Plan and research
Many entrepreneurs underestimate how much planning is required to effectively set up their business. They assume that acquiring the necessary financial investment and dedicating the right amount of their time on the business are all the components needed to get started straight away. However this lack of planning ends up causing the business to pay to fix the issues that weren’t addressed before. A comprehensive research is needed to create the best plan for everyone’s individual business.
Licensing is a pivotal part of setting up a business and it must be conducted in a legal form. This factor is as important as all the other moving parts during the planning and research phase. Choosing the right license at the beginning of the process can help ensure that time and money can be saved. Setting up in a licensing authority or free zone without the correct analysis of it towards the business model will only lead to issues further down the line for the company as it may not allow for certain activities to performed that is needed for the business’ success.
Location doesn’t only mean where the business should be set up, it also reflects licensing jurisdiction. The options available in the UAE are:
- Onshore licensing
- Department of Economic Development (DED) licensing in each emirate
- Free zones (often themed around particular industries or segments)
Some licensing authorities allow you to set up as a freelancer or professional services provider. Others will limit your scope of activities so make sure that when the time comes for expanding the business, the licensing in that zone or authority allows the business to grow.
This type of licensing is under the DED (Department of Economic Development) which is ideal for many commercial enterprises that can benefit from being set up as a limited liability company (LLC). Some examples of this are a trading, logistics or manufacturing company. For this type of license, a minimum of 51 per cent of the shares need to be held by a UAE national. It is also required that this business have a physical office space that could be subject to further requirements or sanctions from government departments.
Free Zones (Offshore)
Free zone can act as the best alternative for start-ups with various benefits. For example, the Dubai World Central (DWC) Free Zone can be the best option if an entrepreneur seeks to start a business venture in the manufacturing facility and export their products. Others that might be of interest are Hamriyah and Ras Al Khaimah free zones. There are themed free zones that can a start-up business within their specific sector become a part of the business community. These include Dubai Internet City, Dubai Media City, or Dubai Design District.
Local partner vs. local service agent
Licensing onshore usually expects the business to find a local partner. However there are certain circumstances where certain onshore licenses for certain activities can be owned fully by foreign nationals. The foreign owner is expected to appoint a Local Service Agent (LSA). They provide government registration services for a fixed annual fee and have no shareholding or involvement in the business. This type of licensing does require a physical office space.