Differences between Free Zone, Mainland and Offshore Company Formation in Dubai
1. Restrictions in Ownership
The major difference between the process of the mainland, free zone, and offshore company formation in Dubai is related to the ownership structure. While the free zone and offshore company formation Dubai offers 100% ownership in the company for the investors, the process of mainland company formation has a shareholding requirement. The mainland company requires a local sponsor who holds a 51% share in the company. It is mandatory that the local sponsor should be a UAE national. The mainland companies under the professional license can have 100% ownership, provided they appoint a Local Service Agent (LSA).
Also read: Businesses in Dubai Mainland Exploring Opportunities For 100% Ownership
2. Flexibility in Business Activities
In terms of conducting a business activity, the mainland company formation offers more flexibility to the investors. The process of mainland business setup in Dubai allows the entrepreneurs to conduct business anywhere in the UAE. The mainland companies are allowed to conduct business in commercial, professional, and industrial activities. On the other hand, the process of free zone business setup in Dubai is restrictive in terms of the business activities as the investors are allowed to trade within the free zone or internationally. The offshore business structure doesn’t allow investors to conduct any business activity within the UAE.
3. WorkSpace Requirements
For successful mainland company incorporation in Dubai, the companies need to have a physical address. This is a mandatory requirement and the DED will issue the trade license only if the company meets this obligation.
For the free zones, there are no stringent office space requirements to start a business in Dubai. The companies can either have a physical office in the free zone or can operate without one depending on the nature of the business activity and work requirement. The free zones also offer the Flexi desk system for the companies where they can use common business centre desks. The Flexi desk is a great benefit to the new startup entrepreneurs, which allows them to save initial costs of company formation.
Also read: Pros & Cons of Setting up a Business With Flexi Desk Facility in UAE Free Zones
4. Number of Visas
There is no restriction on the visas that the investors can obtain on a mainland trade license in Dubai. An E-quota will be issued by the Ministry of Labour for the mainland company that shows the visa eligibility. If the company requires more staff, the visa eligibility can be increased, but it depends on the office space. The company can get more visas if they have more office space. For the free zone licenses, two visas are offered for the smart office package, and if more visas are needed the investors need to lease out a physical space. The UAE has a systematic procedure for visa processing and efficient business setup services in Dubai need to be consulted to make the process quicker.
5. Approval from Government Authorities
To obtain a mainland trade license in Dubai, the companies need to secure approvals from various authorities depending on the business activities. Such government authorities include
For specific business activities, approvals need to be obtained from the concerned authorities. For instance, approval from the Dubai health authority (DHA) is required to set up a business related to medical activities. Apart from this, there are certain activities that are categorized as special activities that need approval from the Legal
- Oil & Gas
On the other hand, the free zone company formation in Dubai is much easier compared to the mainland as usually the approvals from external authorities are not required.