Dubai is one of the best places to start your business. It’s loved by entrepreneurs, startups, and established business owners alike. In the first nine months of 2024 alone, over 51,000 new companies registered with the Dubai Chamber of Commerce.
While starting a business in the UAE is exciting, you can’t afford to make any mistakes. Many entrepreneurs rush into company formation in the UAE without understanding the legal, financial, or operational requirements.
At GAL Business Center, we help business owners venture into Dubai’s booming economy hassle-free. In this post, we’ll highlight the biggest mistakes you should avoid when setting up a business in Dubai.
Let’s dive in.
1. Choosing the Wrong Jurisdiction
Selecting the right UAE company jurisdiction lays the foundation of success for your business. This comes down to three main options:
- Mainland: It’s ideal if you want to trade directly within the UAE. You can operate anywhere but may need a local sponsor for ownership.
- Free Zone: UAE has over 40 free zones, and they are perfect for businesses targeting international markets. Business setup in free zones in Dubai offers 100% foreign ownership, tax benefits, and quick setup. However, trading within the UAE is limited.
- Offshore: This is best for companies needing a UAE presence without a physical address. As an offshore company, you enjoy tax advantages but cannot do business inside the UAE.
Choosing the wrong jurisdiction can impact your licensing, taxes, and business growth. It’s best to consult an expert for company formation to avoid these issues.
2. Not Understanding Licensing Requirements
Every business needs the right business license in Dubai to operate legally. The UAE offers different types of licenses, including:
- Commercial License: For trading businesses (e.g., retail, import/export).
- Professional License: Needed for consultants, freelancers, or service providers. You can set up a professional license in Dubai as a full foreign ownership, but you’ll require a local service agent.
- Industrial License: Required for manufacturing or industrial activities.
Without the right license, your business could face penalties or delays. Make sure you understand the regulations for your industry and choose the correct license.
3. Ignoring Local Regulations and Compliance
Dubai is home to many companies, particularly startups, thanks to its thriving economy and readily available serviced offices. However, when setting up their shop, many startups overlook local regulations for company formation in Dubai.
Each jurisdiction has its own legal requirements for company formation, covering licensing, employment laws, and tax rules. In Dubai:
- Mainland businesses must comply with UAE labor laws and corporate taxes.
- Free Zone companies follow different regulations but still need to renew their license annually.
- Offshore companies must maintain financial records and meet compliance standards.
Depending on where and what business you want to set up, you may need to comply with different local regulations. Hiring a local expert for business licensing and other legal compliances can help you avoid hefty fines or shutdowns.
4. Underestimating the Cost of Doing Business
While Dubai boasts a budding startup ecosystem and endless networking opportunities, running a business often requires more than that. Many entrepreneurs miscalculate their overall business costs in Dubai, leading to financial strain.
Beyond the setup fees, you must consider:
- Visa Fees: Required for employees and business owners. Costs vary based on visa type and duration. It’s best to consult a professional to know your exact costs.
- Office Rental: It’s a major expense, especially in prime locations in Dubai, which have witnessed up to 20% rent hikes in 2024. That said, you can look at other alternative serviced offices as they offer more budget-friendly and flexible terms.
- Local Sponsor Fees: If you want to set up a mainland business, you’ll need a UAE national sponsor, which comes with an annual fee.
Failing to budget for these expenses can slow your business growth. Plan ahead and speak with a seasoned expert to avoid drowning your budget.
5. Selecting the Wrong Office Space in Dubai
Your office space impacts your business costs and licensing. Many entrepreneurs overpay or choose office spaces that don’t meet licensing rules. You typically have these options:
- Serviced offices in Dubai: Unlike traditional leases, they provide a hassle-free setup with ready-to-use workspaces, utilities, and administrative support. They can also help you meet licensing requirements without high upfront costs.
- Flexible Workspaces in the UAE: These co-working spaces allow startups to scale easily with short-term rental options. They offer shared amenities and lower costs, making them ideal for new businesses.
Whether you want to rent an office for a startup in Dubai or a mainland business, your workspace must align with your business licensing requirements. Some licenses require a specific office size or location, and not meeting these rules can lead to delays in company formation.
6. Ignoring Visa and Immigration Rules
When setting up shop in Dubai, you must adhere to UAE business visas and immigration rules. Not following visa regulations can delay your operations or lead to fines. Worse still, you may have to wind up your business before it takes off.
So, keep in mind that:
- In Dubai, visa quota determines how many visas your company can issue, based on your office size and business type.
- Serviced office visa regulations vary depending on your company structure and location. For example, Some Free Zones in the UAE may require a physical office to get visas for your employees.
- Investor and employee visas have different requirements, including salary criteria and medical tests. Consulting a local expert can help you get a clear picture of the latest rules and regulations.
Skipping visa planning can restrict your hiring and business expansion. Ensure your business meets visa regulations from the start.
7. Failing to Seek Expert Advice
Setting up a business in Dubai can be a game changer for your growth. However, many entrepreneurs and owners struggle to do this because they don’t get the right guidance. That’s where professional business setup consulting in Dubai comes in.
They can help you:
- With licensing, jurisdiction selection, and legal compliance.
- Find the serviced office rentals in Dubai that meet your legal requirements.
- Simplify the entire process, saving you time and effort.
Setting up a company without professional advice can lead to delays, legal roadblocks, or unexpected expenses.
Partner with GAL Business Center to Avoid These Mistakes
Avoiding these mistakes can save you time, money, and stress. From choosing the right jurisdiction to defining overall business costs in Dubai, you need an expert who can help you every step of the way. That’s where GAL Business Center can help. We can help you comply with local regulations and visa rules, form your company, and get the ball rolling.
Plus, our business center has meeting rooms, serviced offices, co-working spaces, and a business lounge – right here in the heart of Dubai. We are your one-stop shop for setting up a business in Dubai. Contact us today to see how we can help you.