The United Arab Emirates(UAE) is considered a global hub for business magnets. A start-up or a well-established company, businesses tend to prosper and flourish in this land. Besides, UAE offers several options of company setup. Choosing the right business type is one of the critical decisions a business owner has to make regarding the company’s benefits. The most important consideration is the choice between Sole Proprietorship vs LLC UAE as the majority of the businessmen in the UAE choose either of both.
Business structure can have a great impact on the security of personal assets, taxes, and smooth functioning of the business. In such cases, which structure might be the best choice for your business? Let’s dive into the details and analyze the important pointers of Sole Establishment vs LLC UAE.
Sole Established Company
A sole established company, also known as a sole proprietorship, is a business structure with a single shareholder, who enjoys the complete ownership of the business. The shareholder can be an individual or a company. A sole proprietor owns all the assets and profits, on the other hand, is also liable to incur all the financial losses and liabilities. In other words, the responsibilities and control of the business lie with the owner.
If you are planning to open a sole proprietorship company in any of the Emirates, then UAE has tremendous benefits to offer.
Primarily, the setup process is easy and involves flexible investment funds. It doesn’t involve any partnership, hence, the documentation and paperwork are hassle-free. Moreover, the UAE government provides visa allocation benefits that make the foreign employee hiring procedure stress-free.
The sole establishment owner is allowed to use a virtual address during the company registration, which facilitates saving rental costs for office space. In addition to that, a sole established company involves lesser operational expenses and is easy to wind up.
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Limited Liability Company (LLC)
A Limited Liability Company, or LLC, can be formed with multiple owners, who are shareholders in the business. Each owner’s liability is limited to the share of their investments in the company. Therefore, they are not individually liable for any company debts or financial claims.
Besides, there is no minimum share capital requirement from the shareholders of LLC. It demands minimum investment for its formation. Hence, LLC stands as one of the most in-demand company structures among business owners in the UAE.
Other benefits of opting for LLC include:
- Protection against commercial debts.
- Secured physical assets, properties, and bank balance.
- Greater scope of fundraising
- Visa allocation benefits for employees
Sole Proprietorship vs LLC UAE
The major advantage of setting up an LLC is that it eliminates the liability of commercial debts or bankruptcy for shareholders. In case the company fails, the owners can have their physical assets protected.
Additionally, there are several other differences between a sole establishment and LLC.
Approvals and paperwork –
The paperwork required in a sole established company is less complex as compared to the LLC structure, which requires typical legal paperwork and formalities.
Business setup –
A sole proprietor setup requires a few necessary licenses from the relevant authorities and start-up funds to initiate the venture. It offers an easy and convenient setup to the business owner.
On the contrary, the company formation procedure for LLC is a bit more complex as it involves multiple owners which means extended documentation and legal work.
In a sole proprietorship, the responsibility of arranging the entire start-up investment lies with the owner. Even though he is allowed to invest according to his requirements, he cannot receive any financial help from a third party.
On the other hand, LLC owners can together invest and arrange as per their business needs. In addition, they can even seek financial help from third parties or apply for bank loans.
In case the company requires more funds for operational expenses, LLC owners can opt for fundraising from financial institutions or other sources, while a sole establishment owner has to arrange the required funds on his own without any external support.
Debts and liabilities –
A sole proprietor is legally liable for all the company losses and debts, whereas LLC owners have complete protection of their physical assets against commercial debts.
Organizational goals –
The basic advantage of a sole proprietorship is that the owner is the whole and sole decision-maker of the company’s future plans and goals.
But in case of an LLC structure, the participation of multiple owners in company operations can lead to amendments and changes in future goals and objectives.
Physical storefront –
UAE government permits the commencement of a sole established company with a virtual address, without having to choose a physical space for running the business.
Contrarily, an LLC company requires a physical office or building for its successful launch in the UAE.
Financial exposure –
In LLC, each member’s liability is limited to the share of capital invested in the business, whereas in a sole established company, the liability is unlimited. The owner has to solely bear all the expenses and receive all earnings.
Budding entrepreneurs who wish to start their business in UAE usually have two options for company setup – Sole Proprietorship vs LLC UAE. Any business structure they choose depends on several factors, such as business activity, company size, type of license, number of employees, scope, and many others.
Nonetheless, both the sole establishment and LLC structures have their own benefits, including the minimum capital requirement, office space requirement, visa eligibility, etc. A sole proprietor gets to be his own boss and enjoys all the profits alone. On the other hand, LLC can also serve as a better option in terms of financial and legal exposure. The liabilities of the company are limited to the share of investments, and the assets are also safe against the firm’s losses.
The choice is tough, but the judgment has to be wise and rewarding. Therefore, before concluding with your decision for the right business structure, it is always recommended to seek professional advice from business setup consultants in UAE.
The experts in Shuraa Business Setup can guide you through the right way on your requirements. Shuraa is keen to help clients open a company in the UAE, providing aid and assistance with every aspect of the company formation. Feel free to get in touch with our professional consultant team and we would be happy to assist you and help you to compare Sole Establishment vs LLC UAE.
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To know more about UAE company formation structures and procedures, call +97144081900 or send a WhatsApp message at +971 50 777 5554. You can also connect over email by sending us your query at firstname.lastname@example.org.