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Hi there comrades!
So if you are reading this, you are already interested in the stage of doing something interesting and you would like to know how to start a business in Dubai. Well, you are in for a thrill and I am here to help you with the ins and outs of company registration expenses in the most fast-paced city. For those who have done this in their life like myself, it's quite an adventure!
In this article, we help you appreciate the need to register a business and the expenses associated with it.
Let's begin with the basics for now, shall we?
It is one thing to have a great idea (and that is an excellent starting point), but setting up a company in Dubai is also about registering the company and all its costs. I know this for a fact because I suffered this when I was starting out!
Overview of the process of registration
The registration process in Dubai usually includes the following main steps:
- Determining the required business activity
- Deciding on the name of the company
- Obtaining initial approval
- Filing of the documents
- Getting a trade license
- Applying for other approvals also (if applicable)
So, let's get started at this point -- let's get to the last topic about money. Being a new company, the costs are likely to be different both in size and in the nature of the business and its location but here's what you can expect:
- Trade Name Reservation: AED 620
- Initial Approval: AED 100
- Trade License: AED 10,000 - AED 50,000 (depending on the type of activity)
- Chamber of Commerce Registration: AED 1,200 - AED 2,500
Business Structure Decision is Important
Being a holder of an LLC, although a lot easier to run, was also more expensive unlike when I was a sole proprietor. For instance, in this country when I incorporated my first business as an LLC, I had to make arrangements for expenses of hiring a local sponsor, which was also expensive!
Business Licenses in Dubai
In Dubai, several categories of licenses are available, but with each of them comes costs. Let's dissect them:
Commercial License
This is the type of license that an average company utilizes to conduct purchases and sales of products. The costs are generally from around AED 10,000 to AED 30,000.
Industrial License
For those who are looking to engage in making stuff, industrial license fees tend to be in the range of AED 10,000 to AED 50,000.
Professional License
A professional, service provider, business practitioners or practitioner use this in the range of AED 10,000 ~ AED 40,000.
Factors, Which Affect License Fees
The fees may differ because of:
- Business activity
- Company size
- Location (mainland vs free zone)
Business Setup Expenses in Dubai
Initial Costs
- Trade License Fees: As stated earlier, this type of fee does vary a lot.
- Share Capital Requirements: In the case of an LLC, the minimum requirement is usually AED 300,000. However, this does not need to be met in each case.
Ongoing Costs
- Renewal fees: These are similar to initial license fees.
- Rental of Office Space: This can be a big one! For prime areas, one should expect to pay AED 70-120 per sq. ft on an annual basis.
- Utilities and Other Operating Costs: Monthly, expect to spend about AED 2,000 – AED 5,000.
Free Zones vs. Mainland Businesses
I think this is the decision that would determine your costs and even the kind of operations you engage in a great deal. I recall hyperventilating over this decision for weeks!!
Freezone Companies
Advantages:
- 100% foreign ownership
- Tax exemptions
- Smoother establishment process
Disadvantages:
- Can only operate within the freezone
- Patents and some setups seem higher than normal
Mainland Businesses
Advantages:
- Are free to do business anywhere within the UAE
- Business activities that are allowed are less restrictive
Disadvantages:
- Local sponsor (51% ownership) is needed
- It may be complicated and harder to set up
Well-known free trade zones like Jebel Ali Free Zone (JAFZA) or Dubai Multi Commodities Centre (DMCC) have registration fees starting from AED 15,000 to AED 50,000 depending on the selected package.
Hidden Costs of Business Formation in Dubai
Here are a few of those hidden costs which I did not expect to see:
- Legal Fees: AED 5,000 to AED 10,000
- Consultancy Fees: AED 5,000 to AED 15,000
- Sponsorship Agreement Costs: Can go up to AED 50k per annum
- Visa Costs: About AED 3,000 per individual
How to Register a Company in Dubai – Step By Step Instructions
- Determine your business activity
- Decide between a mainland and a free zone
- Choose and reserve the name of the company
- Prepare all the documents that are needed
- Submit papers for initial approval
- Rent an office
- Receive trade license
- Other approvals if needed
- Open a business bank account
The whole procedure can take from 2 to 8 weeks depending on the business you have.
Legal Steps Towards Establishing a Company in Dubai
The main governing entities include:
- Department of Economic Development (DED)
- Dubai Chamber of Commerce and Industry
According to this law, you will also need to follow certain regulations regarding your business activity in UAE by getting applicable licenses. Believe me, if you keep this in mind from the beginning, a lot of trouble will be avoided later on!
Financial Assistance and other Startup Encouragement Programs that can be found in Dubai
Dubai has been very welcoming to businesses. Some schemes include:
- Dubai SME: Finance and assistance to small and medium enterprises
- Dubai Future Accelerators: Partnership of leading firms with government agencies
- Khalifa Fund: Financing initiatives for Emirati entrepreneurs
Free zones are additional advantages gained in the foreign market as they enable full tax holidays plus repatriation of profits.
Ongoing Operating Expenses Further After Incorporating The Firm
Don’t forget to include a line for:
- Wages and fringe benefits for employees
- Promotion and marketing (I usually invest around 10-15 percent of my revenue in this)
- Insurance
- Technological infrastructure and software licenses
Cases and Examples
Say I tell you a little about myself. When I started my DMCC digital marketing agency, the startup needed about 50,000 Dirhams. It covered the expenses for getting a license and a visa as well as the registration cost. But I overlooked the running costs, particularly the cost for office space and employee visas, which I perceived correctly as the main cost centers. It was an experience, but 18 months later, we were at breakeven and experiencing sales.
Another success story is my friend Sarah, who opened a fashion boutique within the grand Dubai Mall. Similar to Sarah, her first investment was a little large, around AED 500,000 but she made that back in the first year since there were so many people and tourists.
Conclusion
Prepare for spending more money than you plan to and always have extra money in the account.
Establishing a business in Dubai is a thrilling cluster of events as well as complex problems. Yes, the expenses may pile up, nevertheless, it is completely attainable with proper organization and budgeting. Do not forget, every filled dirham is a step towards achieving the set dream. So tell me, are these thoughts making you itch to explore this market? Go on, Dubai is looking for a great idea from you!
If you have any questions other than those already answered above, please do not hesitate to ask. I love talking to other entrepreneurs and am always willing to do so. Best of luck with your business expedition in Dubai!