2009 | Vol. I | No.

Starting a Business
in Dubai:
A Practical Guide

Business Information Series

Dubai Business Advisor

 Table of Contents

Introduction 4

Deciding on Activities and a Corporate Structure 4

Obtain Initial Approval from the DED 5

Register a Trade Name 6

Other Approvals 7

Secure a Location 7

Memorandum of Association 8

Get a PO Box 8

Get a Phone Line 9

Final Approval and Company Registration Certificate 9

Become a Member of Dubai Chamber 10

Hiring Workers 11

Next Steps 12

References 13

Acknowledgements 14
Introduction
This guide is intended to assist people who are considering opening a business
in Dubai. Its contents should be useful in two stages. For those in the planning
phase, it contains information on the time and financial commitments required
to open a business, which are key to conducting a feasibility study and financial
planning. For those who have already decided to open a business, it serves as
a roadmap, guiding the entrepreneur through the various phases of the process
and explaining what is required to complete each step.
It should be noted that the procedures described in this guide can and do
change with time. While every effort has been made to ensure that the details
provided are timely and accurate, readers are encouraged to speak with the
responsible entities to confirm the latest information. In addition, given the
limitless combinations of business activities, corporate entities, and ownership
structures, each new business will inevitably be unique in some fashion. As
such, no single guide can cover the procedural implications of all permutations
of these factors. To this end, entrepreneurs may need to seek further advice
from the concerned authorities or legal counsel should they be contemplating
an ‘unusual’ idea with respect to the above factors.
As a general note, entrepreneurs should exercise common-sense discretion
when engaging people or firms with whom they plan to transact business.
In this part of the world, personal relationships are especially important and
play a crucial role in the business relationship. It would behove the aspiring
entrepreneur to take the time to get to know people before conducting business
– whether they are potential partners, agents, employees, or professional
services providers.

Deciding on Activities and Corporate Structure

The first step in opening a business is determining the activities of the proposed
business. As part of the application process, the entrepreneur must choose a
business category; within each category is a list of activities. Each license may
have up to ten related activities (subject to the discretion of the Department of
Economic Development – DED). The DED and Dubai Chamber jointly publish a
guidebook of the Standard Classification of Economic Activities, which is used
by the relevant authorities to categorise activities for licensing and statistical
purposes.
Once the activities to be practised have been decided, the entrepreneur should
determine the appropriate corporate structure for the business. There are
several issues important to this process, including the scope of liabilities of
the owners and the degree of foreign ownership permitted in each structure.
Interested readers should refer to Al Tamimi (2006) or another resource for


a detailed discussion of the merits and features of each structure. For the
purposes of this guide, we will focus on two of the most popular structures
– the sole proprietorship and limited liability company (LLC).
A sole proprietorship is, as its name suggests, an establishment with a single
owner. There is not a strict legal separation between the establishment and
its owner. As a result, the proprietor is personally liable for the liabilities of the
business.
Foreign nationals are permitted to establish and conduct business in the UAE
through a sole proprietorship structure. There are certain restrictions on the
types of activities which may be practised if the owner is not a UAE national
or GCC national, as the case may be. Non-GCC nationals are generally
restricted to fields involving non-trading, professional services. Generally, a
foreigner looking to establish a sole proprietorship engaged in a professional
service will need to check with the DED as to whether it is required for him to
have qualifications in respect of the activities he is applying for. Additionally,
foreigners forming a sole proprietorship are required to appoint a national
service agent, who will perform certain services related to administrative tasks,
generally in exchange for a flat annual fee.
Another option for the corporate structure of a proposed company is the LLC.
Unlike a sole proprietorship, the LLC is a distinct legal entity, separate from its
owners. The partners are liable for the obligations of an LLC only to the extent
of their invested capital. Also, there must be a UAE national partner(s) whose
ownership stake is at least 51 per cent of the company’s shares. However,
GCC nationals are permitted to own 100 per cent of the shares in an LLC, as
long as there are no partners in the company who are non-GCC nationals. That
is, GCC nationals cannot replace UAE nationals as the 51-per cent partner of a
foreign investor, as per the UAE Companies Law.
Once an entrepreneur has determined the activities of the proposed business,
as listed in the Standard Classification of Economic Activities, and decided
upon an appropriate corporate structure, they should proceed to the DED to
begin the application process.

