubai has become a prime destination for business owners and new entrepreneurs thanks to its strategic location, ease of doing business, and attractive tax benefits. In 2023 alone, over 67,000 new companies set up home in Dubai, and the number seems to be growing year on year. Below we cover everything you need to know about setting up a business in Dubai, from choosing the right business structure to licensing requirements, so that you experience a smooth and successful start to your venture.

Types of Business Setup 

In Dubai, there are two main types of business jurisdictions in which businesses can be set up. Choosing the right one is a critical decision that can impact your operations and growth prospects. Understanding the differences between mainland and free zone jurisdictions is essential before making a choice. 

Mainland 

Mainland businesses in Dubai operate directly within the local economy and have the flexibility to trade within the UAE market. Setting up a mainland company allows businesses to operate across the UAE market without restrictions on the type of business activities or industries. This flexibility makes mainland jurisdictions suitable for companies aiming to tap into the local market fully and engage in a wide range of commercial activities. They are subject to UAE commercial laws and regulations and can bid for government contracts, which can be an advantage when looking to establish a strong local presence and carry out business activities across the Emirates.

Foreign investors can fully own companies in over 1,000 commercial and industrial activities under Federal Decree-Law No. 26 of 2020. Certain strategic sectors remain restricted from full foreign ownership. These setups require the involvement of a local sponsor or service agent, who must hold at least 51% ownership of the company. However, this ownership structure can be managed through a well-drafted shareholders’ agreement, which outlines profit distribution, and management responsibilities, and safeguards the interests of the foreign partner.

Free Zone

Free zone businesses in Dubai are established in designated economic zones that offer various incentives such as tax exemptions, 100% foreign ownership, and streamlined bureaucratic processes. Currently, there are over 30 free zones in Dubai and each caters to specific industries, providing specialised infrastructure and regulatory frameworks tailored to meet the needs of businesses in sectors like technology, media, healthcare, and more.

These zones are ideal for companies that require specific facilities or want to benefit from a tax-efficient environment while maintaining full control over their operations.

Difference between Mainland and Free Zone Businesses

Before setting up your business, consider factors such as the nature of your business activities, target market, budget, and long-term growth strategy. Conduct thorough research or seek professional advice to determine which jurisdiction aligns best with your business objectives. This decision not only impacts your operational flexibility and tax obligations but also influences your ability to expand your business footprint in the UAE and beyond.

How to Apply for a Mainland Business License

The Dubai Department of Economy & Tourism (DET) oversees registration, licensing, and compliance for mainland businesses, ensuring adherence to local regulations and facilitating a smooth operational setup.

There are two main ways to apply for a mainland license in Dubai:

Online via Basher Platform:

The Basher platform is a unified online system that facilitates the establishment of companies in Dubai. It integrates local and federal government agencies involved in licensing economic activities across various emirates. Using Basher, you can complete the company setup process in as little as 15 minutes.

In Person:

Apply for your company license by visiting designated offices:

Steps to set up business in Mainland Dubai

Identify the Nature of Business Activity

The UAE offers over 2,000 economic activities, each requiring specific economic licenses issued by the Department of Economic Development (DED) in Dubai. These licenses are categorised into six main types based on the nature of the company's activities.

Commercial License:

Allows businesses involved in trading activities, including import & export, sales, logistics, general stores, and real estate.

Industrial License:

Issued to businesses engaged in manufacturing activities such as textiles, metal manufacturing, and paper manufacturing, among others.

Professional Licence:

Designed for individuals or companies offering professional services like consulting, healthcare, education, legal practices, and artistic professions, based on intellectual or artistic talents.

Tourism License:

Required for operating hotels, restaurants, travel agencies, and car rental companies, registered with both the DED and the Department of Tourism.

Craftsmanship License:

Aimed at skilled tradespeople and artisans involved in manual skills or handicrafts such as carpentry, blacksmithing, tailoring, and similar crafts.

Agricultural License:

Mandatory for businesses in agriculture, including farming, animal husbandry, horticulture, floriculture, nurseries, and related activities. Requires compliance with agricultural policies and environmental guidelines.

While these are the primary types, there are other specific licenses available to cater to various niche business activities within Dubai.

Determine Your Company’s Legal Structure

A business structure is primarily based on the needs of the business and will determine the laws and regulations the company must adhere to. When setting up a business in mainland Dubai, choosing the right structure is crucial as it determines control, legal and financial liabilities, and tax obligations. Here are the different types of business structures available:

1. Sole Proprietorship:

Owned by a single individual who has complete control over operations and profits. The owner is responsible for all debts and financial obligations. Foreign owners must meet requirements such as obtaining a residence permit.

2. Limited Liability Company (LLC):

A popular choice where the liability of partners is limited to their investment. Partners are not responsible for company debts beyond their investment, protecting their personal assets.

