A sole proprietorship in UAE, also known as a sole establishment, is a company owned and run by one person with a business license registered with their name. This type of establishment is the best option for a small business and minimal capital investment. Additionally, the owner of the sole establishment will be responsible for financial obligations and other business liabilities.
Proprietorships involved in professional services that do not include commercial business are exempt from the Commercial Companies Law of UAE. Still, they must get a trade license from their emirate’s Department of Economic Development. If you are a foreigner starting your sole establishment in the UAE, you will get full ownership of your company. You have to appoint a local UAE resident as a regional service agent. Here’s how you can start your sole establishment in the UAE.
Steps to Start a Sole Proprietorship in UAE
To register your business in the UAE, register with the Department of Economic Development and get your trade license. Here are the necessary steps involved in the registration process.
Obtain Initial Approval
The first step is getting approval from the Department of Economic Development (DED), which allows you to start your business in the UAE. However, depending on the type of professional services you offer, you may need approvals from relevant government bodies. For example, you’ll need to get your license from the Legal Affairs Department of Dubai to start a law firm.
Submit your License Application
The next step involves submitting your business license application to the DED or the relevant authority of your Emirate.
Trade Name Approval
Please select an appropriate trade name for your sole proprietorship in Dubai and get it approved by the authorities. You can submit three trade names and get one of them approved. Selecting a name while considering your business activities mentioned on the trade license is also essential.
Sign Local Service Agent Agreement (LSA)
Prepare and sign your local services agent agreement (LSA) in the presence of your local service agent.
Select Office Space
For a mainland sole proprietorship in Dubai, you must have office space. After selecting your office space, submit your tenancy contract (Ejari).
Ejari was introduced by the RERA (Real Estate Regulatory Authority) to regulate Dubai’s rental market. It is an online system that incorporates contracts into the legal system to help protect the rights of landlords and tenants.
Submit your Fee
After completing all the above-mentioned steps, you must submit your fee to get your trade license for your sole proprietorship in Dubai.
Documents Required for Sole Establishment
Sole proprietorship UAE law requires the submission of the following documents.
- Photocopy of shareholder’s legal passport
- Photocopy of residence visa of UAE
- NOC from current residence visa sponsor of UAE
- Educational certificate and work experience
- Legal passport copy of the general manager
- 2 Photocopies of the general manager’s residence
- CV of general manager
- Bank reference letter for the general manager
Sole Proprietorship Dubai Cost
A sole establishment is a low-cost business venture that individuals can start with minimum capital investment in Dubai. The average cost of setting up a sole proprietorship starts from AED 18,500. The price is relatively low compared to other establishments because no partners, staff members, or other employees exist.
However, it is important to note that the costs can differ depending on the business type you engage in. Therefore, it is best to work with a business consultant to estimate the costs for your sole proprietorship in the Emirates.
Advantages of Sole Proprietorship Dubai
Starting a sole establishment in Dubai can bring you the following advantages,
- Foreign investors starting a sole proprietorship in the UAE get full ownership of their business.
- Unlike other companies, a sole establishment can legally provide professional services anywhere in the Emirates, including the free zones.
- The company can rent or purchase an office anywhere without any restrictions.
- The owner of a sole establishment keeps all profits of their business.
- Starting a sole proprietorship in Dubai is affordable and straightforward.
- The company owner can easily change their legal structure or close their business in dire circumstances.
- The government of the UAE has removed restrictions on the capital requirement of sole proprietorship.
Disadvantages of Sole Proprietorship Dubai
While there are many advantages of opening a sole proprietorship in Dubai, there are also some disadvantages of it, such as,
- In a sole proprietorship, the company owner is entirely responsible for all debts, as there is no legal difference between private and commercial assets.
- It is almost impossible to increase the capital share of the business.
- A sole establishment can only appoint a limited number of managers.
- Getting experienced and skilled workers can be complex.
- The life of the company is limited.
- Setting up a sole proprietorship takes longer than a free zone company, usually 8-10 weeks.
Who Can Set up a Sole Proprietorship Dubai?
Sole proprietorship UAE law allows UAE citizens, foreigners, and Gulf Cooperation Council (GCC) nationals to set up sole proprietorships. However, the requirements and conditions can be different for everyone.
A UAE national and GCC national can set up any sole establishment in the UAE and select any industrial, commercial, professional, or tourism business activity.
Only a professional license is allowed for foreign nationals. You can practice consultancy services in the UAE, but the options are limited. Additionally, a foreign national must sign a Local Service Agent (LSA) with a local UAE agent to register your sole establishment in the UAE.
Activities Allowed Under a Sole Proprietorship Dubai
A sole proprietorship is generally established for professional services in the UAE, such as financial, medical, engineering, legal, IT consulting, management, etc. To get a business license for a sole establishment, the manager or owner must provide proof of their professional qualifications.
Sometimes, the company owner or manager is required to pass certain examinations to prove their qualifications. These exams are an annual requirement according to the type of activity. They are held at the American University in Dubai.
In some cases, the manager may need to provide specific certificates as proof of their qualification and experience in their field.
They may also need to provide certificates from a well-known foreign institution for their relevant professionals.
Final Words!
To summarise, local citizens and foreign nationals can establish a sole proprietorship in UAE. For residents, it is easy to set up any sole establishment. However, you must appoint a local UAE national as your agent if you are a foreign national.
Al-Riyady is here to guide you through setting up your sole establishment in the UAE. Our knowledgeable and expert team will ensure the process goes smoothly by helping you prepare the required documents and get your trade license. Contact us today with your business-related queries. We can also help you get a Golden Visa in UAE, a Trade license and more.