If one were to take a look at the current state of the global startup ecosystem, it wouldn’t take too long to understand that Dubai is home to one of the most supportive and visionary environments for startups to take flight. With innovation placed at the forefront of business operations, Dubai has become a melting pot for startups from around the world.
If you are an entrepreneur who has understood the potential of this region and the benefits it can provide to catalyze your startup’s journey, this blog will guide you through all the legal framework that is in place in order to establish your startup in Dubai.
CHOOSING YOUR BUSINESS STRUCTURE
In the UAE, entrepreneurs have the choice between setting up a mainland company, free zone company or offshore company. With each option having its unique advantages and legal considerations, it’s essential to make the right choice based on your business model and target market.
- Mainland Companies
Mainland companies come under the purview of the Department of Economic Development (DED) and are allowed to trade and transact inside the UAE and Gulf Cooperation Council (GCC) states.
Advantages include:
- Wide market access within the UAE and the GCC
- No restrictions on business activities
- Versatility in operations
Concerns:
- A local partner from the UAE or GCC is required to establish such a business
- The local partner must hold at least 51% of shares.
- Depending on the role of the business, a physical office must be set up on the mainland.
- Freezone Companies
Dubai is home to several free zones which come with their own set of unique incentives and regulations. Depending on your industry, you will be able to pick the right free zone for your startup business.
Advantages include:
- The ability for your business to be a 100% foreign owned entity.
- Tax benefits, streamlined setup and regulations, access to a host of cutting edge infrastructure
Concerns:
- Some restrictions depending on your business activity
- Limited to the confines of the freezone unless a No Objection Certificate (NOC) is granted to conduct business operations in the UAE mainland
- Varying licensing rules depending on the free zone
- Sole Establishment
If you want to follow a single owner business model, setting up your business as a Sole Proprietorship in the UAE would be ideal. This option is better suited for ventures with smaller capital investments.
Advantages include:
- Owner has total control and can make decisions without approval of partners
- Ability to swiftly adapt to dynamic market changes
Concerns:
- Owner is liable for all financial obligations of the business including debts
- Personal assets will be at risk if losses or legal issues arise
- Limitations in raising capital/business expansion.
- Limited Liability Company (LCC)
Consider the LCC option for more control and liability protection. Several startups in Dubai establish their businesses in Dubai as LCCs as it caters to varying business sizes across many industries.
Advantages include:
- Personal assets of owners are protected from business financial obligations/debts
- If legal issues were to arise, owners’ assets will stay separate and unaffected.
- Flexible ownership structures are in place, foreign ownership included.
Concerns:
- Two shareholders are required, some activities will call for local sponsorship
- Regulatory and administrative requirements vary based on business activity and location
LICENSING AND PERMITS
It is essential to have all required licenses and permits in hand to carry out business operations in Dubai. Once these are understood, staying compliant with regulations for smooth business operations will become easier.
Some of the licenses and permits you may need are:
- Trade License
This is the foundation for most businesses in Dubai as it outlines and authorizes the scope of business operations. Three types of trade licenses exist:
- Commercial License: Ideal for businesses engaged in buying and selling of goods
- Industrial License: Required for manufacturing and industrial business models
- Professional License: Doctors, lawyers, consultants, and engineers require a professional license to practice in Dubai.
- Free Zone License
As mentioned above, all businesses operating in the free zones of dubai need to obtain the respective license to carry out operations.
- Special Permits and Approvals
Specialized permits and/or approvals may be required depending on your business. If you are in the food or medical industry for example, approval must be sought from the respective Ministry.
- Import/Export Licenses
If your business is engaged in international trade, obtaining import and export licenses are essential.
INTELLECTUAL PROPERTY PROTECTION
Another important step to consider when launching your startup is the protection of your company’s intellectual property (IP). Dubai is home to a robust framework that protects these rights including trademarks, patents and copyrights.
Here’s is a quick look at the steps you can take to ensure the safety of your IP:
- Trademarks
The name of your business, logo and any other symbols and marks that can be distinctly associated with your brand must be registered as trademarks. Upon doing so, your brand’s identity will be protected and competitors or other startups will not be able to use the same or similar markings. It is advisable to work together with Dubai’s IP authorities and legal partners to complete this step.
Patents
If your startup is focused on the invention of new technologies and innovations that have not been seen before, applying for a patent will give you the rights to create and profit off your invention. Needless to say, this will provide your startup with a competitive advantage. To complete the Patent process, you will have to approach the UAE Ministry of Economy.
Copyrights
Copyrights encompass all of your startup’s creative output. This may include written content, music or audio productions and artwork. Once these elements are copyrighted, your startup will have control over who gets to reproduce and distribute the same. UAE’s copyright office will assist your startup in this process.
Trade Secrets
Some factors and processes will most likely be key to the operation of your startup. Also known as trade secrets, you must protect them by having policies that control access to such sensitive data. A good start would be to implement non-disclosure agreements among your employees and other stakeholders.
Legal Expertise
To streamline the entire process of all elements listed above, employing or seeking the services of a legal expert will prove to be beneficial. Such individuals will be vital when it comes to enforcing the IP rights of your startup.
EMPLOYMENT AND LABOR LAWS
Dubai has many conditions when it comes to hiring your workforce. From visa requirements, work permits and everything in between, the Ministry of Human Resources and Emiratisation (MOHRE)’s plays a key role in this process. When hiring talent, it is essential to stay compliant with all of these requirements.
You must consider the following when drawing up an employment contract:
- Terms of employment
- Job responsibilities
- Compensation packages
- Working hours
- Conditions for employment termination.
Be thorough with Dubai’s labor laws so that your startup can create a productive and fair work environment for your staff.
CONTRACTS AND AGREEMENTS
Contracts are the building blocks of sound business relationships. A good contract must be exceptionally clear, defining the expectations and protecting the interests of all parties. This is true for all kinds of business relationships including ones with vendors, clients, or partners.
Some of the contracts that your startup will have to engage in are:
- Vendor Agreements
- Client Contracts
- Employment Contracts
- Non-Disclosure Agreements (NDAs)
- Non-Compete Agreements
- Shareholders’ Agreement
- Lease Agreements
TAXATION AND FINANCIAL COMPLIANCE
The taxation policies in Dubai are favorable to all kinds of business operations, fostering a positive environment for startups as well.
As a startup, a few of your tax obligations are outlined below:
- Value Added Tax (VAT)
- Corporate Income Tax
- Customs and Duties
- Accounting and Financial Reporting
REGULATORY BODIES AND SUPPORT ORGANIZATIONS IN DUBAI
With such a positive environment present for startups, Dubai’s support for small businesses are enhanced by an array of government bodies and support organizations who will help pave the way on your startup’s journey:
- Dubai Economy (Department of Economic Development and Tourism–DET DED)
- Dubai SME (Small and Medium Enterprises Agency)
- Dubai Chamber of Commerce and Industry
- Free Zone Authorities such as Meydan Free Zone
- Financial Institutions
In Conclusion, when it comes to launching a startup in Dubai, you will be met with several options as outlined in this article. Before choosing a mainland company, free zone entity, or offshore setup, you must be clear about which options work best for you. Taxation, IP protection and compliance with local laws are all important for the success of your business. Equip yourself with the proper knowledge to make a name for your business and take on the world from the heart of Dubai.
