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Main Land Company Formation

A Comprehensive Legal Guide for Start ups So you have finally resolved to start your own business and become an entrepreneur. You either have a great product, a well thought out business plan and a blend of the right kind of people to establish a start-up or you just have an idea!
Starting a business involves a lot of legal intricacies which are often non-comprehendible and sometimes results in abandonment of great ideas or a bad start to a really good business prospect. With a brief insight into the legalities of starting a company and succinctly explained the various aspects of a start-up lifecycle, including choosing the right type of entity and all other aspects you need to know for a start-up company.

Introduction:
1. Getting started: types of entities
Choosing the right type of entity is the first step for any start-up. Currently, UAE offer a variety of options, namely:

(1) Sole Proprietorship
(2) One-person company
(3) Civil company
(4) Limited Liability Company (LLC)

1. Sole Proprietorship:
A sole proprietorship firm is a legal entity owned and operated by a single individual. He/she will be in complete control of operations and profits, while being 100 per cent liable for debts or any other financial obligations.

Things to know
1. A commercial or industrial type sole proprietorship can be owned only by UAE nationals or GCC nationals.
2. The owner of a consultancy type of sole proprietorship should have a scientific qualification for the activity selected.
3. A sole proprietorship firm can have only one manager.
4. A sole proprietorship has no minimum requirement for business capital.
5. Trade name should be related to the activity.
6. A sole proprietorship can have branches, which can perform all activities included in license of parent firm.
7. The firm and its branches can be sold but industrial or commercial type of firm can only be sold to UAE nationals or GCC nationals.

2. One-person company
A limited liability firm owned by an individual or a corporate body is called a one-person company. The difference between sole proprietorship and this legal form is that the liability is limited to the shares held by the owning entity.

Things to know
1. A UAE national or GCC national can set up and own this legal form of firm.
2. A corporate body which is 100 per cent owned by UAE or GCC nationals can own such a firm.
3. The owner is a shareholder and his liability is limited to the value of the shares he holds.
4. Share capital is as recorded in the Memorandum of Association
5. The trade name should include owner name, legal form (one person co.) and end with LLC.

(3) Civil company
This is a partnership for professionals in recognized fields such as doctors, lawyers, engineers and accountants.

Things to know
1. Partners of any nationality can be involved in this form.
2. If the partners do not include any UAE or GCC nationals, the firms needs a local service agent.
3. If the company is involved in engineering activities, one partner should be a UAE national who owns no less than 51 per cent of the business.
4. If the company is involved in consultancy activities, the firm must be owned by professional partners practicing the same activity, with 100 per cent ownership.

(4) Limited Liability Company
A limited liability company has two to 50 shareholders, each of whom are liable only to the extent of his or her share in the company.

Things to know
1. No professional or consultancy activities can be conducted by this form of company except banking, insurance or investment.
2. An LLC can conduct any industrial or commercial activity.
3. 51 per cent ownership should be with UAE nationals but profits can be accorded in a different ratio.

(5) Partnership Company
The ownership is shared by two or more partners who fall into general or limited partner category.
Things to know
1. UAE nationals must be general partners in a simple limited partnership. Partners of other nationalities must be limited partners.
2. There is no restriction on share of ownership of general or limited partners.
3. Limited partners should not intervene in management or administrative issues of general partners. If they do so, they can become liable for all of the business obligations.

Other forms include the following:

6. Branch of a foreign company-
A company registered abroad can have a branch in Dubai which will be its Dubai headquarters and under the business jurisdiction of Dubai and UAE. No import of goods is allowed by the branch and this should be done through a local trading firm. The branch is under 100 per cent ownership of the parent company.

7. Representative Office
Representative office is not a complete structure business and is rather an activity that a branch of a foreign company can do. It has the authorization to promote and market the parent company's business but cannot engage in business operations. Such branches must have a local service agent (LSA).
LSA - The local service agent is a UAE national and does not have any civil responsibility or financial obligations to the business. His obligation is to ensure the branch is able to continue its business in Dubai but he shall not have any legal interest in the management, business, profits or assets of the branch.

8. Branch of a Dubai-based company
A branch of a Dubai-based company must undertake one or all of the activities included in the main company license. For a company with multiple branches, each branch can undertake different activities as long as they were all included in the original license for the main company.

9. Branch of a UAE-based company
A branch of a UAE-based company must undertake one or all of the activities included in the main company license. For a company with multiple branches, each branch can undertake different activities as long as they were all included in the original license for the main company.

10. Branch of free-zone Company
If you have a company whose main license was issued in a UAE free zone, you can obtain a branch license from DED to expand your operations to mainland Dubai. If you do not have a local shareholder with at least 51 per cent ownership, you need an approval from the Ministry of Economy and have a local service agent.

11. Branch of a GCC based company
A branch of a GCC-based company must undertake one or all of the activities included in the main company license. For a company with multiple branches, each branch can undertake different activities as long as they were all included in the original license for the main company.

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