Mainland vs Free Zone in Dubai: Which Business Structure is Right for You? | #25

Watch on YouTube: https://youtu.be/E0_2YrCkOeg

 

Explore the key differences between mainland companies and free zone companies in Dubai. Understand the benefits and drawbacks of each legal structure, including ownership rules, regulatory requirements, and operational flexibility. Learn about the changes in local sponsor requirements and how free zones can be more suitable for certain types of businesses. Discover why choosing the right structure is crucial for your business in the UAE. Aaron Henriques also discusses his personal experience with IFZA free zone and offers helpful resources for setting up your business in Dubai.

 

Mentions: 

How to Choose Between a Mainland vs Free Zones Article - https://handlrzone.com/blog/mainland-vs-free-zone-navigating-the-best-business-setup-in-dubai/

Start your business in Dubai with my agency, Handlr Zone: https://handlrzone.com/yt 

OR get a direct referral to my contact at the IFZA free zone: https://aaronhenriques.com/ksbc 

 

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Episode Transcript

(00:00):
I'm going to explain the twomost common legal structures when

(00:05):
setting up a business in Dubai.
And I believe it's the most importantdecision that you need to make when
you're considering setting up anybusiness in the United Arab Emirates.
you've probably heard of thesetypes of companies and I'm going
to speak about both of them Thefirst one is a mainland company.
The second one is a free zone company.

(00:25):
Today I'm just going to make anoverview of mainland companies
and free zone companies here inDubai and I'll get around to a more
detailed video in the future on each
So mainland companies, or you cancall them UAE mainland companies.
These are limited liability companies.
most often they'll end in LLC orLLC-SO, which is for sole owners.

(00:49):
people from all over the world arefamiliar with LLC because that's
typically what many companies may usein the United States, for example.
Mainland companies in the UAE comewith fewer restrictions than free zone
companies, and they pretty much enableyou to sell anywhere within the UAE or
globally, where it's legally allowed foryou to do so, you can also sponsor any

(01:11):
number of staff visas, which may, again,may differ for free zone companies.
But with every upside,there's a bit of a downside.
So maybe not a downside, maybe morefamiliar with people from back in the
United Kingdom or anywhere in Europe,really, is if you have a UAE mainland
company, there are more regulations youneed to adhere to because it is a mainland

(01:31):
company for the United Arab Emirates.
And there are many different regulations,depends on the type of trade that
you're doing, but one of the commonones, is the requirement for using WPS
payroll, which effectively is puttingyour staff through a payroll system,
which you don't need to do with freezone companies, and also the requirement
for having an office, a physical officespace, if you have a mainland company.

(01:55):
but let's bust this myth once and forall, because it's still commonly believed
that for you to own a UAE mainlandcompany, that you need a local sponsor
who owns at least 51% of the business.
Now, while that was true for avery long time, The rules changed
and that's no longer the case.
And when I say no longer the case,it comes with some exceptions.

(02:18):
So there are some trades which stillrequire a local sponsor to be involved
with the company, but for most trades,you as a foreigner, just like me, And
most of the people watching this can own100% of the mainland company in the UAE.
So they can own 100 percent ofthe shares without needing a local

(02:39):
sponsor for most types of businesses.
Now, there are some restrictions,like I mentioned, things like military
telecommunications, things to dowith space, the internet, banking and
insurance, among a few, there are more.
And if you're someone like me whooperates predominantly remote businesses,
you will need a physical office space.
Even if you don't want touse one, you still need it.

(03:01):
If you have a mainland company,it's just a requirement that
still remains to this day.
Perhaps that will change one day,but at the time of recording,
that's the requirement.
Now, free zones.
I have a free zone company in Dubai.
Most of the people I knowwho have companies in Dubai
operate through free zones.
they're a lot more common withentrepreneurs who are in the

(03:22):
online business space, professionalservices, like consulting services.
And even things like e commerce orjust generally when you're selling
your services, not inside the UAE.
the free zone I'm personallywith is called IFZA.
IFZA is based in the Dubai SiliconOasis, and it's a lot more popular with
Foreigners like myself who are from theUnited Kingdom, Europe, United States,

(03:44):
Canada, Australia, places like that.
That's what it tends to attract becauseit has mainly European, management.
Who operate the free zone, andthat's just a lot more familiar
with people like myself.
there are over 40 free zones foryou to choose from in the UAE.
So there's plenty around there, dependingon what type of business you're doing.

