Tim Elliott
Welcome to Lawgical, the first and so far the only podcast on legal topics in the Gulf region. Lawgical is a weekly podcast from the Dubai-based law firm HPL Yamalova & Plewka. I’m Tim Elliott, speaking to you from the 18th floor of Reef Tower in Jumeirah Lakes Towers, joined as always by Ludmila Yamalova, managing partner of the firm. It’s a pleasure to be here again!
Ludmila Yamalova
Great to see you, Tim.
Tim Elliott
In this episode of Lawgical, we’re going to discuss what it really means to “do business in the UAE,” what’s required, and the fundamental aspects to consider from the very beginning. Let’s start at the beginning. The UAE is currently an excellent location for a wide variety of businesses. You can pursue many ventures here. Entrepreneurship is undoubtedly encouraged, and it’s fair to say the UAE has never been more business-friendly when it comes to starting a company, hiring staff, and, as many hope, succeeding. Ludmila, let’s begin with a bit of historical context. Looking back a few years, what were the rules like, and how have things changed?
Ludmila Yamalova
You’re right that the UAE embraces the entrepreneurial spirit and actively promotes small businesses and startups. Naturally, there are a few legal nuances that have existed for years and continue to evolve. Over the last year or so, several changes have been made to the legal framework for conducting business in the UAE.
Broadly speaking, there are two key considerations to keep in mind if you’re planning to do business in the UAE.
First, any business must obtain the appropriate trade license. To put it simply, if I wanted to open a bakery and sell cookies in my neighborhood, I couldn’t legally do so without obtaining the necessary license. This is an essential legal step, and I’ll explain more about acquiring such a license later.
The second aspect is immigration status. For example, to work or establish a business in the UAE, you must have a valid residence visa with the correct designation. If I’m on a student visa, I can’t legally work or open a business. Similarly, if I have a residence visa that states I work at a coffee shop, I can’t manage an engineering lab. Your visa must align with the business activities you intend to pursue.
So, there are two main challenges: (1) obtaining a trade license and (2) ensuring your visa matches your business activities.
This applies to any business endeavor or profession. These two elements are always critical.
When it comes to starting a business, there’s no minimum threshold for needing a license or owning a company. The law stipulates that any business involving any form of commercial activity—whether receiving or making payments—requires a license. So, to engage in entrepreneurship, you must apply for a trade license through the relevant regulatory authority. In the UAE, this license is commonly referred to as a “trade license.”
Trade licenses are issued by the appropriate government authorities—typically one of the economic departments overseeing your chosen jurisdiction.
There are two main types of business setups available:
- Mainland companies: These are regulated by the Department of Economic Development (DED) in each emirate. For example, Dubai has its own DED, as do Abu Dhabi and other emirates. Mainland companies can operate anywhere within the UAE.
- Free zone companies: Each free zone has its own regulatory authority that issues trade licenses to companies operating there. Examples include DIFC (Dubai International Financial Centre), DMCC (Dubai Multi Commodities Centre), TECOM, Silicon Oasis, and Jafza (Jebel Ali Free Zone).
Choosing between a mainland and free zone setup depends on your business model. Free zones are often preferred for their flexible ownership structures, allowing foreign entrepreneurs to own 100% of their business without needing a local partner. However, some types of businesses—like trading—cannot be registered in free zones, or it may not be advantageous to do so.
On the other hand, mainland businesses, such as LLCs (limited liability companies), often require a UAE national partner owning at least 51% of the company’s shares. However, there are exceptions, such as professional companies, which can be fully owned by the business owner but come with unlimited liability.
Once you’ve identified your business needs, you’ll need to address other requirements, such as securing a physical office space, which is often mandatory in both free zones and mainland setups.
Tim Elliott
It sounds like having a clear understanding of your location, setup type, and associated costs is essential. Ludmila, let’s discuss capital requirements. How accessible is funding for startups in the UAE?
Ludmila Yamalova
Accessing investment in the UAE is still a developing area. Traditional bank loans are less accessible for startups compared to more established businesses, which typically require a track record of 3–5 years. Alternative funding sources, like private investment funds, exist but come with their challenges, including strict regulatory requirements. Entrepreneurs often turn to private partnerships or personal networks for initial capital.
Tim Elliott
Fascinating insights, Ludmila! That wraps up another episode of Lawgical. If you have specific questions, visit our website, LYLawyers.com, or connect with us on social media. We’ll aim to address your queries in future episodes. For legal consultations, LYLawyers.com is the best place to start.
Thank you for your time, Ludmila.
Ludmila Yamalova
Always a pleasure. Thank you.
Tim Elliott
And we’ll see you next time!
