Switching from a Free Zone to a Mainland Company in Dubai

Free Zone and Mainland Company Setup in Dubai

In recent years, Dubai has made considerable strides in developing its business sector. The city has the advantage of having a favorable business climate, a strategic location, state-of-the-art infrastructure, and a skilled international workforce. Additionally, Dubai's ease of doing business and its modern legal system make it a popular choice for entrepreneurs looking to establish their companies in the region.

Business owners can choose between Freezone company formation, Offshore setup, or Mainland company formation in Dubai. Each jurisdiction has its own set of benefits and regulations, and you'll want to choose one that best fits your needs.

However, there may come a time when a business initially set up in a Freezone may wish to switch to the Mainland jurisdiction. One of the reasons for this could be the ability to expand operations beyond the Freezone boundaries. Switching to the Mainland opens up many opportunities to do business with outside markets and benefit from the UAE's favorable taxation system.

If you're a business owner interested in learning about company formation in Dubai or switching from Free Zone to Mainland jurisdictions, this blog is for you! Keep reading, and we'll guide you through everything you need to know to ensure your business runs smoothly and efficiently.

Why Shift Your Business to Dubai Mainland?

Freezone setup in Dubai is an excellent option for entrepreneurs seeking to establish their regional companies. They offer numerous benefits that make Freezone business setup in Dubai easy and accessible. However, as businesses grow, they may need to consider shifting from a Free zone to the Mainland jurisdiction to take advantage of new and expanded possibilities. Here are a few reasons why you might want to make this shift.

Flexibility:

Companies operating in the Mainland can conduct business activities anywhere in the UAE without restrictions. This means businesses can operate in any industry, trade with any company, and hire employees from any part of the world, providing more significant opportunities for growth.

Office Space:

The cost of renting office space on the Mainland is lower than in free zones. It's easier to find affordable options that suit your budget.

Visa Eligibility:

Setting up your business on the Mainland means you can sponsor visas for your employees, making it easier to bring in top talent from around the world.

Overall Cost:

Operating on the Mainland is generally less expensive than in free zones. You will save on office space, visa costs, and other expenses.

Tax Incentives:

Businesses on the Mainland can take advantage of several tax incentives, such as lower corporate taxes and no import or export duties. This can lead to significant savings in the long run.

Auditing Regulations:

The auditing regulations in the Mainland are more flexible, giving businesses more control over their accounting practices.

Foreign Ownership:

While free zones offer 100% foreign ownership, the Mainland allows you to retain complete control over your company's shares.

Specialized Support:

Businesses on the Mainland can access specialized support services that free zones don't offer, such as government grants, training programs, and other resources.

Capital Prerequisites:

The Mainland has different capital prerequisites than free zones, making it easier for businesses to start operating with less investment.

Business Setup Approvals:

The process of getting business approvals is more streamlined in the Mainland, meaning you can get your business up and running faster.

What Are the Available Options for Freezone Businesses to Expand to Mainland Dubai?

There are a few alternatives for Freezone businesses to expand their operations to Mainland Dubai. Let's take a quick glance at the available solutions:

Opening a Branch of the Freezone Company with DED

A Freezone company can extend its operations to the Mainland by registering its branch with the Ministry of Economy and the DED. This branch must conduct the same business activity as the parent company and have the same name as the parent company.

Additionally, the branch can be wholly owned by the Freezone entity, but the local service agent has no role to play in business operations. A local service agent's role is to ensure that the branch can continue its operations in Dubai, but they have no legal, management, business profit-sharing, or asset ownership of the branch.

There are also some restrictions on the activities a Freezone entity's branch can conduct on the Mainland. For instance, Freezone branches cannot engage in trading, labor supply services, commercial agencies, and restaurant licenses.

Forming a Civil Work Company

A civil work company is established to carry out professional activities and can be owned by a foreigner or foreign corporate entity (100% ownership) registered in Free Zones, provided that the activities of the corporate body match those of the civil work company. A UAE Local Service Agent (LSA) must be appointed by the Civil Work Company. LSAs do not hold any stake in your company, unlike local sponsors.

Forming an LLC Company

For registering an LLC Company, a UAE national must legally hold 51% of the LLC company shares, and LLC companies can have shareholders between 2-50. Each shareholder is liable to the extent of their share in the company's capital. A Freezone company can be one of the partners of the Mainland LLC and operate a business in Mainland Dubai.

Steps to Form a Mainland Company in Dubai

Forming a Mainland company could be an excellent option if you want to establish a business in Dubai. To accomplish this, here are a few steps you will need to follow:

Choose Your Business Activity

The first step in forming a Mainland company is determining your business activity. This will dictate the type of license you will need to apply for, as well as the legal structure of your company.

Select a Legal Structure

Once you have determined your business activity, you will need to select a legal structure for your company. Several options are available, including a Limited Liability Company (LLC), Sole Proprietorship, and Civil Companies.

Register Your Trade Name

Next, you'll want to register your trade name with the Department of Economic Development (DED). This process ensures that your company name is unique and does not conflict with other registered names.

Submit Licensing Application

After registering your trade name, you must submit a licensing application to the DED. This application includes details about your business activity, legal structure, and the number of visas required.

Gather Necessary Documents

To complete the licensing application, you will need to provide several documents, including a Memorandum of Association, passport copies of all shareholders and managers, and a tenancy contract for your business location.

Choose a Business Location

As part of the licensing process, you will need to choose a business location that complies with local regulations. This includes having physical office space with a valid tenancy contract.

Collect Any Additional Government Approvals

Finally, you may need to collect additional government approvals based on your business activity. For example, if you plan to sell alcohol, you must obtain a license from the Dubai Municipality.

Need Help Forming Your Business? Let MSZ Consultancy Help!

Whether you’re forming your business in one of Dubai's many Free Zones or opening a Mainland branch, MSZ Consultancy has the experience to help you get up and running with minimal red tape. From Dubai Freezone company formation to helping you secure residence visas, our consultant experts can make owning and operating a business easy and stress-free.

Do you need help choosing which legal structure works best for your company? MSZ can help! Are you seeking the assistance of a Public Resource Officer? We do that, too! Whether you're a smaller company or part of a larger corporation, MSZ has the resources to help your business soar.

So, what are you waiting for? Call us today at +971 52 544 1248, and let our team of consultants help you take your business to the next level! We’ll be happy to provide you with a free quote and a detailed roadmap of how we can help maximize your returns!