Selecting the appropriate legal structure for your business setup UAE is a crucial decision, impacting ownership, liability, and operations. In this guide, we will compare two common legal structures: the Limited Liability Company (LLC) and the Free Zone setup, shedding light on the differences and considerations for each, without relying on introductory cliches.
Limited liability company (LLC):
Ownership and shareholders:
LLCs in the UAE typically require a minimum of two and a maximum of fifty shareholders. These shareholders can be individuals or corporate entities. A notable feature is that UAE nationals must hold at least 51% of the shares in an LLC, granting them majority ownership.
Control and management:
An LLC allows a broader range of business activities across the UAE. However, it’s important to note that the management and decision-making powers can vary depending on the specific agreement between shareholders. This structure often provides a more local presence and engagement with the broader UAE market.
Local sponsorship:
To establish an LLC, you will require a local Emirati sponsor, who holds 51% of the shares. This local sponsor, while not necessarily involved in the daily operations, is essential for compliance with UAE regulations.
Geographic flexibility:
LLCs are not confined to specific geographic areas; they can operate anywhere in the UAE, making them suitable for businesses that aim to tap into the local market on a national scale.
Free zone setup:
Ownership and shareholders:
One of the primary attractions of a Free Zone setup is the option for 100% foreign ownership. This structure offers greater control and flexibility over your business, as there’s no requirement for UAE nationals to be shareholders.
Control and management:
Free Zones have specific activities allocated to each zone, making them ideal for businesses that align with these activities. While Free Zone businesses are restricted from conducting business outside the Free Zone, they can access certain local markets through authorized intermediaries.
Choosing between an LLC and a Free Zone setup in the UAE depends on your business objectives, activities, and long-term plans. LLCs are favored for their flexibility in trading throughout the UAE but require local sponsorship. Free Zone setups are enticing for 100% foreign ownership and tax benefits but are limited to specific geographical areas.