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The business structure you choose is important as it determines the legal implications of obtaining a business license, liability of parties involved, and inflow and outflow of money.
The main types of business structures that can be set up in the UAE include:
• Sole proprietorship/civil companies. An entity owned by one individual who has the trade license issued in his/her own name and assumes all financial liabilities. Such establishments are usually owned by UAE and GCC nationals. Firms which practise professional services and do not indulge in commercial activities may be owned by foreign nationals as long as they appoint a UAE national service agent to assist in obtaining licenses, visas, etc.
• Joint venture. In the UAE, a joint venture maybe defined as a contract agreement between a UAE party and a foreign party for the engagement in a desired business. The local party in the joint venture must have at least 51% of the company, while the profit and loss distribution can be prescribed.
• Limited liability company (LLC). LLCs are formed by a minimum of two and a maximum of 50 individuals whose liability is limited to their shares in the company’s capital. Foreign equity in the company may not exceed 49%; therefore, a UAE national partner must hold a 51% share. LLCs are most common among foreign investors.
Other organizational structures are joint participation, public joint stock company, private joint stock company, and partnership limited with shares.
• Business structures determine legal implications
• Foreign investors can own businesses in free zones
• Sole proprietorships owned by UAE/GCC nationals
Source: Dipshikha Mitra, Special to Classifieds
The writer is a freelancer