Licensing

A Sole Proprietorship is a business owned by one person, which can carry out commercial, professional, and industrial activities.

Sole Proprietorships Business Types

A professional business sole proprietorship covers a range of professions from owning a seafood restaurant to a bespoke tailoring service. In those cases, the owner does not have to be an expert in that particular business field, but as the sole owner of a consultancy, for example legal counsel, building contracting or home tutoring, the sole proprietor must specialise in that business.

Most professional-type sole proprietorships providing personally offered services or the services of a recognised profession such as medicine or engineering require a Local Service Agent (LSA) if they are owned by a National of a country other than the UAE or GCC countries. The local service agent is a UAE National who manages licensing requirements and other government-related matters for your business, in exchange for an annual fee. The LSA has no responsibility for your business and no financial commitment to the business or its activities in Dubai or elsewhere. A sample Local Service Agent Agreement is available, explaining the relationship and the obligations of the owner and the LSA. This agreement must be authenticated by a Notary Public/Court within the UAE.

Ownership

• A sole proprietorship can only be owned by an individual, not a company. This person will own 100% of the business, control all of its operations and keep 100% of any profits. He or she will also be 100% responsible for business debts and any other financial obligations.
• A professional-type sole proprietorship can be owned by an individual of any nationality.
• A sole proprietorship that is industrial or commercial can be owned only by UAE Nationals or GCC Nationals.
• A sole proprietorship that is a commercial or industrial business must be owned 100% by a UAE National. The UAE National owner and any other party can later work to decide on how profits might be shared and how day-to-day business decisions will be made.
• A sole proprietorship that offers legal services—known as a legal consultancy—does not require a local service agent.

Ownership

• A civil company is a business partnership for professionals in recognised fields such as doctors, lawyers, engineers and accountants.
• A civil company can only practice professional business and is 100% owned by the professional partners, whatever their nationalities.
• A civil company for engineering must have one partner who is a UAE National, who owns no less than 51% of the business and must be an engineer of the same type as the business’s activity.
• A foreign company can be a partner in a civil company, as long as the foreign company is in the same profession as the civil company.
• Most civil companies require a Local Service Agent (LSA) if there is no UAE-National partner in the business. The local service agent is a UAE National who manages licensing requirements and other government-related matters for your business, in exchange for an annual fee. The LSA has no responsibility for your business and no financial commitment to the business or its activities in Dubai or elsewhere. A sample Local Service Agent Agreement is available, explaining the relationship and the obligations of the owner and the LSA. This agreement must be authenticated by a Notary Public/Court within the UAE.
• A civil company that offers legal services does not require a local service agent.

The business’s name should be the same as the approved trade name and should reflect its purpose or contain the names of one or more of its partners. The phrase “Limited Liability Company” must also be added to the business’s name. A Limited Liability Company cannot be created to practice law, auditing, accountancy or any other type of consulting service.

Ownership

• An LLC must have between 2 and 50 shareholders, each of whom is liable only to the extent of his or her share in the capital of the company.
• LLCs are authorized to conduct any industrial or commercial business, but not professional – except banking, insurance or investment.
• An LLC must be 51% owned by UAE Nationals, although the Memorandum of Association can distribute profits in a different ratio. In the interests of an open, honest and transparent economy, the LLC must appoint a UAE-accredited auditor. In case of the death of any partner, his or her shares are transferred to the heirs mentioned in the will.
• Shares of an LLC cannot be offered to the public. The company may not resort to public subscription to establish or increase its capital, or to secure loans, and it may not issue any negotiable stocks or shares.

A Private Joint-Stock Company or Private Shareholding Company is a partnership of at least three individuals. The partners must invest a minimum capital of AED 2,000,000 in the business.

A Private Joint-Stock Company can be created for any commercial or industrial type of business. Professional activities are not allowed under this legal form.
A Private Joint-Stock Company is subject to all rules and regulations that apply to Public Joint Stock Companies, except for the rules and regulations relating to public share subscription.

Ownership

• A Private Joint-Stock Company can be established between three or more UAE Nationals or GCC Nationals. Nationals of other countries can establish a private shareholding company with at least one UAE National. If one or more of the partners is a National of a country outside the GCC, the UAE National partners must own at least 51% of the business shares.
• While the shares of a private shareholding company cannot be offered to the public, the business can be converted to a public company two years or more after its creation, if the following conditions are met:

• • The nominal value of the issued shares is fully paid up.
  • A period of not less than two financial years has expired.
  • During the two years preceding the application for conversion, the company achieved net profits distributable to the shareholders, the average value of which is not less than 10% of the capital.
• A sole proprietorship that is industrial or commercial can be owned only by UAE Nationals or GCC Nationals.
• A resolution of the extraordinary assembly for the conversion of the company is adopted by a majority of shareholders representing at least three quarters of the company’s capital.
• A sole proprietorship that offers legal services—known as a legal consultancy—does not require a local service agent.

Management Requirement

• • The company must have an appointed manager.

Formed of at least two partners, a Simple Limited Partnership involves at least one general partner and at least one limited partner.

