What Business Structure to Choose? Free Zone, Mainland or Offshore?
In setting up a company in the UAE, one must understand the differences between business structures in order to choose the right one that will perfectly suit your requirements and objectives.Basically, UAE has three fundamental business structures, namely:
- Free Zone
Free Zones allow 100 % foreign ownership and offer zero % imposition of personal and corporate taxes. They have an independent set of regulations and they do not require a local sponsor to register a company. It is the best solution for residence visas with no overhead cost. Free Zones are seen best fit for business activities like import, export, international trading, and consultancies.Go for Free Zone if,
- You want 100 % ownership;
- You want to register a consultancy, import and export;
- You want a cost-effective residence visa solution;
- You want no physical office requirement;
- Your business leans more in international trade.
Mainland companies require a local sponsor who will either own 51% of the shares in commercial companies or act as local agent in professional companies. Basically, mainland companies offer a broader trade as business is allowed all over the mainland. Mainland companies are seen best suitable for retail activities.Go for Mainland if,
- You want a retail business;
- You want to do business in the local market;
- You want less restrictions and wide options for office space locations.
Offshore companies are the most practical option to maintain a virtual office in the UAE as they do not require a physical office. Incorporation is cheaper and easier. It is eligible to acquire assets, buy real properties in its name, and own shares. A bank account may also be opened under its name, and like the Free Zone companies, it also pays zero corporate taxes. Offshore companies are seen best appropriate for international businesses including trading, consulting, investment and holding structures.Go for Offshore if,
- You want to open a bank account in the UAE;
- You want to own real properties under the offshore company’s name;
- You want to acquire shares under the company’s name;
- You want to do international business.
For more details about knowing the right structure for you, contact us to get a free consultation with one of our business formation specialists.Author: Kim Medina, Business Formation Specialist