A Guide To LLC Company Formation In Dubai
As provided for in the Federal Law, there are seven types of business entity that may be established in Dubai and in the six other emirates of the UAE. Of these seven, the Limited Liability Company (LLC) is the one most preferred by investors planning on setting up a business in Dubai.
The general rule for LLC company formation in Dubai typically starts off with a stipulation as to the number of individuals allowed to comprise a company.
It states that an LLC can be set up by no less than 2 but not more than 50 individuals. The liability of said individuals is limited to their contributions in the capital.
Currently, the minimum capital required in LLC company formation in Dubai is 300 thousand UAE dirhams (approximately 82,000 U.S. dollars). The required capital may be contributed either in cash or in kind.
The minimum equity participation of UAE nationals in an LLC must not be less than 51%. This means that foreign equity cannot be more than 49%. But even with this shareholding ratio, the distribution of profit or loss can be prescribed.
Moreover, either the UAE nationals or the foreign partners may be granted the authority of managing the company.
Going back to the maximum foreign equity of 49%, this in fact is one of the reasons why many companies with foreign partners often choose the LLC type of incorporation as it evidently provides the highest possible percentage of legal ownership to foreign partners in a trading business setup.
In LLC company formation in Dubai, it is guaranteed that the company shares are not open for public subscription. A company registered as an LLC is highly recognized for being able to offer a structure fit for an entity that is looking at a long-term business relationship with the local market.
Furthermore, an LLC, as stipulated in the Companies Law, may engage in any lawful undertaking. Exceptions to this are such activities related to banking, money investment (on behalf of other parties), and insurance.
The six steps needed to be done in LLC company formation in Dubai are as follows:
1. A commercial name under which the company will be conducting its business activities must be chosen and applied for approval by the Licensing Department of the Dubai Economic Department.
2. A Memorandum of Association of the company must be drawn up and then attested in the Dubai Courts by a Notary Public.
3. Approval of the Dubai Economic Department must be sought along with the entry (which must be applied for) in the Commercial Register.
4. Upon the granting of approval by the Dubai Economic Department, formal entry of the company in the Commercial Register will be made; publication of the company’s Memorandum of Association in the Bulletin of the Economy and Commerce Ministry will then follow.
5. The Dubai Economic Department will then issue the license to the company.
6. Finally, the company must be registered with the Chamber of Commerce and Industry of Dubai.
As in any business undertaking, an LLC has both advantages and disadvantages. As examples of the former, the LLC owners (often referred to as LLC members) are shielded against any or all liabilities for the acts and/or debts of the LLC itself.
In relation to this, mention must be made here that an LLC is treated as an entity separate and distinct from its members. Compared to most of the other types of business organization, there is far less record keeping, paperwork and such other administrative functions involved in an LLC.
For those planning on LLC company formation in Dubai, note these disadvantages: Many people may not be familiar with the management structure of an LLC as, unlike most of the other forms of business organizations, it is not required to have a Board of Directors.
Because of this, there may be some reservations as to the conduct of business dealings with an LLC. Here also lies the possibility of an LLC having difficulty raising its capital as investors may be more comfortable placing their money in a business form that they understand better.
The time required to successfully complete LLC company formation in Dubai is from 8 to 15 working days reckoned from the date of filing of all the required documents.
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