A business partnership in Dubai involves collaborating with another party to conduct business; however, finding a local partner can depend on the type of legal structure and jurisdiction. Previously, mainland businesses required a local partner; however, after the new law, 100% foreign ownership is allowed for most companies. Dubai offers various types of business partnerships for entrepreneurs, depending on the needs and goals of their business.
The key steps to finding a business partnership include defining partnership objectives, selecting a legal structure and trade name, getting initial approval, drafting a partnership contract that covers ownership, finances, responsibilities, and settling disputes. Here are the essential aspects involved in a business partnership in Dubai.
What is a Business Partnership in Dubai?
A business partnership refers to a company formed by two or more partners who share common goals and mutual trust. A partnership involves uniting and working together, both financially and professionally, with both partners taking on full responsibility for the company’s duties. There are two most common types of business partnerships in Dubai,
- General Partnerships
- Limited Partnerships
Business partnerships are unique structures because of their flexibility, helping navigate new markets. In a fast-moving landscape like Dubai, trusted connections and market knowledge make all the difference.
Why is it Important to find the Right Business Partner in Dubai?
Dubai’s market is competitive and full of potential, and having the right partner can help with the growth of your business. The right partner can provide local market insight, professional skills, and networking opportunities, which are challenging to achieve alone.
Dubai makes it easier to find a partner as it is a global hub for investors, entrepreneurs, and leading companies. Additionally, it gives you access to 3 billion consumers, 100% foreign ownership, and full profit repatriation, along with a world-class infrastructure. Many free zone authorities offer the opportunity to start your business through their websites, obtain a trade license within an hour, and collaborate with compatible professionals who are ready to partner.
What are the Features of a Partnership Company? – Business Partnership in Dubai
In a business partnership, having strong trust and responsibility among partners is the key to a successful company. Below are the unique features of a partnership company and why you should consider it.
- Mutual Trust. Trust is the base of a partnership, which allows transparency and effective collaboration.
- Shared Financial Contributions. Both partners share the responsibility of the company’s debts, regardless of their individual share in the company. The shared financial responsibility requires a commitment from both partners to the company’s financial health.
- Shared Leadership. Each partner plays a role in company decisions, from providing expert skills to sharing market experience to guide the business with a strategy.
- Shared Workload. Each partner has equal responsibilities, which helps reduce the load on individual partners, helping achieve high productivity.
- Flexible Policy Adjustments. Partnerships provide flexibility to adjust policies, meeting the needs of businesses and industry demands to promote growth.
- Flexible Structure. Partnerships allow quick adaptability, which enables companies to respond to market changes quickly.
- Transfer Restrictions on Ownership. To transfer ownership, businesses require unanimous consent of the other partner, which promotes stability, in case the other partner wants to sell their shares or quit the company.
What are the Different Types of Business Partnerships in Dubai?
There are mainly two types of business partnerships in Dubai, which we have discussed below in detail.
General Partnership in Dubai
A general partnership means a business agreement between two or more partners, where each partner shares full liability of the company’s obligations and debts, supported by their assets. In the UAE, the authorities allow only Emirati nationals to establish this type of business.
Let us look at the standard features of a general partnership in Dubai.
Features of General Partnership
Equal Responsibility
In a general partnership company, all partners have an equal share of the company’s debts and obligations.
Financial Liability
Partners are fully responsible for the debts of the company with their personal assets.
Company Name
When naming the company, you can either include a single partner’s name or list all partners’ names, followed by “General Partnership Company”.
Share Trading Restrictions
It is not allowed to represent partner shares in tradable certificates, which ensures stability in management and ownership.
Permitted Activities
General partnerships allow companies to engage in most commercial, industrial, and professional activities. The structure includes accounting businesses, law firms, and engineering professionals.
Flexibility to Manage
The structure gives all partners equal rights to manage the business, or they can appoint other partners for this position. There may be some restrictions on manager roles, which are declared officially.
Investment Requirement
Instead of relying on one partner, the distribution of capital is according to the financial capacity of each partner.
Limited Partnership Company
In a limited partnership, partners fall into two main groups, each with different levels of ability and roles.
General Partners
General partners are,
- Fully responsible for all liabilities and finances of the company.
