How to start a small business in Dubai - A step by step guide

Are you thinking about launching a business abroad? Dubai could be the perfect spot for you. This vibrant city, recognized as the trading heart of the Middle East and North Africa (MENA), offers numerous benefits for entrepreneurs looking to grow, expand, and connect with global markets.

In 2023, Dubai’s real GDP growth was 3.6%, and for 2024, it’s projected to reach 4%. The UAE is widely regarded as a low-risk country for business, maintaining its position as the safest place to invest in the MENA region. The best part? Setting up a business here is a smooth process, especially with the many free zones available.

Things to Know Before You Start Your Business in Dubai
Before diving into the process, it's essential to understand a few key aspects of starting a business in Dubai. Let's break them down:
Choosing the Right Economic Zone: Mainland, Free Zones, or Offshore?
In Dubai, you have three main options: Mainland, Free Zones, and Offshore. Each comes with unique benefits, depending on what your business needs.

Mainland
If you want your business to have the freedom to trade both within the UAE and internationally, establishing your company on the Mainland is a great option. Mainland companies have the flexibility to operate anywhere in the UAE, offering plenty of opportunities for growth. Plus, recent changes to ownership laws now allow foreign investors to own 100% of their businesses in many sectors.

Benefits:

Flexibility to trade with the local market and abroad.
Location freedom: You can operate anywhere in the UAE.
No office restrictions: Choose any location for your office.
Ownership: 100% foreign ownership is now possible in most sectors.
Taxation: Enjoy a 5% VAT and a 9% corporate tax for profits above AED 375,000.

Considerations

More regulatory oversight and approvals from various government entities.
A minimum of 2% of the workforce must be Emirati under the Emiratisation requirement.

Free Zones
If 100% ownership is crucial for you, a Free Zone is an ideal choice. Dubai’s free zones were created to attract foreign investment, offering full ownership of your business. However, businesses in free zones cannot trade directly with the UAE market.
Dubai is home to over 30 free zones, each designed for specific industries. For example, DMCC (Dubai Multi Commodities Centre) and DIFC (Dubai International Financial Centre) are popular free zones tailored to commodities and finance.

Benefits:

Full foreign ownership without a local sponsor.
Tax-friendly environment: 0% personal income tax, no corporate tax, and VAT exemptions within the zone.
Repatriation of profits: 100% repatriation of capital and profits.
No currency restrictions.

Considerations:

You cannot trade directly with the local market without a distributor.
Business activities must be conducted within the designated free zone.

Offshore
Offshore companies also benefit from many of the same perks as free zones, including full foreign ownership and privacy. However, offshore businesses are restricted from operating in the UAE market and can only conduct business internationally.

Benefits

Full foreign ownership.
Privacy and asset protection.
No minimum capital requirement.

Considerations

No direct trade within the UAE market.
A local sponsor is required, which limits foreign ownership to 49% in some cases.

Choosing the Right License for Your Business

Dubai’s Department of Economic Development (DED) offers three main types of business licenses:

1. Commercial License: For businesses involved in trading activities like import/export, sales, and logistics.

2. Industrial License: For businesses involved in manufacturing and production, such as textiles or metal manufacturing.

3. Professional License: For service providers, like medical clinics, beauty salons, or educational services.

You will need to select the right license based on your business activity, which will dictate the regulations and requirements you need to follow.

No Local Sponsor in Free Zones
One of the best perks of setting up in a free zone is that you don't need a local sponsor. This means you can maintain 100% ownership of your business without a UAE national partner.

7 Steps to Set Up Your Business in a Dubai Free Zone
Setting up in a free zone is a popular choice due to the benefits like 0% tax rates, no currency restrictions, and full ownership. Here’s a simple breakdown of the 7 steps involved:

1. Decide on Your Business Activity
Start by choosing your business activity. Dubai offers over 2,100 activities ranging from industrial to professional services. Find one that aligns with your goals.

2. Choose the Right Free Zone
With more than 30 free zones in Dubai, it's best to pick one that aligns with your industry. For example, DMCC is ideal for commodities trading, while DIFC is perfect for financial services

3. Pick a Business Name
Make sure your company name follows UAE’s naming conventions. Names that are offensive or refer to political groups are not allowed. If you're using a person's name, they must be a partner or owner.

4. Apply for Initial Approval
Once your name is approved, you need to get initial approval from the DED. This can be done online or in person. You'll need to submit documents like a passport copy and business plan.

5. Open a Corporate Bank Account
Choose from a range of local and international banks in Dubai to set up your business account. Some popular options include HSBC, Citibank, and Commercial Bank of Dubai.

6 .Find Your Office Location
All businesses in Dubai must have a physical address. Free zones often offer office spaces for rent, so you won’t have to worry about finding one.

7. Get Final Approval
Once all documents are in place, submit for final approval. This includes everything from your office lease to licensing approvals from other authorities

Ready to Start Your Business in Dubai?
Setting up a business in Dubai can seem like a long process, but with the right support, it can be completed in just a few weeks. If you’re ready to start your own business, consider reaching out to us at Go2Sell. We’re here to help you every step of the way, from paperwork to approvals. Let us help you turn your business dreams into a reality in one of the world’s most dynamic cities!

FAQ:

1. Can foreigners start businesses in Dubai? Yes, Dubai actively encourages foreign investment and entrepreneurship.

2. What are the key benefits of starting a business in Dubai? Tax exemptions, easy setup, excellent infrastructure, and a strong economy.
3. What are the main types of business structures in Dubai? Limited Liability Company (LLC) and Sole Establishment.
4. What are the main business jurisdictions in Dubai? Mainland and free zones. How do I get a business license in Dubai? Apply to the Department of Economic Development (DED) or the relevant free zone authority.
5. What types of business licenses are available in Dubai? Commercial, professional, industrial, and tourism.
6. What is the process of registering a business in Dubai? Choose a business type, name, obtain a license, and register with the relevant authority.
7. How can I get a business visa for Dubai? Apply through the local embassy or immigration office.
8. What are the costs involved in setting up a business in Dubai? Costs vary based on factors like business type, location, and additional permits.

9. What kind of small-scale businesses are popular in the UAE? IT solutions, manufacturing, e-commerce, logistics, digital printing, digital marketing, tourism services, and consultancy services are some examples.
10. What are the key considerations for starting a small business in the UAE? Legal structure, licensing, visa and residency requirements, local partnerships, market research, financial planning, and cultural sensitivity.