3. Partnership Company:

Ownership is shared between two or more partners who share profits and losses according to an agreed ratio. It can be a General Partnership, where all partners are equally liable, or a Limited Partnership, where liability is limited to the extent of investment.

4. Private Shareholding Company:

Requires a minimum of three investors and is suitable for commercial and industrial activities, excluding professional businesses. GCC nationals can own up to 100% of the shares.

5. Public Shareholding Company (PJSC):

A legal entity suitable for large-scale ventures with specific incorporation requirements. The trade name cannot be one of the investors’ unless it is patented or a shareholder's property.

6. Civil Company:

Intended for recognised professionals such as doctors, accountants, engineers, and lawyers. Fully owned by its partners, it is limited to professional activities and has specific establishment requirements.

7. Branch of a Foreign Company:

Allows a foreign company to expand its presence in Dubai while operating under the same name and ownership as the parent company. It does not have its own legal status but increases sales and revenue for the parent entity.

Choosing a Company Name

When choosing a company name in Dubai, business owners must adhere to the UAE’s naming conventions. Here are the key guidelines:

1. Uniqueness and Relevance:

2. Prohibited Content:

3. Personal Names:

4. Legal Structure:

5. Character Requirements:

6. Language and Translation:

7. Approval and Registration:

The process of registering a trade name can be completed online or through the smart application provided by the economic development departments in Dubai. It involves submitting the relevant documents and paying the necessary fees. Once approved, the trade name will be added to the Dubai trade register, allowing you to proceed with the remaining steps for your business setup.

Apply for Initial Approval

The UAE Government’s 'no objection' certificate, allows you to proceed with the business setup steps. Note that this approval doesn't permit you to start business operations yet.

Create LSA or MOA

Depending on your business structure, create a Memorandum of Association (MOA) for civil companies, LLCs, public or private shareholding companies, or a Local Service Agent (LSA) agreement for sole proprietorships.

Choose Your Business Location

Secure a physical address for your business that complies with the emirate’s Department of Economic Development requirements and local zoning regulations. In Dubai, register the tenancy contract through the Dubai Land Department’s Ejari portal.

Apply for Additional Government Approvals

Obtain necessary approvals from specific government entities if your business activities require it. These might include the Ministry of Interior for transport services, the Ministry of Justice for legal consultancy, or the local Health Departments for health-related activities, among others.

Submit Required Documents

Provide all necessary documents, including the initial approval receipt, attested lease contract, Memorandum of Association, and any additional government approvals.

Pay Fees and Collect License

Pay the required fees and collect your business license from the economic department’s service centres or their website.

Register with the Chamber of Commerce and Industry

Register your company with the Chamber of Commerce and Industry in the same emirate where your business is incorporated, such as the Dubai Chamber of Commerce and Industry.

By following these steps, you ensure your business complies with local regulations and is ready to operate legally in Dubai.

Steps to Set up Business in Dubai’s Free Zones

In Dubai there are over 30 types of free zones, each offering different benefits and with slightly different regulatory and legal frameworks. The first step is deciding which free zone works best for your business and offers better advantages.

1. Determine the Nature of Your Business Activity:

Identify the type of business you plan to conduct, as free zones offer various licenses like commercial trade, consultancy, industrial, educational, media, eCommerce, offshore, freelancer, warehousing, manufacturing, innovation, and others.

2. Determine Your Company’s Legal Structure:

Choose the appropriate legal frame for your business:

3. Register the Trade Name:

The rules for selecting a trade name are the same as for a Mainland business.

4. Select Business Space and Location:

Choose an office or industrial space in the free zone, depending on your business needs. Options include renting fully equipped or partially furnished offices, registering a virtual office, or buying land for a factory or office building. Free zone authorities offer support services such as trade name reservations, NOC letters, visa services, legal advice, and various office amenities.

5. Obtain Initial Approval:

Submit the necessary documents to get initial approval for your business. Additional approvals may be required for specific activities like tourism, travel, or health.

Documents typically required:

Completed application form
Business plan
Passport copies of shareholders and appointed manager
Existing trade license (if applicable)
Specimen signatures
Title deeds (if applicable)
Letter of Intent
Financial reports or bank reference letters

   For freelancers/professionals:

Registration application
CV or profile
Bank reference letter

6. Register and Pay Fees:

Complete the registration process and pay the necessary fees. Required documents include:

Closing Thoughts

Starting a business in Dubai presents immense opportunities, but it requires planning and informed decisions. Whether you are an established business owner looking to expand to Dubai or a new entrepreneur, understanding the local landscape and regulatory framework is key. Take the time to explore your options, choose the right structures, and align your plans with Dubai’s unique advantages.