Obtaining a Trade License in Dubai – 5 Steps to Follow
Once you’ve decided to become your own boss and start a business, you will be faced with a challenging decision: where to set up shop. While you can easily establish your company in your home country, you might want to think about all your options first.
Instead of taking the easiest route available, why not go for the most rewarding? Free Zone entrepreneurship in the United Arab Emirates has been attracting foreign investors since it was established as a financial hub, with several free trade zones helping boost this cause.
Setting up a company in a Dubai free zone has countless benefits — from corporate tax exemption and zero visa restrictions to 100 percent company ownership regardless of nationality. And the first thing you need to start your business is a trade license.
To help you out, here are five steps you must take to become a full-fledged Dubai businessperson.
Step #1: Decide What Your Business Will Be
Deciding the identity of your business entails more than just thinking of a trade name — it also requires you to choose what type of legal entity your business will be, and the applicable trade license category you need to start business operations.
Types of Legal Entity
Legal entities in Dubai come in two main types: limited liability (FZ LLC or FZ Co.) and establishment (FZE). The main difference between a free zone limited liability company and a free zone establishment is the number of investors involved.
It is also worth noting that not all free zones register both types of companies. The Dubai Multi Commodities Centre (DMCC), for example, approves of LLC businesses with either one or several shareholders. It also allows an entity to be owned solely by an existing foreign or local company.
3 Trade License Categories
Aside from the type of legal entity, you would also need to decide which trade license category is applicable to the company you’re about to set up. The nature of the business activities you will be undertaking will serve as the key determining factor when selecting the most appropriate among the three license categories.
- Commercial Trade Licenses are issued to companies with activities focused on trading.
- Industrial Trade Licenses are most appropriate for businesses engaging in manufacturing and other forms of industrial activities.
- Professional Trade Licenses, as the name suggests, are given to companies offering specialised services as well as professionals, craftsmen, and artisans who wish to practice their trade in Dubai.
Step #2: Pick a Trade Name
After deciding on the nature of your business, you would then need to decide on a trade name for your company. This needs to be done before you can bring your business to its registration phase and should be based on the type of legal entity you choose.
To accomplish this task, you need to check your proposed trade names with the Department of Economic Development (DED) in case of mainland or the assigned authority on the free zone you wish to set up your business in. There are also several prohibitions stated under the DMCC’s guidelines that you should consider.
As a general rule, the Freezone’s ruling states that a good trade name:
- Must be based on public order and morals of the country
- Must include the company’s legal form (e.g. FZE, FZ LLC, DMCC, etc.)
- Must be unique and not previously registered for another company
- Must be compatible with the nature of business activities and the legal status of the company
- Must not contain any names or logos related to religions, governing authorities, and other external bodies
Step #3: Look for an Office
Starting a business in a free zone means you would need an office to operate in. With that said, the next steps in acquiring a trade license are to seek a place that will serve as your business premises and to execute a tenancy contract.
When choosing an office, you must consider the expected number of employees and business activities your company will perform. For instance, DMCC firms may opt for a flexi desk of about 20 to 20 square meters, a flexi office ranging between 200 and 265 square meters, or an edifice with several floors measuring a total of 2,000 square meters each.
Step #4: Prepare Your Documentary Requirements
Since there are three different license categories in Dubai, the specific requirements may differ according to the type of business you’re planning to run.
However, there are five basic documents that are absolutely necessary, no matter what category the license falls under. These are:
- Colored copies of passports of all investors and business partners involved
- A No Objection Certificate (NOC) from the business sponsor or concerned authority governing the business (applicable for international investors only)
- Copies of residency visas for all partners (if applicable)
- A copy of the Articles and Memorandum of Association
- A copy of the Lease Agreement or Tenancy Contract (if applicable)
Step #5: Proceed with the Trade License Application
As with the different set documentary requirements, you may also need to undergo varying processes depending on the license category your business falls in. In general, the process starts with a visit to the center to obtain legal forms necessary for the application.
After that, you would need to choose a trading activity and include the names of partners involved in the business when filling up the forms. It is also necessary to indicate the share capital, the total capital value of the business, and the partnership ratio.
Next, you need to reserve a trade name and acquire a trade number that can be instantly provided by the e-Services system. From there, a payment voucher will be generated which will need to be paid to obtain the trade license.
Start a Company in a Dubai Free Zone with the Right Help
Obtaining a trade license in Dubai can be challenging without the right knowledge and professional help. Use this guide and talk to us at Flying Colour for reliable business setup assistance.