Obtain Initial Approval from the DED

The first step is to obtain the initial approval. The initial approval essentially
states that the activity has been initially approved by the DED and allows them
to proceed with the necessary steps to obtain a business license. In order to
apply for initial approval from the DED, one needs the following:

• A completed application form.


 • Passport copies of the owners and managers and their visa pages;
if they are also sponsored, a no objection letter in Arabic from their
sponsor.

The application fees are AED 320. This amount covers the initial application
fee (AED 110) and fees for the reservation of a trade name (AED 210).
If an owner of the proposed company is a corporate entity, the following
documents will be required from this entity:

• Certificate of incorporation or certificate of good standing.

• Memorandum of Association.
• Board resolution calling for the establishment of, or taking a stake in,
the proposed company and appointing an authorised representative to
execute this decision.
• Power of attorney authorising the representative to execute the above
resolution.

The documents above must be notarised in the company’s home country,

legalised by the government of the home country, authenticated in the UAE
Embassy in the home country, authenticated again by the Ministry of Foreign
Affairs in the UAE, and translated by an accredited translator (and the translation
should be stamped by the Ministry of Justice).
The DED aims to process initial applications and issue initial approvals within
one to two days of receipt of the above documents.

Register a Trade Name

Once the entrepreneur has obtained initial approval, the next step is to register
a trade name. The fee mentioned in the previous section is for a ‘standard’
Arabic business name. There are additional fees associated with using foreign
names, using trademarks, or using words describing the geographic scope of
the firm (such as ‘Middle East’ or ‘International’). These fees range from AED
1,000 to 2,000. In addition, the trade name must be consistent with Arabic and
Islamic traditions and values. Names not complying with this standard will be
rejected.


Other Approvals
After the DED, the applicant may have to proceed to other Government
Departments to obtain other approvals. As examples, the following
Departments’ approvals are required for these activities:

A. Ministry of Information, for advertising and media related activities;

B. Ministry of Economy, for insurance activities;

C. Dubai Municipality, for contracting and manufacturing activities.

Secure a Location
With the initial approval in hand and a trade name registered, the entrepreneur
should look to securing a location for the proposed business. Before signing
a lease, it is highly recommended to get pre-approval from the Planning
Department of Dubai Municipality for the proposed site. Officials from the
Planning Department need the parcel ID number associated with the site,
which the landlord will be able to provide. The parcel ID number is linked in the
Planning Department database to a list of permissible activity codes from the
DED’s Standard Classification of Economic Activities. This allows the Planning
Department to approve a site for a proposed business based on the parcel
ID number and the initial approval granted by the DED. After the Planning
Department has given approval to the site, Civil Defence must also sign off
on the proposal. Civil Defence will do an on-site inspection of the premises,
although they may waive this requirement for businesses whose activities have
minimal safety implications, instead opting for random inspections after the
business is in operation. Some businesses, such as a restaurant, will require
an on-site inspection from Civil Defence, as well as other approvals – from the
Health Department and Sewage Department – before the site can be approved
for business.
It is also necessary to secure approval for a name board for the proposed
business, which must be in English and Arabic. This approval comes from
the DED, who ensure that the name board is consistent with the proposed
business and registered name. It is generally required that the entrepreneur
obtain a no-objection letter from the landlord for the use of the premises as a
business and for the name board.


Memorandum of Association
The next step is to draft the Memorandum of Association (in the case of an LLC)
or the appointment contract with a local service agent (in the case of a sole
proprietorship). The DED provides specimen copies of these documents, which
entrepreneurs can use for their own company. It is strongly recommended,
however, that entrepreneurs who wish to make even slight modifications to
these documents consult legal counsel for this purpose. Legal fees for drafting
a Memorandum often run in the thousands of dirhams, but this document is
critical to the new business, as it lays out the rights and responsibilities of the
partners and directors of the new company. Additionally, the Memorandum
sets out certain corporate procedures and practices, such as which partners or
employees of the business have access to the corporate bank account.
The Memorandum must be in Arabic, or in both Arabic and English (in this
case, the document is typically written in parallel, with Arabic in one column
and English in the other). If the original document is in English, it will need to be
translated by an accredited translator. It is important to note that in the event
of a discrepancy between the English and Arabic versions of the document, the
courts will use the Arabic version as the official version of the Memorandum.
The document must then be taken to a notary at the DED or at Dubai Courts.
The notary will check to ensure that the Memorandum contains the correct
information and is in compliance with the UAE Companies Law before
notarising the document. For his services, the notary will charge 0.25 per cent
of the paid-up capital mentioned in the Memorandum; this amount is capped
at AED 10,000.

