As UAE keeps evolving in the business world in a way surpassing the expectations of investors and entrepreneurs, it is attracting many forms of businesses from startups to well-established companies looking to enter new markets. Entrepreneurs are part of the public who are interested in investing in UAE, looking for a lucrative investment that could generate profits and survive while growing in the long run. Despite all its attractiveness, company formation in UAE can present many challenges.
Challenges face in a Startup
Before considering a new business setup in UAE, entrepreneurs should know the challenges for forming a Limited Liability Company LLC or an onshore company there requires the presence of a local partnership with a UAE National. In addition, rules applied demand that the investor can only have an ownership of 49%, while 51% is owned by the local partner.
Accordingly, some entrepreneurs find this fact discouraging to the extent that they don’t engage in company formation in the UAE. Other investors seek help from Dubai business setup consultants, located in the city of Dubai where important investments take place, or from other business setup companies in UAE. Another option that permits entrepreneurs to have 100% exclusive ownership is to conduct a new business set up in the UAE free zone, or by setting up a Limited Liability Company outside the free zone under industrial or commercial. However, the existence of a local partner is still necessary in this case, this might be one of the main challenges for a new entrepreneur.
One of the big advantages the UAE used to offer to entrepreneurs worldwide who wanted to establish a company in Dubai, or anywhere in the UAE, was the opportunity of a tax-free investment. This was one of the main reasons that made the UAE an attractive destination for new entrepreneurs who wanted to start a business without any tax burdens. However, this all changed as of the 1st of January 2018, with the announcement of VAT applicable to all new businesses setup in UAE, which affected the considered business model of entrepreneurs due to a stringent legal compliance framework set in place.
Finally, although the Emirati people are very welcoming and congenial, challenges can arise for foreign entrepreneurs concerning the culture and communication that is required to be addressed in the process of company formation in the UAE. UAE business setup requires business communication which is specifically different for men and women, and the formal directness and approach should also be conducted in a specific way. Emirati culture has a strong impact on business and daily life in the UAE, and it sometimes stands in the way after conducting UAE company registration in order to run a business there.