Do you want to convert your Sole Establishment to an LLC in UAE? Learn how to do it

All different types of company formation or structure have their benefits. However, some structures can be more favorable than others, depending on the investor’s business needs. For example, an LLC in UAE can be more profitable than a sole establishment. Nonetheless, it’s always essential to know more about each structure first.

In this article, you will learn everything about the LLC structure in the UAE and its benefits. Also, here you can learn how to convert a sole establishment to an LLC Company. In addition, you will learn how to complete the LLC registration process, its requirements, and many other vital details. Let’s observe:

1. What is the LLC company formation structure?

As an investor, you must be aware of the LLC Company meaning in Dubai and any other location. It’s essential to know the basic information about all types of company formation before selecting the one you want. Therefore, let’s take a look at some general information about this type of business entity or company formation.

An LLC in UAE business is a Limited Liability Company, and like many other business structures, it has advantages and disadvantages. This type of legal entity has also features of a corporation, partnership, or sole partnership. In the UAE, this is one of the most popular types of company formation among investors.

Unlike a sole proprietorship, an LLC is the best option for investors who work with two or more shareholders. Nonetheless, there’s a limit of a maximum of 50 shareholders allowed. Another outstanding feature of LLCs is how the shares are divided between sponsors and owners. For example, if the investor is an ex-pat, then having a local sponsor is mandatory.

In the case of having a local sponsor or local agent, the owner will only possess 49 percent of shares. Meanwhile, the agent or sponsor will own 51 percent of the remaining shares. Therefore, it’s important to choose a reliable local sponsor before concreting any agreement or contract.

2. How many benefits can investors get by having an LLC Company?

Although having a free zone company can bring you many benefits, an LLC entity can be also very favorable. However, you must remember that it will mostly depend on the type of business you want to establish. Also, you can find an LLC in UAE more useful depending on your business activities, location, business goals, etc.

If you decide to establish this type of company, you’ll obtain the following benefits of LLC Company in UAE:

• All LLC entities can conduct any type of business activity, except for insurance, banking, and investment.
• This type of company formation protects its owners’ personal assets should the business face any legal issues.
• There are no restrictions on the number of visas that the investor wants to obtain.
• All LLC investors can avail investor’s visa. Under this visa, they can get investor status in the emirate along with their families.
• There is no local corporate tax.
• Having a minimum share capital is not a requirement.
• LLC entities are exempted from paying the standard 5 percent of customs duty on imported products and goods.
• There are no imposed restrictions on real estate ownership.

3. A brief comparison between LLC structure and sole establishment structure.

Investors can choose between many options when setting up a business in the UAE. For example, they can choose the UAE mainland or free zones. However, if they choose the mainland, they have to choose between two main choices; a sole establishment or an LLC. Let’s take a look at some key elements of each structure and compare them:

• Formation: a sole proprietorship Abu Dhabi, or in any other emirate, requires to obtain business permits and register a trading name. On the other hand, an LLC requires these things plus filing the articles of organization with the state.
• Taxes: a sole proprietorship has a pass-through taxation structure, while an LLC can elect corporate tax status. However, the pass-through taxation structure is the default one.
• Operations and management: only one owner has the final say on every decision. Meanwhile, several owners can share the decision-making process in an LLC. Or they can also appoint a manager to make decisions for the company.
• Paperwork and compliance: a sole proprietorship pays taxes and renews business licenses. On the other hand, an LLC in UAE besides paying taxes and renewing licenses, files an annual report, in most states). It’s recommendable for LLCs to have an operating agreement, hold member meetings, and record membership units.
• Legal protection: in an LLC, owners are not personally liable for debts. Meanwhile, the owner of a sole establishment is personally responsible for them.

4. How can you convert a sole establishment to an LLC Company?

These are the steps you need to follow to convert your sole establishment to an LLC business:

• Update your company’s corporate documents and open a new bank account under the name of the LLC.
• Reconstruct and obtain new legal documents, like the Memorandum of Association (MOA).
• Find and choose a local UAE partner as your sponsor.

