What is Sole Establishment in UAE?
A Sole Establishment is a legal entity exclusively owned by one individual, who is personally liable without limit to the full extent of his assets for the liabilities of the entity. This type of establishment can either conduct commercial activities or professional activities in the Emirate where it is registered. In accordance with the existing laws, only UAE nationals and nationals of GCC countries (subject to certain conditions) are permitted to form such companies for carrying out commercial activities. The commercial activities are those activities which are described in the Article 5 – 6 of the UAE Federal Law No. 18 of 1993 on Commercial Transactions. Some of these activities are trading, import-export, real estate development, manufacturing and etc.
However, expatriates are also allowed to form Sole Proprietorship only for conducting professional activities, such as medical services, engineering consultancies, management consultancies, legal consultancies, IT consultancies and similar services. The Sole Proprietorship, owned by a foreigner, should appoint a Local Service Agent in accordance with UAE laws. A Local Service Agent should be a UAE national (either individual or a company), whose primary job is to act as liaison between the company and the government entities, for example, in applying for work permits, visas etc. The relations between the principal companies and the agents are regulated by an agency agreement.
To sum up, Sole Proprietorship for carrying out commercial activities can be formed only by UAE nationals or GCC nationals (subject to certain conditions). Expatriates can form Sole Proprietorships only for providing professional and consultancy services, provided that Local Service Agent is appointed.