As the name suggests, a Limited Liability Company or LLC has limited liability. In other words, the business partners are liable only to the extent of their financial participation in the company. When it comes to LLC company formation in UAE, the minimum number of shareholders required is two and the maximum number is 50.
Advantages of a Limited Liability Company
A Limited Liability Company offers protection in the sense that the shareholders / business partners are not personally held liable for any debt accumulated by the company. Let us consider an example. If there are ten business partners and each invests AED 10,000 then the total capital invested would be AED 100,000 in the Limited Liability Company. But if the Limited Liability Company accrues a net loss of AED 200,000 then each of the business partners does not have to shoulder a debt of AED 20,000 each.
The Limited Liability Company and the shareholders are seen as different legal entities. If the Limited Liability Company is wound up, then each business partner loses only the amount he/she invested in the company, which is AED 10,000. So setting up a Limited Liability Company is seen as an effective way of reducing risk for the investor and protecting his/her personal assets – these cannot be dragged into a court of law to face liquidation proceedings and subsequently make good the loss incurred in the United Arab Emirates.
Steps to Start a Limited Liability Company (LLC) in Dubai
- Decide on a name for your Limited Liability Company: It is recommended that you enlist the help of a business setup consultant, who will run a search to see if the name you have in mind for your Limited Liability Company has already registered by another business entity. If yes, you would have to come up with an alternate name for your Limited Liability Company or explore the possibility of appending ‘Middle East’ to your proposed name, so that you will be able to register it successfully.
- Choose a location for your Limited Liability Company: You can opt to open your Limited Liability Company on the mainland or in a free zone. Out of around 45 free zones in the United Arab Emirates, about 30 of them are in Dubai. A business setup consultant can help you with this decision, as not all business activities can be undertaken in free zones. There is a right-fit for every business model. In case you determine that a free zone would be best, your business setup consultant can advise you on the right free zone for your Limited Liability Company.
- Get a Local Sponsor for your Limited Liability Company on the mainland: In the event that you have decided to set up your Limited Liability Company on the mainland, some business activities may require you to have a Local Sponsor who will own 51% of your company. The Local Sponsor must be an Emirati (this is the term used to refer to an UAE national, someone who is a citizen of the United Arab Emirates) who has attained the age of 21 or a company incorporated in the United Arab Emirates that is 100% owned by Emiratis.
Generally speaking, a free zone offers lower LLC incorporation costs than the mainland. Free zones in Sharjah are comparatively cheaper than free zones in Dubai, and some free zones allow you to receive a Mainland License for an additional fee. This enables you to operate on the mainland and still have 100% ownership of your company, without the need for a Local Sponsor.
- Apply for your Business License: Once you have decided on your name and the location of your proposed Limited Liability Company (and a Local Sponsor, if needed), you can then proceed to establish the company. This requires the professional assistance of someone who has experience with LLC company formation in Dubai. A good business setup consultant can help your draw up the Articles of Association – this is the formal term for the company documents – and apply for company registration, plus a Trade License that allows your newly incorporated LLC to carry out commercial activity in the United Arab Emirates.
Cost of LLC Company Formation in Dubai
The exact costs vary. This is dependent on two factors – the number of shareholders in the Limited Liability Company and the number of business activities it proposes to undertake. Generally speaking, the higher the number of shareholders, the more the LLC incorporation costs, as each business partner is entitled to a separate investor visa. The more the number of business activities, the higher will be the costs of applying for a Business License, as there is a specific fee associated with each business activity. There are more than 2,100 designated business activities to choose from in the United Arab Emirates, so it would not be possible to provide the entire list here.
Why Choose A&A Associate LLC for Company Formation in Dubai?
At A&A Associate LLC, we have years of experience when it comes to Limited Liability Company business setup. We can tell you the exact costs of incorporating your Limited Liability Company so that you do not have to pay a penny more than you have to. We help you arrive at the best location for your Limited Liability Company. In case you decide to incorporate your Limited Liability Company on the mainland, we can inform where on the mainland would be the best place for your Limited Liability Company.
We go one step further and also let you know of affordable commercial space options for your Limited Liability Company should you choose to set up your Limited Liability company on the mainland. We put you in touch with the right Local Sponsor, in case one is needed. The right Local Sponsor will be one who lends a patient ear to you and your business, and supports your Limited Liability Company at all times, going out of his/her way to do so.