FZE Company and FZCO Company: What’s The Difference

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Nithila Kumar
Last updated on April 18, 2025

Setting up a business in a free zone starts with selecting the right type of company structure. You can choose between several legal structures, including an FZE or an FZCO. Both types of entities offer specific benefits for business owners, but the difference between FZE and FZCO lies in factors like ownership, flexibility, and capital.

Difference Between FZE Company and FZCO Company Explained

An FZE company, also called a Free Zone Establishment, is a single-owner company. Similar to a sole proprietorship, it is managed by a sole individual who is responsible for the management and liability of the business. The sole owner/shareholder can be a single person or a corporate entity.

An FZCO company, which stands for Free Zone Company, is managed by multiple owners. These shareholders can also be companies or a sole person. FZCOs are allowed to have two to fifty shareholders. Like a limited liability company, FZCOs and FZEs both offer limited liability to its owners and are treated like LLCs by government authorities.

5 Questions to Help You Choose a Free Zone Structure

If you’re considering business setup in a free zone but don’t know which legal structure would be the best choice for you, ask yourself the following questions:

What Business Activity are You Conducting?

The type of activity you choose to conduct in a free zone will be a factor that influences your business structure choice. If you’re offering professional services or selling products on a small scale, an FZE will be a perfect fit.

However, for activities that require more heavy duty equipment or land, like manufacturing or technology production, an FZCO is a better choice as the owners can combine resources and expertise to manage the business.

How Many People Are You Going Into Business With?

An FZE company only allows for a maximum of one owner. While they can be a person or entity, UAE law only permits a single name on the trade license. An FZCO company permits a maximum of fifty shareholders. So if you have multiple business partners, go with a FZCO.

What’s Your Budget?

Places like the DMCC Free Zone and DAFZA Free Zone no longer have a minimum capital requirement, while locations like JAFZA still do.

FZCOs also have larger setup costs as there are more shareholders involved. The capital investment requirement would be easier to manage if you had multiple partners to share the burden.

If you are planning to conduct activities related to finance or insurance, you may also have extra costs as these are highly regulated sectors.

Do You Want to Collaborate on Business Decisions?

As an FZE company, you won’t have any external input on how you run your business as you are the only owner. Even if the shareholder is a corporate entity, collaboration would be minimal as FZEs are autonomous entities. If you’re looking for total control over your business, pick the FZE.

In contrast, FZCOs would have a lot more people involved in the decision-making process. An FZCO company is also more operationally flexible, meaning the shareholders decide how much control they have over the business, and how to allocate shares. So if you’re looking for a business environment with more discussions and partnership, go with a FZCO.

Are You Planning to Scale Up Your Business Within the Next Few Months?

It is pretty difficult to expand your business operations as a FZE company, as they are better suited for simple activities. While you can always convert your FZE into an FZCO, you can stick with setting up an FZE if you have no plans to scale for at least a few months to a year.

Difference Between FZE and FZCO Company

What are the Benefits of Free Zones in UAE?

No corporate taxes

Most free zone companies don’t have to pay corporate tax. Exemption from personal and income tax makes free zones an attractive option for business owners. Companies only have to register for VAT if their taxable income exceeds AED 375,000.

Complete business ownership

Free zone companies offer full foreign ownership, eliminating the need for a local sponsor. This allows for 100% repatriation of profits and capital, without restrictions from the authorities.

Easy business setup process

Businesses in the free zone are much easier to set up than companies on the Dubai mainland. Hiring an experts like our business consultants! can make the process faster and more cost-efficient. Free zones can also pick their own financial year if they get approval from the relevant free authority.

Access to international market

Due to the location of most free zones in UAE, free zone businesses have easier access to ports and airports, making international trade a smoother process.

Network of like-minded entrepreneurs and investors

Setting up a free zone company also opens the door for you to connect and work with business owners in your field. Building a community in your niche is always a good business decision as it helps you discuss ideas and stay up-to-date with industry news.

A&A Associate Makes FZE and FZCO Company Setup Simple

If you work with A&A Associate, we can help you pick the best free zone structure that supports your business goals. Our consultants can streamline your business setup process and make applying for a license, getting visas, and opening a bank account as efficient as possible.

Frequently Asked Questions

What is the Meaning of FZCO in UAE?

FZCO stands for Free Zone Company and can be owned by up to fifty shareholders. FZCOs are the best choice for large scale operations with big budgets as they are easy to scale up and usually require more capital.

What is the Difference Between an FZE and LLC?

FZEs are treated as LLCs by free zone authorities in the UAE, as they both offer limited liability to its owner(s). However, LLCs are set up on the mainland, while FZEs can only operate in their designated free zone and outside the country.

How many Free Zones are There in UAE?

There are about 46 free zones in the UAE, with Dubai housing over 20 free zones. Business setup in a free zone offers investors and entrepreneurs many benefits like easy global market access, minimal tax obligations, and easy business setup.

What is the Meaning of FZE in UAE?

The full form of FZE is Free Zone Establishment. In the UAE, it is owned and operated by a sole owner, which can be a corporate entity or a person. Unlike a civil company, they do not need a local service agent for the set up process.

What are the Types of Free Zone Companies?

Free zone companies can be set up in the form of an FZE (Free Zone Establishment) or an FZCO (Free Zone Company). FZEs are better suited for small businesses and sole proprietors, while FZCOs are better for joint ventures and large companies.

What Does DMCC Mean in Free Zone?

DMCC, or Dubai Multi Commodities Center is a free zone in Dubai that mainly deals with commodities trading. It is located in JLT.

Do Free Zone Companies Pay VAT?

Most free zone companies do not have to pay VAT, but are required to register for VAT if their revenue is over AED 375,000 in the past 12 months.

What Does FZCO Stand For?

FZCO stands for Free Zone Company. The difference between FZE and FZCO company is that FZCO allows for a minimum of two and a maximum of fifty shareholders, while FZE only allows one.

What Type of Company is Allowed in Free Zones?

You can set up a branch of a foreign or local company, an FZCO (Free Zone Company), a PJSC (Private Joint Stock Company), an FZE (Free Zone Establishment), or a Private Limited Liability Company in a free zone.

What is the Difference Between Offshore and FZCO?

An offshore company does not require a physical presence in the country to conduct business activities. It can also only operate outside the country it is established in. An FZCO (Free Zone Company) needs a physical location, but can operate within the free zone and internationally.

What is the Difference Between FZE and FZCO?

An FZE company and an FZCO company both offer limited liability and can only be set up in a free zone. FZE can be owned by only one shareholder, while FZCO can be owned by a maximum of fifty shareholders.

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