With the thought of Dubai comes the image of skyscrapers, thriving businesses, and high-end lifestyles. When one thinks of Dubai, the first thing that comes to mind is business. Dubai is, without a doubt, one of the most business-friendly and entrepreneur’s favored places. It is a business hub of the entire world. The government not only encourages but fully backs business initiatives and provides an environment that ensures its smooth functioning. This is the reason startups are on the rise and established businesses are increasingly being shifted to Dubai.

It is easy to setup a business in Dubai. Courtesy: Clear-cut government policies and one-window operation. The World Bank’s Ease of Doing Business 2020 Index ranked UAE 16 while it aims to top the list in 2021. While it is true that setting up a business in Dubai requires substantial investment and financial backup, Dubai also facilitates those with little resources and who want to setup a business with low investment. If you're looking for low cost business setup in Dubai, so read the complete details.

Factors that make low-cost business formation possible in Dubai

Unlike many countries that make business formation a hectic and costly process, Dubai facilitates startups and SEM’s. Following are the reasons that allow anyone with low investment to setup a business in Dubai.

• Dubai does not have minimum investment requirements. One can start with their least potential investment and expect massive returns.
• Dubai offers free zones that exempt businesses from all types of taxation such as Value Added Tax (VAT), Income Tax, Corporate Tax, and Customs. To get things in perspective, taxes imposed on businesses in different countries range from 10% to 50%.
• The cost of acquiring a Dubai business visa is low.
• Office spaces are available at low rates with easy transportation and other facilities. If you are in one of the free zones, co-working space is offered with no extra charges.
• Government policies support SME’s and a business-friendly environment helps them grow faster.

Dubai Mainland or Freezone business setup– which one is cost-effective?

The thing that differentiates Dubai from anywhere else is that it accommodates everyone when it comes to doing business there. It presents different types of business opportunities for people with various preferences.

An important decision to take before you start a business in Dubai is to choose your jurisdiction. This will mainly define where you can or can’t do business. There are two types: Mainland and free zones. Although both have their pros and cons, the final decision should be made based upon the nature of your business, preferences, and cost. The differences between the two are summarized in the following points.

• A mainland business can work both inside and outside the UAE market. There are no restrictions as to the jurisdiction of the business. A free zone business, on the other hand, can only trade within the free zones or outside of the UAE. It can’t trade directly with the local UAE market.
• A mainland business requires a UAE national who will hold at least 51% share of the company while 49% share is allotted to the expatriate partner. A free zone business does not need a UAE national and the investor gets 100% ownership of the business.
• For every mainland license, there is a minimum requirement of 140 square foot office space needed whereas no such requirement is needed for a free zone license.
• A mainland entity comes with no visa limitation whereas a free zone one is limited to a certain number of visas.
• A mainland business needs approvals from different government departments such as the Department of Economic Development (DED), Dubai Municipality (DM), Ministry of Labor (MOL), etc. No such approvals are needed for a free zone business since it only deals imports and re-exports.

In light of the above differences, it’s easy and cost-effective to set up a business in one of the free zones. So if you are the one seeking to set up a business in Dubai with low investment and do it quick, free zones are for you.

How to setup a business in Dubai with low investment?

Now that we have concluded that the cost-efficient way to start a business in Dubai is to go for a free zone setup. It’s time to learn the actual process. Here’s how you can get started.

1. Choose a business activity

First off, you need to choose a business activity (s) you intend to carry out. This decision will impact the type of license permitted and the place to register your company. There are over 2000 business activities permitted by DED covering all sectors and sub-sectors. You need to find the one that best fits your activities. Note that many Dubai free zones allow for multiple activities under one license. It is advised to consult an expert at this stage to avoid any hurdles later on.

2. Find a free zone

Next, you need to decide which free zone is right for you. Over 30 free zones are operating in Dubai. Choose the one that you think will serve your activities better by taking into consideration factors such as access to highways, proximity to airports and ports, etc.

3. Choose a company name

This one might seem easy but it’s not. Not only because the name should reflect your business but you also have to abide by the following naming conventions.

• The name must not already be registered
• The name must not include offensive or blasphemous language
• The name must not have references to Allah, Islam, or any religious organization
• You can’t include your surname or initials. You have to use your full name in case you want to use your name in your company name.

4. Apply for a business license

Now you have to formally apply for a business license. The type of license you require depends on the business activity you have chosen. For example, professional services license for professional services, industrial license for industrial activities, and so on. The documents required depend on the type of license you are applying for and the free zone you have selected. Generally, you can be asked for some or all of the following documents.

• Duly filled license application form
• Color passport and visa copy of the shareholder(s)
• Copy of business plan
• Board resolution
• Memorandum of Association (MOA) and Articles of Association (AOA)

When applying for a freelance visa in Dubai, you may also be required proof of invoices or portfolio.

5. Apply for a visa

In parallel to license application, you can apply for a visa(s). You can apply for visas of your own and those of your employees. The number of visas you can apply for depends on the size of your business and the free zone you have chosen. The process is as follows.

Registration -> Entry permit -> Status adjustment -> Medical test -> Emirates ID registration -> Visa stamping

6. Open your corporate bank account

Finally, you will need a bank account to run your business. Opening a corporate bank account in Dubai is a hectic task and requires extensive documents including:

• Business documents such as Company trade license, Memorandum of Association, company incorporation, etc.
• Company Ownership documents like Share Certificate
• Source of funds, supplier information, and expected revenue
• Business experience, the inflow of funds, and planned activities
• Passport copies for shareholders and authorized signatories

Next, choose a bank that best fits your business requirements.

Conclusion

We have made an effort to explain why is Dubai an ideal place to start your business, what is the difference between mainland and free zone business setup, and how to start your business in a free zone. If you want to embark on the journey of starting a business in Dubai, this is your complete guide. Potential pitfalls may come along the way but with the right documents and expert advice, you can get your business set up in Dubai in just a matter of a few weeks.