An establishment or sole proprietorship is an entity owned by one individual with the trade license issued in his or her own name. The owner assumes all the financial responsibilities of the entity including all its financial liabilities.
Establishments that practice professional services and do not extend to any commercial business are exempt from the Commercial Companies Law (CCL) but are required to be licensed by the Department of Economic Development (DED).
Unlike a Limited Liability Company (LLC), which requires that at least 51% of shares must be registered to a UAE/GCC national sponsor, a qualified foreign investor that sets up an establishment or sole proprietorship to practice a professional service is permitted 100% ownership in the company.
Establishments that are owned by foreign nationals are required to appoint a Local Service Agent (LSA) to assist in obtaining licences, visas etc. LSAs have no direct involvement in the business. A &A is able to act as the LSA.
Key steps to setting up an Establishment or Sole Proprietorship:
- Appoint a Local Service Agent (LSA), which must be either a UAE national or a company wholly owned by UAE nationals. A & A has created a number of 100% UAE-owned LLCs that it fully manages and controls through power of attorneys and other legal agreements. These companies can act as the LSA.
- The required documentation for registration and approval will include but is not necessarily limited to:
- passport copy for the shareholder;
- Copy of the UAE residence visa, if applicable;
- No Objection Certificate (NOC) from current UAE residence visa sponsor, if applicable;
- Proof of education, professional qualification or experience, if required;
- passport copy for the General Manager;
Advantages of a Sole Proprietorship or an Establishment
- Foreign professionals can retain 100% foreign ownership in the business;
- The company can legally practice professional services anywhere in the UAE, including Free Zones;
- No restrictions on the location where the company can rent/buy office premises;
- The government has permanently waived any paid up capital requirements.
Disadvantages of an Establishment or Sole Proprietorship
- The owner is personally liable for business debts and any other financial obligations. This liability cannot be limited by shares because the company is inseparable from its owner’s personality and financial standing.
Establishment or Sole Proprietorship – FAQs
- What activities can be conducted under an Establishment or Sole Proprietorship?
Expatriates are allowed to form sole establishments only for practicing professional services, such as management, medical, engineering and IT consultancies or similar services.
- Can a bank account be opened for an Establishment or Sole Proprietorship?
Yes. A business bank account can be opened with any of the UAE banks.