Business Setup

The Difference Between Mainland and Free Zone Business Setup

“I want to start a new business in Dubai” This is the most of the search query for few years for the business enterpreneurs. To invest in the UAE market for the investors and business owners, they should know about the legal rules and restrictions for the prefered jurisdictions. Here in this blog, you came to know the major difference between the Mainland and Free Zone business setup services.

Business setup in Dubai is either we can do with the Mainland LLC or Free Zone entity as per the requirements of the types of the businesses. LLC and Free Zone are the two main jurisdictions with different scenarios with some restrictions and the rules for allowing the business activities. Each jurisdiction has different legal structures and the various business opportunities for both mainland and free zones in UAE.

Why Mainland?

If the expats wants to start a business in Dubai or UAE market, need to open a Mainland license with a local sponsorship options. In this case, the local sponsor will be owning 51% of shares and remaining 49% will be owned by the expats. Except in the case of professional license, the expats can own 100% of shares in the license, but the local sponsor will be acting as Local Service Agent. Department of Economic Developement will issue the license for the respective business type and the location of the business. This is why Mainland Company Formation is free to start the business anywhere in the UAE local market and can operate without any restrictions.

Free Zone Company

The free zone entity is a company formation type in which expats can hold 100% ownership with a flexible manner. This type of jurisdiction, the local sponsor or local service agent is not required for setting up the business in Dubai and UAE Free Zones. Free Zone is allowed to do the business activities in the specific free zone and outside UAE. As compared to mainland, free zone has some restrictions for operating the businesses outside the particular free zone.

Major Difference Between Mainland and Free Zones are as follows;

Difference Between Mainland and Free Zone Business Setup

Business Scope: The Mainland business is more flexible which allow to do the business activities in the local market more secure way without any hassle. It is applicable to both professional and commercial licenses. In Free Zones, which allows to performs the business activities in the respecrive emirates as which the license is issued. The main purpose of investors who wants to setup their business in free zone is to operate the business through distributors in the case of export and import activities. They are not allowded to do direct selling on the local market.

Ownership: For a Mainland Company, Need to aquire a local sponsor or local service agent for issuing the license from DED. In Commercial License – The major shares with 51% will be owned by the local sponsor and remaining 49% of shares with the expats. In Professional License – 100% of shares owned by the expats and here the local sponsor is appointed as Local Service Agent or LSA.

Office Space: From the point of Office Space, 200 Sq.ft office space is mandatory for each mainland license. But in free zone, the office space is not required, there should be a flexi desk option for the same.

Approvals from Authorities: Approvasl are required for opening the mainland company respective to the type of the business activity. Most of the cases, need approvals from DED (Department of Economic Development), Dubai Muncipality, Ministry of Labor and Civil Defense approvals for some cases.

Whether if you are confused with the business activities and the legal type of company formation? Then come to us for any query related to Mainland and Free Zone and the approvals for company formation in UAE. You can reach ATBSS Business Setup Consultant at WhatsApp +971 52 905 0031 or send your requirement through email : info@atbss.org.

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