Legal Structures of Business

The seven categories of business organizations defined by the law are:

  • Limited liability company
  • General partnership company
  • Partnership-en-commendams
  • Joint venture company
  • Public shareholding company
  • Private shareholding company
  • Share partnership company

Limited Liability Company (LLC)

LLC is the most common incorporation for operating commercial activities such as trading and Services. (Insurance and banking activities mandatorily need to be carried out under a Public Joint Stock company formation).

An LLC can have between two and 50 shareholders and a UAE national sponsor should own at least 51 percent shares in the company at all times. In an LLC, the liability of the shareholders is restricted to the share capital of the company to be paid in full upon incorporation. The minimum capital required for incorporating an LLC is AED 150,000 in each of the Emirates except Dubai, where the minimum is set at AED 300,000. An LLC can have up to five Managing Directors appointed and selected from the shareholders or from other sources that can either be appointed in the Memorandum of Association or in a separate contract.

The time required to form a company will be approximately 1-2 weeks from the date of receipt of all the documents. And procedures and the breakdown of the cost can be given upon request.

The Majority of Companies with expatriate partners have opted for this Limited Liability Company, due to the fact that this is the only option which will give maximum legal ownership i.e. 49% to the expatriates for a trading license.

51% participation by UAE nationals is the general requirement for the Limited Liability Companies. Therefore, the normal shareholding pattern for an LLC will be:

Local sponsor (Partner) – 51% and
Foreign Shareholder (s) – 49%

Minimum capital required is AED 300,000 (US$ 82,000), and should be contributed in cash. Whilst foreign equity in the Company is not permitted to exceed 49%, profit and loss distribution can be agreed mutually.

Conditions for establishing an LLC

  1. The number of partners should not be less than two and not more than fifty
  2. The objectives of the company should not include conducting the business of insurance, banking or investment of money for others
  3. The capital should not be less than three hundred thousand Dirham’s (Dhs. 300,000) and it should be divided into equal shares whose value is not less than one thousand Dirham each. This share shall not be represented by negotiable instruments
  4. The shares of the UAE nationals should not be less than 51% of the capital of the company, taking into consideration the business activities reserved for nationals. Incorporation of such a firm shall be according to the following procedures
  5. Approving the name of the Company
  6. Preparation of the Memorandum of Association
  7. Authentication of the Memorandum of Association
  8. Approval of the Memorandum of Association
  9. Inscription in the Commercial Register at the Trade Licensing Department
  10. Publishing the Data of the Company
  11. Obtaining a Trade License.
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