Simply put, a company located in a free zone is a free zone company. In the UAE, you can always distinguish a free zone company by the extensions FZE or FZC after the name. FZE stands for Free Zone Enterprise, and this nomenclature is used when there is only one owner for the company. When there are multiple owners or shareholders, it is called a FZC or Free Zone Company.
One of the advantages of locating your company in a free zone is that, unlike the mainland, you can be 100% owner of your company. On the mainland*, you are required to have a Local Partner who owns 51% of the company. But this is not to scare you away from setting up a company on the mainland. The Local Partner does not need to receive 51% of the profits from the company. It could be a monthly / quarterly / half-yearly / annual fee, or a percentage of the sales.
*The area in the United Arab Emirates which does not come under a free zone.
What is a Local Partner, and how do I find one for my mainland company?
A Local Partner – sometimes called a Local Sponsor – can be an Emirati (this is the term used to describe a UAE national, someone who is a citizen of the United Arab Emirates) who has attained the age of 21, or a company that has been incorporated in the United Arab Emirates and is 100% owned by Emiratis.
A good business setup consultant can help you find the right Local Partner. For instance, if you were planning to establish a law firm in the United Arab Emirates, wouldn’t it be great if you had a Local Partner who was an attorney himself/herself and was well-versed with the laws of the UAE, having years of courtroom experience? This can prove to be an immense advantage, and a Local Partner brings to the table his/her local expertise.
Even if you would like to be in full control of your business, the Local Partner can agree to hands-off approach, entrusting you with the Power of Attorney so that you run your business yourself.
It is the Local Sponsor who represents your company before all Government agencies, and also applies for work visas for yourself and your team. However, if you are located in a free zone, the respective Free Zone Authority will apply for visas for yourself and your staff.
Why Choose a Free Zone for Establishing Your Company?
In the United Arab Emirates, most free zones have designated purposes. The Dubai Internet City, for instance, aims to be a hub for companies that specialize in Information Technology. Global technology major Microsoft is located in this free zone. However, the Dubai Design District, true to its name, caters to those in the field of art and design.
Because economic activity in each emirate is governed by that emirate’s Department of Economic Development, it is not uncommon to see free zones set up with similar purposes in different emirates. For example, the Sharjah Media City and the Ajman Media City free zones are both geared towards those in the media sector.
There are about 45 free zones in the United Arab Emirates, and Dubai alone is home to some 30 of them.
You can avail of dedicated infrastructure in free zones. The Sharjah Publishing City free zone has state-of-the-art printing and air conditioned warehousing facilities for publishers. This provides a massive impetus for those in the publishing industry looking to have a presence in the UAE. The Sharjah Airport International Free Zone enables easy logistics, which is a major advantage for the export-import and global airfreight companies located in this free zone.
Which is the Best Free Zone in the UAE?
If you need help determining which free zone would be best for your business, talk to a company setup specialist who has ample experience in this area. He/She will tell you that sometimes, Sharjah would be a better location than Dubai, as Sharjah is located only 20 minutes from Dubai. The business setup costs are comparatively lower in Sharjah. From a Human Resources perspective, Sharjah is where a lot of people reside, even though they commute everyday to Dubai for work. So it might be easier on your employees.
But then again, Dubai has a Dubai International Financial Centre free zone, and Sharjah doesn’t, so if you are into financial services and/or banking, Dubai might still be the better location for your business. There is no best free zone, but there can be a best-fit according to the needs of your business. Sometimes being located on the mainland can be a better option as it provides your clients with easy access to you. Which is why you need to talk to one of our friendly company formation experts to see if a free zone would be right for you, and if yes, which free zone.
How much will it cost me?
In a free zone, business setup costs are extremely affordable, as you can avail of built-up, fully furnished office space. You could choose to rent a single desk if you are starting small. Free zones offer you the opportunity to scale up with ease. Or you could even avail of a flexi-desk, where you can use a desk for a specified number of hours every week. You still get your own free zone address with a dedicated PO Box, and can receive mail at this address.
If you want to setup a company in the UAE with a number of staff, whether big or small, a free zone can offer you an exclusive office for your company. This can be fully-furnish or semi-furnish if you prefer to customize your own office according to your preferences. You can choose to have your own cabins, meeting rooms and pantry zones; or you could share them with other companies if you want to keep costs down. A free zone provides you with a lot of flexibility.
Looking at the geographical origins of companies located in a free zone, they come from across the globe. So you get a truly international and multi-cultural experience in a free zone in the United Arab Emirates.
What kind of company structure would be best for my business?
In a free zone, you can set up your company as a Sole Establishment (this is the same as a Sole Proprietorship), a Limited Liability Partnership, or a Limited Liability Company. The minimum number of shareholders, when it is not a sole establishment, is two; and the maximum number is 50.
Only on the mainland can you set up a Private Limited Company. You cannot undertake some types of business activities, such as banking, finance, or investment with a limited liability company structure. A Local Partner is also mandatory for some fields like fisheries, defence, and construction. If you are not sure under what category of commercial activity your business comes under, a company formation expert can be of assistance.
Why Choose an Experienced Business Setup Consultant?
A business setup consultant can tell you if the name you have in mind has already been registered. He/She can also tell you that in the United Arab Emirates, there also exist certain restrictions on nomenclature. Your company’s name cannot have religious terms in it. You can use the name of a person, but this person must be a shareholder in your company. Your business entity’s name cannot contain the names of countries and/or cities. However, geographical terms like Middle East are, provided the name of the company doesn’t begin with these terms.
If you would like to know more, get in touch with us. We have years of experience setting up companies in both free zones and the mainland. Our consultants are all highly knowledgeable and can inform you of the procedures associated with setting up a company. They take care of all the paperwork for you. They also work closely with our legal team to ensure that everything is in order. We also have a team of expert auditors to handle your application for you.
Should you set up your company in a free zone or on the mainland?
We can tell if you where it would be best to establish your company. Professionals like a doctor planning to set up his/her consulting clinic require a Professional License. Other examples include a lawyer opening his law firm (or a branch of an established law practice). It could also be an engineer establishing his engineering consultancy. We can let you know of exactly what kind of Business License you need.
We can also help you find the right office space for your business. Not sure of the market for your products/services in the UAE? We can also help you with a Feasibility Study. We have helped clients from 100 countries set up companies in Dubai and elsewhere in the United Arab Emirates.
In short, we can be a one-stop destination for all your business needs.
Office No: 208, Rawdat Al Wasl Bldg, Near Mazaya Center, Business Bay, Dubai
+971 56 408 6728
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