Get a PO Box
It is not required, but is advantageous, for the entrepreneur to open a PO Box.
As there is no postal delivery to residential or commercial addresses, this is
the only way to receive mail. This can be done at an Emirates Post branch.
Entrepreneurs will need to bring the following to open a PO Box:

• Initial approval certificate (or business license). If the PO Box is opened

with an initial approval certificate, the business owner must bring in the
business license when the application process is complete.
• A passport copy of the owner or manager.
• A completed application form.

The annual fee for a PO Box for a business is AED 570. This includes key and
registration fees. The rental agreement is on a calendar year basis. If the PO


Box is applied for later in the year, a reduced fee will be charged based at the
time of the application. For these purposes, the year is broken into three four-
month periods. All applicants opening a PO Box in the first period of the year
will pay the full fees. Those applying in subsequent periods will pay a lower
price, based on the period in which they apply.
It is possible to assign power of attorney to authorise another person (typically
to be an employee of the proposed company) to have access to the PO Box.
There is a small fee for this option, and it requires the signature of the original
authorised person in the company, as well as passport/residency information,
a photo, and a signature specimen of the person to be authorised to access
the PO Box.
Empost offers a courier service, where they deliver mail directly to a company’s
place of business.
Another service that Emirates Post offers businesses is to act as a liaison with
the Ministry of Labour as part of applying for work permits for employees. A
business can take the appropriate documents to the post office (which accepts
them as registered mail) and pay the fees there. Emirates Post then deposits
the fees into a special Ministry account. Businesses can then collect approvals
and other documents from the Ministry at their local post office.

Get a Phone Line

Businesses should obtain a phone line during the application process. This
service is typically provided by Etisalat. There is an Etisalat desk at the DED
where entrepreneurs can complete this step. Installation charges are AED 180,
and line rental is AED 50 per month, in addition to usage fees.

Final Approval and Company Registration Certificate

At this point, the entrepreneur will take the documents collected from various
entities back to the DED to apply for a Company Registration Certificate. At
this point, the entrepreneur should have the following:

• The initial approval from the DED.

• The trade name approval certificate.
• Approval for the building and name board.
• A valid and original lease for the business premises.
• A notarised copy of the Memorandum of Association or an appointment


 contract for a local service agent, in the case of a sole proprietorship
owned by a foreigner.
• Corporate owner’s documents, officially translated.
• Passport copies of the owners – or their representatives – and the
managers.
• No objection letters (if applicable).
• Other Government Departments’ approvals (if applicable).
The fee structure for final approval is complex and depends on a variety of
factors. Fortunately, the DED website has a ‘simulator’ that asks a series of
questions about the proposed business to estimate the cost of a trade license.
One of the major fees is linked to the annual rent of the business premises; five
per cent of this amount is payable as a market fee. In any case, the best way
to assess registration fees is to visit the DED website and use the simulator.
Like the initial approval process, the DED aims to process applications and
issue the Payment Voucher for the business within one to two business days.
The license (for sole proprietors and LLCs) and Certificate of Partners and
Commercial Registration Certificate for LLCs are issued upon payment.

Become a Member of Dubai Chamber

Just opposite the DED’s main building is Dubai Chamber’s headquarters.
Registering with Dubai Chamber is quick, and entrepreneurs leaving the DED
with their new trade license should have all the documents they need readily at
hand. The following documents are required to register with Dubai Chamber:

• A copy of the business license.

