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Business Legal Structures in the UAE


Provided By Lesley Yap for Khalifa Fund for Enterprise Development, SME Toolkit UAE

 

Local Individuals and foreign investors interested in establishing a business presence in the UAE must begin by determining the appropriate form of business ownership necessary for their desired business venture. Choosing the right form of business ownership is important because the business legal structure you select will determine the requirements and conditions in obtaining your business license, how your business is organized and how the money that flows in and out of your business is handled.

When deciding on the appropriate business legal structure, you need to consider the activity/activities of your business, the number of nationalities of the business owners and the Emirate in which you choose to launch your business.

With the exception of free zones, (where foreign investors can have the full ownership of their businesses), companies established in the United Arab Emirates must have a UAE national partner or partners who hold at least 51 percent of the company’s capital as per the Commercial Companies Law. The law also permits foreign companies to open branches or representative offices in the UAE provided that the branch or office appoints a UAE national services agent. A foreign company can also sell its products or services in the UAE without establishing a formal company in the country by entering a commercial agency agreement whereby a foreign company is represented by a UAE national agent to sell, offer, or provide goods or services for a commission or profit. Other exceptions of the Commercial Companies Law exist depending on a company’s primary activities, for example, activities involved in oil, gas, electricity, water, etc.

 

The below is an overview of the different types of business structures that can be set up in the UAE.

 

Establishment or Sole Proprietorship

An establishment or sole proprietorship is an entity owned by one individual with the trade license issued in his or her own name. The owner assumes all the financial responsibilities of the entity including all its financial liabilities. Establishments are usually owned by UAE nationals and GCC nationals. Since establishments are exempt from the Commercial Companies Law, certain foreign nationals may also set up sole proprietorships depending on their business activity/activities. These firms usually practice professional services and do not extend to any commercial business. Establishments owned by foreign nationals need to appoint a UAE national service agent to assist in obtaining licenses, visas, etc. The agents have no direct involvement in the business and are paid a lump sum and/or percentage of profits. Establishments or Sole Proprietorships are also sometimes referred to as Civil Companies.


General Partnership Company

General Partnership Companies are limited to UAE nationals only, consisting of two or more partners who are jointly responsible for all financial obligations to the extent of their personal assets.

 

Limited Partnership Company

Limited Partnership Companies consist of one or more general partners liable for the partnership’s financial obligations to the extent of their personal assets, and one or more limited partners liable for the partnership’s obligations only to the extent of their respective shares in the company. Usually the general partner manages the business and the limited partner does not participate in day-to-day activities.

 

Joint Participation (Ventures)

This entity is an association between two or more partners who share in the profit and loss in one or more commercial businesses conducted by one of the partners in his or her name.

 

Public Joint Stock Company

A Public Joint Stock Company has its capital divided into equal value and tradable shares. Each partner is liable to the extent of his or her respective shares in the company. A minimum of 10 founding members is required. Any UAE businesses involving finance and management of funds on behalf of third parties must take this business form.

 

Private Joint Stock Company

A Private Joint Stock Company requires a minimum of 3 founding members and the shares of this entity cannot be offered to the public unless converted into a public joint stock company. Several conditions must be met before this can occur.

 

Limited Liability Company (LLC)

Limited Liability Companies are formed by a minimum of 2 and a maximum of 50 individuals whose liability is limited to their shares in the company’s capital. Foreign equity in the company may not exceed 49 percent; therefore a UAE national partner must hold a 51 percent share. LLCs are most common among foreign investors.

 

Partnerships Limited with Shares

Partnerships Limited with Shares are formed by general partners that are jointly liable for the partnership’s financial obligations to the extent of their personal assets and participating partners who are liable to the extent of their shares. General partners must be UAE nationals and are responsible for the management of the company. Participating partners are prohibited from being involved in the day-to-day activities.

 

 


Abu Dhabi Government. (2013) Forms of Ownership and Legal Requirements. https://www.business.abudhabi.ae

Dubai Department of Economic Development. (2013) Legal Business Structures. https://dubaided.gov.ae

UAE Embassy – Washington Trade & Commercial Office. United Arab Emirate Ministry of Economy. (2013) Doing Business in the UAE. http://www.uaetrade-usa.org

UAE Investment Map. (2013) Legal Structure. http://www.uaeim.ae

United Arab Emirates Ministry of Economy. (2013) http://www.economy.gov.ae

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