How to Choose the Right Legal Structure for your Business in Dubai Mainland?

2022-05-17

Determining an appropriate legal structure or legal form is one of the important requirements of business setup in Dubai mainland. Choosing the appropriate business structure for a business has long-term implications. It impacts how you meet your obligations, and your regular governance needs to be based on how you manage your business. If you wish to learn how to choose the best legal business structure in Dubai, then you need to communicate with the best business setup consultants in Dubai.  They will guide you and also help you in this process and make it easy for you.

Selecting the type of legal entity is an important decision you must make while incorporating a business in Dubai. The legal structure determines the personal liability you will face, your capability to raise funds, ownership arrangement, and the documentation needed to submit.

A legal structure is determined based on factors such as the number of shareholders, nature of activity etc.

You need to be careful while determining a legal structure as each legal form has specific requirements and restrictions. Read ahead to know how to determine an appropriate legal structure for your business:

Factors to Consider before Choosing a Legal Structure 

Entrepreneurs who are unaware of the laws of business setup in Dubai may not find it easy to decide on an appropriate legal structure for their proposed company. You must consider your company’s financial requirements, risk and the ability to grow before choosing a legal structure. Choosing the wrong legal structure may affect your business operations, so give it careful thought before finalising a legal form.

Here are some important factors to consider before selecting an appropriate legal structure for your business. You are advised to consult with business consultants in Dubai for a better outcome.

1. Flexibility

Just consider where your company is headed and what type of legal form will help you achieve the growth you envisioned. Read the business plan again, review your goals and assess which legal structure aligns with the objectives enlisted in the business plan. If you are still confused, discuss with business setup consultants in Dubai about the legal structure.

2. Complexity

Analyse whether complex legal structures are what you need. Depending on your business plan and activities, you can decide if a simple structure or complex structure is better. A sole proprietorship is the most simple legal structure in Dubai. However, it allows you to carry out only professional service activities.

3. Liability

If you are aiming for the least amount of personal liability, go for a Limited Liability Company (LLC) in Dubai mainland. An LLC prevents creditors and customers from directly suing you. They can only sue your LLC in case of any dispute. They can’t even gain access to your assets when the company is in a serious dispute with creditors.

4. Control

If you want full control of a business, it’s advisable to set up a sole proprietorship in Dubai. It allows you to fully control your profits and business operations. If you are ready to share the control of the company, you can incorporate an LLC in Dubai.

Types of Top Legal Structures in Dubai Mainland 

After carefully considering the factors detailed here, you must have derived a conclusion regarding the selection of a legal structure. Now, you must know about the type of legal structures recognised by the Department of Economic Development (DED), which is the licensing authority in Dubai mainland. More details can be obtained from business setup consultants in Dubai. Here is a list of top legal structures permitted for company formation in Dubai:

Sole Proprietorship 

Only a single individual can be the owner of a sole proprietorship who is solely responsible for the profits and liabilities of the company. Setting up a sole proprietorship is involves easy procedures compared with other legal structures. As per the rules of business setup in Dubai, only GCC and UAE nationals can claim 100% ownership in a sole proprietorship. Other nationalities can claim 100% ownership if they appoint a UAE national as a local service agent (LSA). A sole proprietorship can carry out only those activities permitted under a professional license in Dubai.

Limited Liability Company 

A Limited Liability Company (LLC), as the name suggests, is owned by multiple shareholders. Persons of any nationality can form an LLC in Dubai mainland. The liability of owners or shareholders towards the company is limited to the extent of capital they have invested in the entity. In case of any disputes, a case can be filed against the company and not against the individual shareholders. Business setup consultants in Dubai can guide you on how to set up an LLC.

One-person Company 

A one-person company is an LLC with a corporate body or an individual as its owner. Unlike a sole proprietorship, the liability is limited to the shares held by the owner.  Only UAE or GCC nationals are allowed to incorporate a one-person company in Dubai. A corporate body 100% owned by a UAE or GCC national can also be the owner of a one-person company. The regulations of business setup in Dubai mandates that the share capital of a one-person company must be recorded in the Memorandum of Association (MoA). Also, the company name should contain the owner’s name and the suffix ‘LLC’.

Civil Company 

A civil company can be owned by recognised professionals such as doctors, lawyers, engineers and accountants. The partners can be of any nationality. However, an LSA must be appointed if the company doesn’t have UAE or GCC nationals as partners. Consult with business setup consultants in Dubai set up a civil company.

Hire the Best Business Setup Consultants in Dubai 

The process of business setup in Dubai is simple if the entrepreneurs properly fulfil the mandatory requirements such as determining an appropriate business structure. Selecting the right legal structure is a crucial process as it’s difficult to switch to a new structure once incorporated. What you can do is get proper advice from business setup consultants in Dubai such as Jitendra Business Consultants (JBC) before choosing a legal structure. JBC has a team of highly qualified business consultants who can help you navigate every step of company formation in Dubai. Feel free to call us to register a company in Dubai without any hassle.

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