A professional company is a UAE-based firm established for special purposes, focusing on self-activities, rather than profiting from others’ business. In Dubai, these firms are allowed to conduct non-commercial activities, ensuring a balance between professional and non-commercial activities. Professional firms in Dubai can have 100% foreign ownership, allowing for professional or artistic activities and business independence.
A local partner can be appointed, but not directly involved, and be remunerated based on profits or turnover revenue. Businesses in the UAE require a professional license from the Department of Economic Development (DED) for service-related operations. Eligible individuals have a professional degree and extensive expertise in a specific field.
Entrepreneurs often hesitate between commercial and professional licenses, but many Dubai ventures can be eligible for both. It is important to explore the challenges of opening a professional company in the UAE. Do not worry, as there are several ways to overcome them, so let’s dive in to know everything.
Key Takeaways
- Dubai businesses require a professional license from the Department of Economic Development (DED) for service-related operations.
- The Professional Services market in the UAE is forecasted to generate revenue of $216.54m by 2025, with a CAGR of 6.37%.
- The demand for professional services is increasing due to the country’s booming economy and focus on innovation.
- Challenges faced by UAE business owners include workforce management, labor laws, corporate tax, cultural differences, regulatory compliance, high operational costs, and a competitive business marketplace.
- Company setup types include sole proprietorships, private joint shareholding companies, limited liability companies, partnership companies, and public shareholding companies.
6 Challenges professional entrepreneurs face in the UAE
The top challenges to overcome by the UAE business owners include the following.
Workforce Management and Labor Laws
The UAE’s labor market, dominated by expatriates, presents both opportunities and challenges. Complex labor laws, including hiring, firing, and employee relations, necessitate awareness for businesses. The high cost of living in Dubai often leads to higher salary expectations.
Corporate Tax and VATs
The UAE, known for its tax-free status, has attracted global businesses due to its absence of burdens. However, the introduction of VAT and corporate tax is changing the landscape, potentially increasing operational costs and affecting profitability. Companies must consider these factors when planning their business setup in Dubai, as these taxes could impact their long-term financial strategies.
Cultural Differences
Understanding UAE’s cultural and social norms is crucial for successful business setup, as it requires building relationships and trust, and adjusting to the holy workweek on Friday for smooth operations.
Regulatory Compliance
The UAE’s dynamic regulatory environment, aimed at maintaining competitiveness, can pose challenges for businesses. Rapid regulatory changes are crucial for compliance and smooth operations, especially for Dubai-based companies. The business sector of Dubai presents a complex regulatory environment.
AS the Dubai mainland and various free zones are offering distinct rules and regulations. This can cause confusion for foreign entrepreneurs. Obtaining licenses and adhering to regulations is crucial, but compliance can be time-consuming and costly. Balancing compliance with budget constraints is crucial for low-cost businesses in Dubai.
High Costs
The UAE’s high operational costs, including office space, visas, and regulatory fees, pose significant challenges for startups and small businesses. Even low-cost setups can add up, making it difficult to sustain them. Access to funding is also challenging due to fierce competition in the competitive market.
Competitive Business Marketplace
Dubai and the UAE face intense competition, with the government promoting the region as a global business hub. To succeed, businesses must adopt strategic approaches, differentiate offerings, and adapt to evolving market dynamics.
Types of the business licenses in the UAE
The UAE requires a trade license for conducting businesses, issued by the economic department. Major types include professional, commercial, and industrial licenses, with specific procedures varying across emirates.
Industrial License
An industrial license is necessary for establishing manufacturing activities in the UAE, allowing businesses to process goods using local or imported materials. Professional licenses allow individuals and companies to engage in their chosen profession. For example, artisan ship, carpentry, consultancy, printing, publishing, medical services, beauty salons, and more.
Commercial License
A commercial license is granted to companies involved in trade activities like logistics, car rental, and real estate brokerage, with tertiary activities and main activities limited to 10 per license.
Professional License
A professional license allows individuals and companies to engage in their chosen profession. For instance, artisanship, carpentry, medical services, beauty salons, consultancy, printing, publishing, computer graphic design, repair, security, and document clearing.
Craftsmanship License
A craftsmanship license is required for individuals in plumbing, carpentry, and electrical work, and companies employing craftsmen must apply. Non-licensed business in UAE can result in fines and penalties. Renewals are mandatory.
Agricultural License
An agriculture license is required for individuals involved in crop cultivation, greenhouse installation, agricultural consultancy, harvesting, and pesticide trading.
Tourism License
Businesses in the tourism sector, including hotels, restaurants, guest houses, travel agencies, camps, and cruise boats must obtain a trade license.
Kinds of company setups in Dubai, UAE
Let’s explore some of the most prominent company setup types in Dubai, UAE.
Sole Proprietorship
A sole proprietorship is a UAE-based business structure where a single individual owns all operations and holds 100% shares in profits. It’s the simplest corporate structure and requires a residence permit for foreign citizens. Owners are responsible for debts and financial duties. However, certain rules must be followed before proceeding.
Private Shareholding Company
A GCC national can own up to 100% of shares, but requires Ministry of Economy approval and 51% UAE national ownership.
Limit Liability Company
In the UAE, limited liability companies (LLCs) are the preferred business entity for individuals, with partners’ liability limited to their investment. They can conduct commercial or industrial activities, except banking, insurance, or investment. Foreigners can hold full ownership of the LLCs in Dubai mainland, and can appoint UAE nationals as nominee directors. Formation requires an accredited UAE auditor, and minimum 2 to 50 shareholders can invest in the company.
Partnership Company
Partnerships are business entities where ownership is shared among partners, with profits and losses determined by a ratio. There are two main types: General Partnership and Limited Partnership.
In UAE, UAE nationals are required as general partners, while other nationals must be limited partners. Limited partners cannot intervene in general partners’ management or administrative issues, potentially causing liability.
Public Shareholding Company
A Public Share Holding Company, also known as a Public Joint Stock Company (PJSC) in the UAE, is a legal entity with a trade name not from partnering investors. It can practice industrial, commercial, or professional business activities, has a maximum of 5 appointed managers, and has at least 5 founding members, owning between 30% and 70% of the capital shares.
Professional company registration process in the UAE
Follow this procedure to set up a professional company in Dubai, UAE.
- Choose a trade name
- Select a business activity
- Obtain initial approval from the Dubai Department of Economic Development (DED)
- Submit necessary documents
- Pay fees, and obtain the license
- Apply for visa and open your bank account
Conclusion
Dubai requires a trade license for all commercial or business activities, with the Department of Economic Development (DED) dividing diverse sectors into different licensing options. Professionals require a DED license for accountants, auditors, financial advisors, advertising, entertainment, architectural, teaching, business, legal, medical, and more. The list of activities can be found on the DED website or office. Consult a business setup company like KWS ME to determine the best license for your business.
