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The biggest difference in the mainland or in a free zone is in the ownership regulations. If you set up your business in the mainland, you will need a UAE national to be your sponsor. For a trading company, this means the local sponsor must own 51% of the shares. However, the sponsor can provide you with a power of attorney and avoid any involvement in the operations or profit sharing. For a professional company, the ownership is 100% for the investor, but a local service agent is still a requirement. In a free zone, there is no such sponsorship required.
A free zone business can only operate within the free zone and outside the UAE, meaning no business can be conducted within Dubai or any other emirate. This poses a problem if your main market is Dubai, UAE. However, you may legally appoint a broker or service agent for local market distribution. On the other hand, if you set up in the mainland, you may carry out business activities both locally and internationally.
A free zone license is strictly associated with free zone office space (you have to rent it), but Dubai mainland businesses can be run from a business centre with cheaper rent and all-inclusive. Free zone business license and visa costs are cheaper, but it restricts you to work within free zones and international regions only – with a Dubai mainland (DED) license, you can have clients from anywhere in UAE as well as internationally.
The long-term free zone benefits and services are more appropriate for a large international company than a small business owner. In a free zone, foreigners can hold up to 100% share in a company, while in the Mainland, a local partner should hold 51% shares and the foreign partner 49%. A free zone company cannot open an office outside the free zone. In order to do business outside free zones, the company has to be registered with the Economic Department of the respective Emirates. A company bank account can be opened and operated solely by expatriates in a free zone company.