• A passport copy of the owner/partners.
• A copy of the Memorandum of Association (for LLCs) or a copy of the
appointment contract for a local service agent (for sole proprietorships
owned by foreigners).
• A copy of a power of attorney, if an authorised representative is
registering the company.
• An authorised signatories card, which Dubai Chamber provides, with
signature specimens of the partners.

Membership fees vary based on the activities in which the company is engaged,
but they are typically less than AED 2,000 per year.

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Membership in Dubai Chamber is required for most businesses registered in the
Dubai customs territory (i.e. not in the free zones). All businesses that export
and require Certificates of Origin from Dubai Chamber (whether in the free
zones or not) will need to become members to obtain them. All businesses are
encouraged to become members of Dubai Chamber in order to take advantage
of the numerous benefits of membership.

Hiring Workers
The first step in hiring workers is to obtain an establishment card from the
Department of Naturalisation and Residency – Dubai (DNRD). This permits the
company to engage the DNRD for transactions related to securing residency
for expat workers. The following documents are required for this application:

• A completed application form.

• A copy of the commercial license.
• A copy of the list of partners issued by the DED (if an LLC).
• Copies of the e-gate cards of the partners who are authorised
signatories.
• Notarised signature authorisations for authorised signatories.
• A map of the establishment’s location and office phone numbers.
• A copy of the lease for the business’s premises.
• Passport copies of the signatories/manager.

The fees for the immigration establishment card vary based on the types of
visas the business plans to acquire, but they are typically around AED 1,160.
After receiving an establishment card from the DNRD, businesses must get an
establishment card with the Ministry of Labour and Social Affairs. This card is
similar to the above card, but it allows the business to conduct business with
the Ministry, who have to approve all applications to hire an expatriate worker.
The following documents are required for the labour establishment card:

• A copy of the trade license.

• Copies of the partners’ passports and visas (if applicable).
• A completed application.
• Power of attorney for any non-local authorised signatory.

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 • A copy of the Memorandum of Association.
• A copy of the establishment card from the DNRD.
• A map of the establishment’s location.
• A copy of the lease for the business’s premises.
• One passport-size photograph each of the local/sponsor or the
signatories and the manager or the person on the license.
• PIN (Personal Identification Number) of the local/sponsor.
• A copy of the work permit of the manager / other signatories.

The fees for the above application are AED 2,250. It typically takes around two
weeks to complete the application.
After a business has the above establishment cards, they can secure
employment and residency visas for the staff they recruit. The procedures
for this process are complicated and vary based on the type of position
being filled, the qualifications of the prospective employee, and other factors.
Several businesses report that the total cost to recruit an employee is around
AED 10,000, including all fees and bank guarantees / deposits required.

Next Steps
The next step for a business is to commence its operations. Whether a business
is taking its first steps after just having set up, is looking to grow and reach out
to new markets, or is facing internal or external difficulties, Dubai Chamber is
there to help its members. As part of its efforts to assist businesses and foster
an environment conducive to their growth, Dubai Chamber offers Business
Advisory Services to companies looking to embrace opportunities and meet
new challenges. Contact Dubai Chamber to learn how you can avail of these
services for your business.

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References
Al Tamimi, E. (2006). Setting up in Dubai (4th Ed.). Dubai: Excelencia.

For Further Reference:

DED website:
www.dubaided.gov.ae

DNRD website:
www.dnrd.gov.ae

Emirates Post website:

www.emiratespost.co.ae

Etisalat website:
www.etisalat.ae

Ministry of Labour website:

www.mol.gov.ae

Dubai Chamber website:

www.dubaichamber.ae

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Acknowledgements
The following professionals were of tremendous assistance to the preparation
of this guide by sharing their advice, knowledge and experiences. Of course
any errors or omissions are the sole responsibility of the author.

From Trench & Associates, Ms Cynthia Trench and Ms Keeley Foley.

From Capital Advantage, Ms Sharon Ditchburn.
From the DED, Messrs Jassim Alqallaf, Juma Al Suwaidi, and Rauf
Mammadov.
From Dubai Municipality, Mr Abdulla Al Mulla.
From Emirates Post, Mr Ali Abdulrahman Ali.
From National Bank of Dubai, Ms Shomita Bose and Mr Shuja Kamili.

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