UAE has made a name for itself amongst all of the Middle East to be one of the countries with a large number of free zones for conducting businesses. With an abundance of opportunities and benefits, UAE has without a doubt attracted investors and entrepreneurs from all over the globe.
One of the most desirable factors of setting up a company in the UAE is the various structures of companies and benefits that come with it, particularly Free Zone Limited Liability Companies (FZ LLC). In this blog, we will explore what an LLC business structure is, its benefits all the way up to the differences between mainland and free zone to set up your company with the LLC structure in a free zone in Dubai and other emirates.
What is a limited liability company in a free zone?
A free zone establishment (FZE) or free zone company (FZC) is a limited liability company that is formed and governed by the rules and regulations of the free zone in which it is established.
There are two company structures for free zones businesses: Free zone establishment limited liability company (FZE LLC) and free zone company limited liability company (FZCO LLC). The feature of FZ LLC is that it has a single shareholder (single member LLC), unlike FZCO LLC where one can have multiple shareholders.
Benefits of LLC structure in a free zone:
One of the main benefits of having an LLC company structure is that it allows the shareholder of the company to be protected from personal liability, debt and more that may occur with the operations of the company.
An LLC structure in a free zone in Dubai and other Emirates would also mean that you could only suffer losses up to the amount you have invested in your company and not any more than that. Therefore, LLC is a business that offers flexible ways to manage your profits and losses without being personally liable for the entire gains/losses. There are various other benefits of having an LLC business structure in a free zone including:
- 100% foreign ownership: Foreign entrepreneurs can benefit from having complete ownership of their company with no local partner. However, you will need a local sponsor to whom you will be required to pay a mutually agreed annual fee.
- Full repatriation of capitals and profits: Free zone companies can repatriate all their profits to their home country. Giving them the freedom to transfer 100% of their capital to their place of origin without any requirements.
- No personal, corporate or income tax
- Exemption from all import and export duty
- Convenient recruitment and cost – effective workforce
- Range of business activities: Free zones support a range of business activities. This makes it easy for individuals to connect and network.
- Numerous options of facilities: There are various options for facilities you can choose for your business setup. This includes flexi-desk facilities, standard offices all the way to warehouse facilities.
- UAE residence visa for 3 years
LLC company formation and licenses offered:
When considering LLC structure in a free zone in the UAE, unlike mainland, it enables you to opt for an LLC structure regardless of the type of license you have. You will still have the protection of having a limited liability company LLC structure and not suffer any setbacks in terms of liabilities, unlike when you have a sole proprietorship where you could suffer 100% loss. The types of licenses you can have with LLC structure include:
- Professional License
- Commercial License
- Industrial License
A free zone LLC structure is suitable for clients looking to provide services or obtain a professional license. Professional license in a free zone enables you to conduct business in local markets without the concern of debts or liabilities that could carry forward with your business.
There are about 45 free zones that offer a structure of LLC in Dubai and other emirates. The free zone that is most suitable for LLC structure for your company would depend upon the nature of your company such as the business activities, nature of the facility, number of visas and more.
LLC formation on mainland and on free zone:
LLC company formations are usually formed on the mainland. Mainland companies with LLC structure would require 51% ownership to be given to a local sponsor while 49% is owned by the foreign expat.
This is however not the case with free zones LLC company structure where the expat has the opportunity to have 100% ownership of the company without the need of a local sponsor. If you choose to have more partners in an LLC structure in a free zone, you are given the choice to choose how your shares are divided and do not need any other individuals in your business that you do not require.
The similarities between a mainland LLC company and a free zone limited liability company is that you will still have the same protection of the LLC structure that would enable you to have. However, not all free zones have LLC structures.
What’s the Difference between LLC and FZE in the UAE?
Limited liability companies and free zone establishments have their set of benefits and limitations. Here, we compare them on various grounds to make it easier for you:
- Business Scope
A key difference between LLC and FZE is that each has authorities that have its own set of rules and protocols. One common restriction imposed on businesses is that they’re only permitted to have an operating agreement within their designated free zone. It mainly refers to commercial licensing. Professional licenses can still work in the local market if they want to.
LLCs are free to trade independently with the local marketplace, any free zone, or even outside the UAE. The same applies to all commercial and professional business licenses.
- Office Space
A free zone limited liability company license can be applied for with or without a physical address. For a minimum of 5 hours per week, administrations authorize the use of flexi desks or smart office spaces. Business Bay, Media City, and JLT are all good places to look for offices.
A minimum of 200 square feet of office space must be leased out yearly to qualify for an LLC license. Upon registration, the certified tenancy contract must be given to the Department of Economic Development (DED). The DED will then grant the LLC license.
- Authority Approvals
A free zone limited liability company is managed by the authority in charge of it. By presenting the required documentation, you must obtain the necessary authorization from relevant departments. External approvals are usually not required unless a specific activity necessitates them. Standard permits from agencies such as the Department of Economic Development, the Ministry of Labor, and the Ministry of Immigration (MOI) are required for an LLC license.
Individual and corporate shareholders may have different documentation. It is occasionally necessary to obtain approval from external authorities. Education-related licenses, for example, are to be approved by the Knowledge and Human Development Authority (KHDA).
- Visa Eligibility
Another vital aspect of free zone vs. LLC Dubai is visa eligibility. The number of visas available to free zone enterprises is limited. They are usually limited to one to six visa packages. If a corporation requires more, they must rent a physical area within their designated free zone.
The Ministry of Labor (MOL) issues LLCs a digital quota for visa candidacy. The quota is determined by the size of the office. One visa is granted for every 80 square feet of office space, with the number of visas available growing as the size of the office grows. Companies might request a separate quota for employees who don’t work in the office.
Get started in the world of business with Shuraa
Getting your company formed all by yourself can be quite taxing and time-consuming. When starting a business in the UAE, there are various factors and steps that are involved in the process of business setup. For more in-depth information about the business structure of free zone LLC in Dubai, contact Shuraa Business Setup – one of the leading providers of company formation solutions.
Our free zone specialists at Shuraa will guide you through the entire process and get you started with setting up your company in the UAE. You can get in touch with our specialists by contacting us on +971 44081900 or drop a WhatsApp message on +971 507775554. You can also email your query to [email protected].
Author
Seema Sasidharan
Corporate Advisor | Free Zone Specialist
