What to Know Before Starting a Business in Dubai?

What to Know Before Starting a Business in Dubai?

The recent announcement pertaining to 100% company ownership in Dubai has certainly garnered a positive response from entrepreneurs from across the globe as it has opened an array of opportunities for them. Having said that, the fact that it’s not easy to start a business in Dubai cannot be denied either. Even if the requirement for having a local sponsor has been abolished, there are still many challenges that one has to face when setting up a business in the emirate.

Suffice it to say, the journey of becoming a successful entrepreneur in Dubai is not an easy one. However, if you’re persistent and dedicated, you can conquer all the challenges.

On this note, let’s take a look at some important things that you need to know before starting a business in this emirate:

Force Majeure Clause

Force Majeure means an uncontrolled or unanticipated event or effect that is not in the control of anyone. It comes into effect when a party in a contract cannot fulfil its responsibility as specified in the agreement because of unforeseen circumstances.

The reason why you should know about force majeure is that the world is still reeling from the effects of COVID-19. Among various other changes it brought in the business and commerce sector, a high number of cases pertaining to force majeure happened to be a major one. Many companies were unable to complete their contractual obligations because of the global pandemic. Hence, they had to apply force majeure to bail out of the contract.

Difference Between Free zone, Mainland and Offshore

You can set up a company in Dubai in either of the three jurisdictions; free zone, mainland and offshore. It’s important to know details about them in order to make an informed decision. For your assistance, we have discussed these three jurisdictions briefly here:

Mainland

A company set up in the mainland is also called an onshore company. If you own a company in the mainland, you are allowed to do business not only in the local market but overseas as well. There are no restrictions pertaining to area-wise limitations. Companies in the mainland are licensed by DED.

Free Zone

Companies established in a free zone get to avail numerous perks and incentives, including tax benefits. Over 30 free zones are operating in Dubai, including:

  • Dubai Silicon Oasis
  • Dubai Internet City
  • Dubai Design District
  • Dubai Knowledge Village
  • Dubai Healthcare City
  • Dubai Airport Free Zone

Offshore

An offshore organisation is established in another place or jurisdiction while the parent (onshore) company is present in another country. It is not called a branch of the company as no physical presence is required. It is important to note that an offshore company can be converted into an onshore company after completing an extensive procedure.

Obtaining License

You cannot start a business in Dubai without obtaining the relevant licenses. This usually depends on the nature and type of company you want to establish. It is important to hire consultancy services as they can guide you through the entire process of getting registered and obtaining the required licences.

Know What’s Not Allowed

Even though Dubai has a modern outlook, there are, however, some cultural boundaries one must adhere to. So, when starting a business here, know what’s allowed and what’s not. Getting information about the same will help you avoid troubles in the later stages.

Know About the Company Formation Process

This one’s a must. You should know about the process to set up a company in Dubai. Bear in mind that it may vary depending on the type and nature of the company. At first, you will have to rent a place to start a business. This is mandatory in the case of an onshore company or if you are operating in the mainland. Be mindful that DED will only grant its approval if you are presenting them with the tenancy agreement, RERA documents, along Ejari registration.

A Final Word

This is just the tip of the iceberg. The process, as stated above, isn’t exactly very simple. However, by taking the help of business consultants, you can set up a company in Dubai. Other than that, you may also require the assistance of a law firm in certain stages. For example, if you are getting into a partnership, hiring a lawyer may prove to be a wise idea. They will help to draft the partnership agreement and assist with other important steps as well.  

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By Sachan Lathiya

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