Commercial vs Professional License in Dubai: What’s the best for you?
Setting up a business in Dubai is a strategic decision and choosing the right category of license is a very critical step in starting a business in Dubai mainland. Several factors influence the investors in choosing the right license: business activities, location, legal structure etc. Professional license and commercial license are the most common license types foreign investors opt for company formation in Dubai. Since the license determines the industry you are going to do business and the type of activities, you can’t afford to be ignorant about the differences between the important licenses issued by the DED.
If you’re a foreign investor, this blog will equip you with sufficient knowledge about whether you should apply for a professional or commercial license in Dubai. Alternatively, you can also consult with the best business setup consultants in Dubai for authentic advice on choosing the right license.
Let’s dissect the two licenses to simplify the company formation process in Dubai mainland:
What is a Commercial License in Dubai?
A commercial license is the most popular form of a license issued by the DED for conducting commercial activities. The DED defines commercial activities as the activities that require capital to be practised. In line with the DED definition, we can list commercial activities as wholesale and retail trade, construction, transportation, stockpiling, communication, financial intermediation, real estate, leasing etc.
What is a Professional License in Dubai?
A professional license is required for a business that engages in professional activities that depend on mental and physical effort to be practised. Such activities include agriculture, fishing, education, health, community and personal services. Professionals such as tailors, beauty salon owners, cafeteria operators, designers, consultants etc. run their businesses under a professional license in Dubai.
Commercial License Vs Professional License: Differentiating Features
A commercial license differs from a professional license mainly in terms of the nature of activities and the ownership structure. If you look at the prominent features of professional license and commercial licence, the following differences can be discerned:
a) Type of Business Activities
A commercial license issued by the DED mainly facilitates the selling of tangible products. Activities like general trading, software trading, e-commerce etc. come under the commercial license. A professional license enables the entrepreneurs to utilise a specific skill set or knowledge and facilitates the provision of services in exchange for a fee.
b) Company Ownership Structure
Foreign investors can set up a company with a commercial license in Dubai mainland with the foreigner owning only 49 % shares in the company. A UAE national (Local Sponsor) is entitled to 51% shares in the company. A professional licence company can be incorporated in Dubai with 100% foreign ownership provided a Local Service Agent (LSA) is appointed. It is better to consult with the best business setup consultants in Dubai to clear the air on the ownership structures.
c) Liability on The Company
An individual can set up a professional company in Dubai as a sole establishment. In this legal structure, the individual will be the sole owner and partner of the company. Even though the foreign entrepreneur can fully own the company, the liability will be unlimited. Foreign investors can set up a Limited Liability Company (LLC) with a commercial license, where the liability will be limited. An LLC can have up to 50 partners, which means the shareholders have limited liability and debts.
d) License for Businesses Practising both Professional & Commercial Activities
So far, we have discussed how the activities allowed under professional and commercial licenses differ from each other. However, there are cases where business establishments practice both professional and commercial activities. Foreign investors are often confused by the type of license they should apply for in such cases. DED says a commercial license will be issued when professional and commercial activities are blended. For example, tailor selling fabrics and sewing tools. In such cases, foreign investors are not required to appoint LSA. If you are still in the dark regarding such cases, seek the advice of business setup consultants in Dubai.
Why Is It Important to consult with Business Setup Advisers in Dubai?
Choosing the right trade license is one of the most important steps that foreign investors need to undertake while initiating the process of business setup in Dubai. Professional and commercial licenses issued by the DED are demarcated by factors ranging from the nature of the activity to ownership structure. For a newbie entrepreneur in Dubai, the features of the licenses may appear to be confusing. With the help of business setup advisers in Dubai, such as Jitendra Business Consultants (JBC), the investors can easily differentiate between the various types of licenses and apply for the right fit.
JBC has assisted thousands of investors and companies to remove the obstacles that may delay the company incorporation process in Dubai. JBC’s highly qualified business setup consultants provide the entrepreneurs with the best mainland and free zone company formation advice. Obtaining a license in Dubai that rightly fits the business activities will no longer be a tough task if investors opt for JBC’s business setup services in Dubai.