Setting up a business

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Do you fancy becoming the next Richard Branson or are you just sick of being told what to do every day? If so then it's about time you took the plunge and set up your own business.

Starting up a business is never without risks. But, as the old saying goes, nothing ventured, nothing gained.

And where better place to do it than in Dubai, where a booming economy and tax-free environment has created a fertile breeding ground for entrepreneurs.

In this feature we explain how to set up a business in the UAE - from bureaucracy to banking - so that you get the perfect finished product.

Step 01 - Red tape

No matter how big or small your business is - you must be prepared to navigate your way through a sea of red tape before being allowed to set up in Dubai.

The three main government departments you will encounter on your way to setting up your business are: the Dubai Department of Economic Development (DED); the Ministry of Economy and the Dubai Chamber of Commerce and Industry (DCCI).

Every commercial, professional and industrial company must register with the Chamber of Commerce.

Those choosing to operate within one of Dubai's free zones will deal directly with the free zone authority and will be subject to the free zone authorities' own immigratio n and labour laws as a well as the regulations required to set up a business.

The DED is responsible for issuing trade licences and more information can be found about the organisation on www.dubaided.com.

Dubai's Ministry of Economy oversees economic activity in the UAE.

It supervises and regulates all commercial activities in the country and gives approval to all foreign companies wanting to set up a branch in Dubai - as well as insurance companies and insurance brokers.

Dubai Chamber of Commerce's role is to promote commerce throughout the emirate to compile business related data, set standards for commercial activity and to receive commercial complaints.

The starting point for every business hoping to operate in Dubai outside a free zone is to obtain a trade licence, which is issued by the DED.

The licence defines the type of business activities they are allowed to practice and there are three different types of licence you can apply for: a commercial licence issued for business activities in general; a professional licence for services and certain professions; and an industrial licence for manufacturing activities.

Before applying for your licence you must have a clear idea of what legal form your company will take.

This influences what type of licence you can apply for and the business activity and ownership requirements your company must fulfill.

There are two main categories of company that expatriates generally can set up in Dubai: a branch of a foreign company; or a limited liability company which is incorporated under the UAE companies law.

It is also possible to set up a professional company or consultancy business which usually practices engineering and business consultancy, graphic and architectural design, healthcare, IT or teaching.

In the case of an LLC a UAE foreign national must have 51% ownership of the company's shares.

The degree of the control this gives the shareholder over the management of the company varies according to the agreement between the two parties, as Simon Adams, a partner in Dubai based law firm Clyde & Co explains.

"It's acceptable to put in place an arrangement which turns over management control to the foreign party. Ownership of the shares however remains with the UAE national otherwise the arrangement is illegal."

Cynthia Trench of the law firm Trench & Associates, adds: "The UAE companies law allows for expatriates to have 100% management control over the company. There just needs to be a clause in the contract between the two parties identifying who has management control."

Branches of foreign companies and consultancy businesses are 100% foreign owned but the company has to appoint a UAE national service agent - also referred to as a sponsor - who is responsible for assisting the company with immigration or Ministry of Labour issues - in particular obtaining visas for employees.

Again the degree of involvement the service agent has in the running of the company or its activities can vary considerably, according to Adams.

"A service agent can have whatever degree of power you care to give them. In order for the company to register with the immigration and labour authorities and therefore employ staff, the UAE national needs to make the application and sign certain forms. Thereafter every visa applied for has to be signed off by the UAE national.

"He can delegate his authority to a representative in the foreign company or a foreign shareholder in an LLC. There is a whole raft of things you could ask the UAE national to do or not to do - it's entirely a matter of negotiation between the two parties."

The agent is paid a flat annual fee or a percentage of the company's profits according to John Martin St Valery, CEO of the Dubai-based companies formation specialist firm Links. He said this is worked out according to the type of business and the number of employees it has.

"We like to look at the company's business plan to see what the projected growth in staff will be then to come up with a fair and reasonable fee."

According to Valery, the way to find a UAE national to sponsor your company - or to be a shareholder, is to approach a law or accountancy firm or a government department such as the Dubai Chamber of Commerce and Industry.

"You should take the advice of people on the ground both in the government departments and the private sector. It's important to look at whether the local partner has a genuine interest in your business," he says.

All companies must apply to the Dubai Department for Economic Development for a trade licence.

Companies apply for different licence categories depending on the nature of their business.

There are different licence categories for commercial, professional and industrial companies with listings of the types of activities that fall into the different categories.

For instance, banks, insurance agencies or supermarkets would fall into the commercial licence category; accountants, advertising agencies or legal consultants would need a professional licence; while companies involved in fishing, construction or agriculture require an industrial licence.

In order to apply for a trade licence companies are required to have obtained a lease for commercial property in Dubai. They then pay a fee based on 5% of their annual rent for commercial property in connection to an additional 5% of any additional leases that are held in the name of the company. Depending on the legal form the company takes and the activities it will carry on, some businesses require additional approvals from other ministries before being able to obtain their trade licence from the DED.

Those setting up a business should read the Standard Classification of Economic Activities which is published by the DED and Dubai Chamber of Commerce and Industry to find out if they need to register with additional government ministries.

According to Valery, 30 working days is the standard time it takes to register for a trade licence.

However, this can vary according to the structure of the company and is particularly complex in the case of branches of foreign companies.

"Depending on the structure of the foreign company's business there might be quite a bit of documentation and legal paper work that is required from outside the country in order to get the process going," says Valery.

"So for example in the case of a branch of a foreign company, you would need corporation documents from the parent company - these need to be legalised and attested in the country of origin then translated and processed here before a licence can be granted."

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