Top 5 Mistakes to Avoid While Setting Up a Company in the UAE

Setting up a company in the UAE involves several steps and rigorous documentation. You need to follow the established procedures and meet all the deadlines – be it for paperwork submission or payments to enjoy hassle-free company formation in Dubai.

However, there’s a good chance that you might fail to meet the legal requirements as an expat who’s still new to this legal framework. Therefore, it’s critical to collaborate with a reputed business consultancy firm like Shuraa to set up your business in the UAE without committing any mistakes and aligning with all the compliance protocols.

5 Common Mistakes You Must Avoid while Opening a Company in Dubai

It’s critical to avoid mistakes while setting up a company in UAE to save your time, effort, and money. Moreover, some mistakes can cause serious legal troubles to your company. Some of these mistakes are discussed below:

1. Choosing the Wrong Jurisdiction

Does your target segment reside in the mainland region? If yes, you should choose DED’s jurisdiction for setting your business in the UAE. You also have the option of opening a company in any of the free zones. However, things can go nasty if you choose the wrong jurisdiction. Several specialized free zones cater to specific business requirements.

You won’t be able to leverage the benefits of specialized free zones if you form your company with the wrong jurisdiction. This can dent your business aspirations and might force you to relocate quickly. The entire process would add up a lot of overhead expenses that’ll alter your initial investment plans.

2. Applying for an Incorrect License

The government offers a variety of trading licenses that cater to your niche business requirements. But, you can apply for a commercial license, professional license, industrial license, or tourism license as per your activities. Partial knowledge or misconceptions about the purpose of each license might result in you applying for an incorrect license.

Expatriates often commit this error and end up requesting license cancelation followed by another trading license request with the correct details. However, this mistake is easily avoidable with expert guidance provided by the local business setup experts in the UAE.

3. Skipping External Approvals

Business owners can apply for external approvals to obtain permission to carry out exclusive business activities not mentioned in their license. However, many investors skip this step on the assumption that these are optional approvals. Remember that you can only carry out the business activities that are covered in your trading license.

The UAE’s government can blacklist your company if you’re found carrying out operations that aren’t a part of your legal permit. It’s better to connect with Shuraa’s legal advisors while applying for your license and external approvals to ensure a risk-free business establishment in the Emirates.

4. Improper Legal Agreements

You need to partner with a local service agent (LSA) for setting up a company in the UAE in any of the free zones or the mainland region (if your business is eligible). In case your business doesn’t qualify for complete foreign ownership, you need to collaborate with a local sponsor who’ll have 51% ownership of your company.

It’s vital to formally document these agreements with your LSA or local sponsor. Ensure that you mention all the ownership partnership clauses in the agreement for smooth resolution in case of any dispute or disagreement. Business owners who commit the mistake of taking these contracts casually suffer from exhausting legal wrangling.

5. Not Understanding UAE’s Legal Framework

Decisions made in haste often result in dire consequences. Your zeal to open a company in the UAE should be laid on the foundation of educated decisions and not selections made in haste. Be it regarding the capital investment, criteria for obtaining visas, or for anything else. You must know everything inside out to make wise decisions in the future.

However, it’s a mistake that several investors make thinking that they’ll learn on the go. You might end up paying penalties for not renewing your trade license. If you don’t have an in-depth understanding of the UAE’s legal framework.

How to Start a Company in the UAE?

Opening a company in Dubai is straightforward and doesn’t take much time when you submit the required documents, and don’t violate any deadlines. Follow the steps mentioned below to start your business in the UAE:

1. Firstly, decide your Legal Structure: you need to finalize your legal structure depending on your business activities. You can open an LLC, joint venture, sole proprietorship, etc., in Dubai. Moreover, you can get in touch with the concerned economic department to submit the list of business activities you wish to carry out.
2. Reserve a Trading Name: the next step is to reserve a trading name for your venture. Ensure that you follow all the naming conventions maintained by the government. Furthermore, refrain from using derogatory terms and words that have any reference to God or religion.
3. Choose a Business Location: It’s imperative to choose the right location to make the most out of your business in the Emirates. You can choose the mainland region or enjoy a free zone establishment for setting up a company in the UAE.
4. Apply for a Business License: you can apply for your desired trading license once you’re done with all the above steps. Moreover, you can obtain external approvals from the concerned governing bodies in case any of the required business activities aren’t covered in your license. The business experts at Shuraa help you obtain the ideal business license for your venture by taking care of documentation, translation work, and much more.
5. Manage Visas: business owners can apply for a residence visa in the UAE alongside their business application. You can procure visas for your family members, relatives, and domestic staff members too.
6. Finally, open a Bank Account: you need to open a corporate bank account to manage all your monetary transactions. Always prefer a bank that’s reliable and offers long-term business benefits. We can help you find the ideal bank for your company in the UAE.

Set Up Your Company in the UAE!

Opening a company in Dubai is a dream of many investors and entrepreneurs, thanks to the region’s business-friendly laws. We, at Shuraa Business Setup, ensure that your company is incorporated in the UAE without any issues. And our business experts supervise all the steps to facilitate risk-free business formation devoid of mistakes and legal troubles.

To book a free consultation, call on +971 44081900. You can also send a WhatsApp message at +971 50 777 5554. To connect over email, send us your query at info@shuraa.com.

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