Mainland vs. Free Zone Company Formation in Dubai

MAINLAND COMPANY

An LLC (Limited Liability Company) is the earliest and most commonly known structure in the global marketplace. LLCs are limited by their shares and are defined by the liabilities of the company. In order to form an LLC, a minimum of 2 to a maximum of 50 shareholders is necessary.

In order to encompass such an ensemble, with regard to the UAE law, a UAE national (individual or corporate) should own 51% of the shares while the remaining 49% is allotted to the other expatriate shareholders of the company. The major benefit of Mainland companies is access to the UAE Market.

Business Overview

Mainland companies are at ease of carrying out their business activities throughout the UAE market, either inside or outside, without limiting their access within the Free zone alone.

Structure of Ownership

• The presence of a UAE National is mandatory in mainland licenses either as a National servicing Agent or a local partner
• In an LLC, 51% of the shares rest with the UAE National while only 49% is allotted to the expatriate partner.
• In the case of a professional license, 100% of the shares rest with the expatriate partner while a UAE National is appointed as a National Service agent.

Office Space

In the case of mainland license, a 140 square foot office is mandatory along with an Ejari (Dubai), or Tawtheeq (Abu Dhabi). Only after producing these documents to the Department of Economic Development, the license will be released.

Visa Eligibility

Mainland ensembles don not have limitations. The MOL (Ministry of Labor) issues an Electronic Quota to every company highlighting their visa eligibility. This can be increased by increasing your office space, as you will be allocated 1 visa for an 80 square foot office space. In case of the presence of external staff like drivers, sales professionals, etc. a separate quota can be applied without affecting the office space quota.

Approvals of Governing bodies

• It is mandatory in case of a mainland license to get approval from concerned departments like Dubai Municipality (DM), Department of Economic Development(DED), Ministry of interiors or Immigration (MOI), Ministry of Labor (MOL)
• Certain circumstances, the third party governing licenses are also needed depending on business activities. This includes KHDA (Knowledge and Human Development Authority) approval for education-related activities, DHA (Dubai Health Authority)/HAAD (Health Authority Abu Dhabi) for medical activities, Civil defense for security-related activities, Food Control Department of Municipality for a food-related license, RERA (Real Estate Regulation Authority) for real estate activities.

FREE ZONE COMPANY

Free zones are different from the mainland owing to the fact that it’s an isolated land or setting with different tax, import, and customs regime. The major advantage is that a free zone company does not have to give out the shares, the expatriate can own 100% of the shares.

Business Overview

• Free zone companies are allowed to conduct businesses only in specific free zones or outside UAE but are not authorized to sell their products or provide services in the UAE mainland.
• Even though the local business is restricted for free zone companies, the distribution of products through a distributor having a mainland license is possible. This particular distributor can act as your local agent and charge a certain fee (lower than 5% on free zone invoices) to trade into the local market. The distributor is responsible for shipping the goods if not so, a 5% duty fee needs to be paid for goods leaving the free zone
• Marketing your company is also possible only inside the free zone, which may even be a face-to-face or business card handouts.

Structure of Ownership

A company in the free zone can be handled 100% by the expatriate without the need for a UAE National or a service agent.

Office space

A free zone license can be procured with or without a physical office. The license holders are at ease to use a smart/Flexi office, but with due restrictions on visa allocation.

Visa Eligibility

The visa allocation is limited in the case of free zone companies from 1-6 visa packages. In the case of more visa requirements, you will have to rent a physical space inside the free zone. Renting physical spaces inside the free zone is pricey due to the high demand for commercial space and limited supply.

Approvals by Governing bodies

Approval from external authorities is usually not required by free zone authorities as free zone facilities are mainly for the import and export of goods. It is to be noted that no external approvals from governing bodies outside the free zone are entertained.

Originally posted 2021-09-29 05:21:57.