Ownership

• Each general partner and limited partner can own any share of the business. There is no minimum or maximum ownership level for any partner.
• The general partners are liable for the company’s liabilities to the extent of all their personal and business assets.
• The limited partners are liable for a share of company liabilities equal to their share of the company capital.
• A limited partner with, for example, 30% of the shares of a simple limited partnership is liable for 30% of the company’s debts if it becomes insolvent—unable to pay its debts with its operating revenues—while a general partner is liable for 100% of the company’s debts. This means that, if the company becomes insolvent and the limited partner owns 30% of the company but has no assets, the general partner is liable for 100% of the company’s debts, payable with his or her personal and business assets.

General Partners

• Only UAE Nationals are permitted to be general partners.

Limited Partners

• Nationals of any countries can be limited partners in a Simple Limited Partnership.
• A limited partner may not intervene in management or administrative issues related to the other partners. If he or she does so, that limited partner shall be responsible for all the business’s obligations.
• If the limited partner carries out administrative or management duties on behalf of the business, which lead others to believe he or she is one of the general partners, he or she can be held responsible to the extent of all their personal and business assets for all of the business’s obligations.
• In such a case, the rules and regulations of the general partners shall apply to the limited partner. If the limited partners carry out any of the banned business-administration duties based on an explicit or implicit authorization from the general partners, such general partners shall be held responsible along with the limited partners involved for the obligations resulting from such acts.
• The limited partner is entitled to review the profit/loss statement and the balance sheet, and check the validity of the data by reviewing the company’s records and documents. This may be done by the limited partner or by a partner representative, provided that this does not harm the company.

Company Name

• The name of the company should be that of one or more of the general partners, with an addition noting that this is a company name. The company can also have a special trade name.
• The name of any limited partner should not be mentioned in the name of the company. If it is mentioned with his or her knowledge, that individual is deemed a general partner and responsible for company liabilities.

Partnership Contract

• The simple liability contract shall include, in addition to other data, the name of each limited partner, his or her surname, nationality, date of birth, country, capital share, and the part paid of it.
• A Simple Limited Partnership shall issue resolutions with the consensus of all general and limited partners, unless the contract states a majority. The majority shall be a simple numeric majority, unless otherwise stated.
• Resolutions to amend the company contract shall not be passed unless duly approved as a consensus of all general partners and limited partners.

To open a branch of a foreign company in Dubai, a manager must be appointed to represent the company; the manager must have an approved motion by the Board of Directors to open the branch.

The branch will be considered the company’s headquarters in Dubai, and its business shall be subject to the provisions of the laws of Dubai and the UAE.

Ownership

• The parent company retains 100% ownership of the branch or representative office, which must operate under the same name and conduct the same business as the managing firm. There is no separate legal identity
• A branch or representative office needs to appoint a local services agent, who has no rights, interests or financial involvement in the business. This can be a UAE National, or a company owned by one or more UAE Nationals, who will manage the necessary government procedures and administration.
• The branch office must have an independent budget, its own profit/loss statements and must appoint a UAE-accredited auditor.

Activities

The requirements for registering a branch office in Dubai differ, depending on whether the parent company and the branch are involved in commercial and industrial activities or professional Activities.

Commercial and Industrial Activities

• A foreign company can conduct trade, commercial or industrial activities in Dubai by registering first with the UAE Ministry of the Economy (MOE), then with the Dubai Department of Economic Development (DED).
• For indirect commercial activities such as construction contracting, registration must first be done with DED then with the Ministry of Economy.

• After obtaining MOE and DED approval, the company must engage a UAE National Local Service Agent before the business license can be issued. The Local Service Agent can be an individual or a company. If it is a company, it must be a UAE-based company licensed by the Dubai Department of Economic Development and 100% owned by UAE Nationals. The appointed Local Service Agent is subject to the approval of the Ministry of the Economy.
• The obligations of the Local Service Agent towards the parent company, the branch office and third parties are limited to rendering the services required for the company, for example dealing with government requirements. The Local Service Agent has no responsibility or financial commitment in respect of the company’s business or activities inside the Emirate or abroad.

Branch Imports

• A branch can conduct all the business of the company apart from importing its goods into Dubai, which will be managed by a local trade or commercial agency. The registered agencies must be UAE Nationals, or companies 100% owned by UAE Nationals and will receive a commission or profit on sales.

Professional Activities

• The Local Service Agent for a branch of foreign company undertaking professional activities must be an individual UAE National and not be a corporate body (a person, not a business).

• For professional activities, the branch office does not need to be registered with the Ministry of Economy. The registration and licensing process can be completed directly with the Dubai Department of Economic Development.

Representative Office for Commercial Activities

• While a representative office is not a business structure in its own right, it is a business activity that a branch can conduct and has its own criteria. This includes the authorization to promote and market the parent company’s business but not conduct business operations.

• A representative office must be registered first with the UAE Ministry of the Economy, then with the Dubai Department of Economic Development.

• After obtaining the approval of the relevant authorities, the company must engage a UAE National Local Service Agent, either an individual or a UAE National-owned company. If the Local Service Agent is a company, it must be UAE-based—licensed by the Dubai Department of Economic Development—and 100% owned by UAE Nationals. The appointed Local Service Agent is subject to the approval of the Ministry of the Economy.

• The Local Service Agent’s obligations towards the company and third parties are limited to rendering the services required for the company, such as dealing with government requirements, for example. The LSA holds no responsibility or financial commitment in respect of the company’s branch, business or activities inside the Emirate or abroad.