- Has merchant status, which means each general partner is fully responsible, just like in a general partnership.
Limited Partners
Limited partners,
- They make financial contributions but are only responsible for business debts in proportion to their investment.
- They do not hold the merchant status and are not involved in the company’s daily management.
Features of Limited Partnership
The main attributes of a limited partnership include,
Role of a Limited Partner
An individual or an entity can become a limited partner with no managerial and legal status as a general partner.
Business Name Requirements
The company name must include the names of one or more general partners, showing the legal structure of the partnership. You can not include the names of limited partners in the company’s name.
Rules of General Partnership Apply
The rules of a general partnership apply to the general partners in a limited partnership.
Management Restrictions
Only general partners can manage a limited partnership business. Additionally, it is possible to sign agreements to limit the authority to a majority of the general partners of the company.
Steps to Start a General Partnership Company in Dubai
The following steps are involved in starting a general partnership company in Dubai.
- The first step is selecting a suitable name for your business.
- The business name must include all partners’ names, or you can limit it to one or two partners.
- The partners must apply to register the company name through an application form, duly signed by each partner. The application must include the following,
- The name of your general partnership company should include the word “partnership” at the end.
- The registered office address of the company.
- Types of business activities your company will conduct.
- Name and address of each partner of the general partnership company.
- After the application submission, the authorities may require additional documents to assess your application.
- Once the authorities have reviewed and approved your application, you can move forward to start your business operations.
Documents Required for Starting a General Partnership Company in Dubai
You need to submit the following documents to establish a general partnership business,
Valid IDs of managers and partners
- Passport copies of managers and partners
- Company name registration documents
- Initial approval from the DED
- NOC of all partners
- Company’s office address
What are the Pros and Cons of Forming a Partnership?
Just like anything else, a partnership also comes with many advantages and disadvantages.
Pros of Partnership Business
The pros of forming a partnership are as follows,
- Through a partnership, individuals with expert skills and experiences collaborate, making problem-solving and decision-making easier.
- Each partner contributes to making business decisions, promoting collaboration and balance within the management.
- It is a flexible structure that allows quick operational adjustments, which is essential in a fast-paced place like Dubai.
- Dividing workload and responsibilities according to the expertise of each partner improves efficiency and prevents burnout.
- Partnerships enjoy significant tax benefits, helping the company increase savings.
Cons of Partnership Business
The cons of a partnership business are,
- General partners are responsible for a company’s obligations and debts, exposing them to financial risk.
- The sale or transfer of shares requires approval from all partners, making the transition difficult.
- Getting agreement from all partners can slow down making urgent decisions, which is a huge drawback for a fast-paced industry.
- If there are disputes or clashes among partners, the business can become unstable and inefficient.
- If the company faces financial difficulty, it can put all general partners at risk of bankruptcy.
- Partners may have to face the consequences of another partner’s unethical or illegal actions.
- Reliance on partners for investment and ownership restrictions can hinder the business’s growth.
What is the Process of Partnership Liquidation?
Closing a business partnership requires adherence to specific procedures and careful planning.
Reasons for Liquidation
The main reasons for the liquidation of a business partnership can be
- End of commercial term.
- Completion of business purpose.
- Legal judgment due to financial or legal issues among partners.
- End of mutual agreement among partners.
Main Steps in Partnership Liquidation
- Appointing a Liquidator. To manage liquidation, including debt collection, asset valuation, and distribution.
- Distribution of Assets. After settling company debt, they divide the remaining assets among partners based on their shares.
- Notifying Authorities. The authorities make a public announcement through official notification, allowing creditors to file their claims.
- Finalize Business Accounts. Close and finalize accounts, then initiate the deregistration process to terminate the partnership’s legal status.
Final Verdict
Forming a business partnership in Dubai is ideal for growth, by relying on mutual trust and leadership. Each partnership offers unique benefits and challenges, which is why it is essential to consider the nature of your business when choosing a partnership.
Alriyady can help you understand the legal requirements of a business partnership and how to achieve long-term growth that also supports the UAE’s economy. We also provide Golden Visa Services, PRO Services Dubai, Corporate Tax services, and more.