(04:05):
I think IFZA is great for themajority of businesses, but there
are some specialist ones out there.
they do vary on cost the general rulesfor the free zone, the type of people
they attract, the type of help you'll get,and the way they do business may be more
comfortable for some of you versus others.
as I told you the, Mainland companiesend in LLC or LLC-SO in most cases.

(04:29):
you may see free zones that also haveLLC-FZ, just to confuse things a bit.
Mine with IFZA is FZCO andthere are others that exist.
Ultimately, though, free zone companiesare also limited liability companies.
the sort of limited liabilityprotections that you get through
owning a mainland company, you stillalso get through owning a free zone

(04:50):
company, just like back home in theUK, with a limited company, the sort
of protections that you get with those.
there are fewer UAE regulationsfor you to adhere to, To be
honest with you, the differencesare becoming slimmer over time.
However, things like I mentioned earlier,the WPS payroll system, you don't have
to use that if you're operating through,certainly my free zone, and my free zone

(05:14):
won't require you to have an office space.
until you've got over four sponsoredvisas you may not need any other
sponsored visas other than yourself,or maybe you and your business partner.
there are some people who particularlyif you operate like me where I've
got staff who are situated in otherplaces other than the UAE who are
operating in my business and asI've alluded to you can sponsor

(05:36):
people's visas through the company.
In fact, your visa, if you decided to setup a company in Dubai, in a free zone, and
you wanted to come and live here and getyour residency visa and Emirates ID, you
would get sponsored by your own companyas an employee effectively, even though
you own it, and then your company can alsosponsor other staff members if they need

(05:58):
to be in the UAE and actually live here.
If they don't need to, thenyou don't need to sponsor them.
It would make no sense.
And free zone companiescan be 100% foreign owned.
when I say foreign owned, you and me,most of the people watching this, we
can own 100% of the free zone companywithout any need for a local sponsor.
And as I've mentioned, thedifferences are reducing.

(06:19):
And so mainland companies actually don'trequire it for most types of businesses.
The main downside to a free zonecompany, and it may not be a downside
for you, it isn't for me in how Ioperate, but you cannot, typically sell
physical products or have a physicalshop inside the UAE if you're operating
under a free zone trade license.

(06:40):
For anyone who's selling professionalservices like consulting services, you
can sell within the UAE under a FreeZonelicense, and you can also sell anywhere
else in the world, or at least that'swhat I've been told by my FreeZone.

(07:07):
And everything I've just said there, ifyou don't plan on selling your products
and services inside the UAE, which mostpeople I speak to are not, that's not
their market, that's not their market.
then you don't need to worry aboutit because the free zone license will
allow you to trade globally anywaywithout restrictions from the UAE.
It can be really hard to decide betweenstarting a mainland company or a free

(07:31):
zone company, particularly if you'resomeone who actually wants to do
something like, a real world scenario,sell coffee beans inside the UAE, But
you have no need for a physical office,and don't want to take on the extra costs
that come with the mainland company.
It can be a really tough decision becausethere are ways around it, and it's not the
aim of the video for me to go into that.
So I will make more detailedvideos on both free zone

(07:53):
companies and mainland companies.
But for now, I do have a blog post thatI wrote, an article relating to this
exact thing on how to choose between aUAE mainland company and a UAE free zone.
So just look in the descriptionand you'll be able to find a
link to access that article.
Now for those of you who are looking toset up a company in Dubai, you can do

(08:15):
this yourself, you do not need an agency.
However, I do have an agency here.
My company is called Handlr Zone.
And if you'd like us to help you getyour business set up in Dubai, then
click on the link in the descriptionor if you'd like to connect directly
with my contact at IFZA, the free zonein Dubai, Silicon Oasis, there's also a
link in the description for that as well.

(08:36):
And all you need to do is fill inyour details and I'll connect you
up with my contact over at IFZAand you can go direct with them.
Since you've stayed with me thislong, please like, subscribe,
and share it with someone whoyou think may find this useful.
I'm also going to be posting morevideos about Dubai and getting
your business set up here andrelated topics in the coming weeks.

(08:56):
So I'm Aaron Henriques.
Thanks for staying with me.
Bye.