4.1. What information contains the MOA?

• The company name and office location.
• The organization objectives/activities.
• The company’s share capital.
• Liability of the shareholders.
• Detailed powers of the managers.
• First subscribers to the company.
• Duration of the company.

5. Learn how to set up an LLC Company in the UAE.

If you’re interested in knowing how to start an LLC in UAE, here you’ll find the information you need. Nonetheless, remember that there might be additional steps to follow according to the location you choose. Similarly, some additional documents could be necessary according to the type of business you select.

These are the steps you must follow to set up an LLC business in the UAE:

• Firstly, you must select a proper name for your company. Remember that you have to follow certain rules when doing this process. For example, you cannot include sensitive or religious content. Also, you cannot choose a name that has been already taken. After completing this step, you will also have to choose the location where you want to set up your business.
• Secondly, it’s necessary to find and choose a registered agent. Since the agent will receive your official documents on behalf of the company, make sure that the agent is reliable. The chosen agent will be practically a go-between that passes information along to you.
• Thirdly, prepare all of the LLC operating agreements. Some of the details that it includes are the board of managers, business organization, voting requirements, etc. Other important details are the restrictions on transferring and selling shares and the division of profits and losses.
• And lastly, submit all the necessary documents and wait for the necessary approvals. Once you obtain them along with your issued license, you’ll be able to start operating your LLC business.

6. Which UAE locations are perfect for setting up an LLC business?

The best locations in which you can set up an LLC in UAE are mainland zones. In these locations, you’ll be able to obtain all the benefits you need and support services too. However, you first need to know which emirates offer mainland spaces to set up this type of company. Let’s take a look at them:

• Dubai Mainland: it’s the most popular mainland zone in the country. It offers an entrepreneurial ecosystem, which is highly favorable for all investors from all over the world. The pertinent authority that is responsible for Dubai Mainland is the Dubai Department of Economic Development (DED). This government agency issues all of the business licenses in this location.
• Abu Dhabi Mainland: this mainland has been developing tremendous advancements during the last years. Therefore, it is also a good option for setting up an LLC business. In this case, the main authority that issues the licenses is the Abu Dhabi Department of Economic Development (ADDED). Besides, here you have the option of applying for a 2-year business license.
• Ajman Mainland: just like the other locations, Ajman Mainland has developed a strong economy that keeps growing every day. Subsequently, it’s been an attractive business location that offers countless opportunities to new investors. It’s an ideal place for small and medium enterprises, startups, and low-budget businesses. This place is regulated by the Ajman Department of Economic Development.
• Sharjah Mainland: Sharjah is one of the best-industrialized emirates in the country, besides being affordable for all investors. This option is the best one for factories and industries, as well as small and medium enterprises. The pertinent authority in this location is the Sharjah Economic Development Department (SEDD).

7. What do you need to start registering your LLC business in the UAE?

Depending on the location you choose, several documents will be necessary to complete the setup process. Here you will discover the common or general documents that you need to set up an LLC in UAE. This is what you need to gather and submit to register your LLC business in this country:

• Passport copies of the investor, the local sponsor, and the manager.
• The No Objection Certificate (NOC) in case the shareholder or manager works in any of the UAE Company.
• The application form of registration from the Department of Economic Development.
• A copy of the Emirates ID (only applicable for UAE nationals).
• The attested Memorandum of Association from the public notary.
• The attested tenancy contract for the office or warehouse or showroom by the planning department and civil defense department of the municipality with location plan.

8. How can Connectfz help you set up your LLC business in the UAE?

Besides being able to change your company structure, you can also get other advantages with Connectfz by your side. For example, you can skip tedious procedures by letting us complete them for you. Or in case you need to get a UAE business license, you can choose between our many different packages.

On the other hand, we can help you establish a free zone company if you don’t want an LLC. Similarly, you will be able to save time and money by letting us do the setup process for you. Besides, we can also help you choose between many different locations, packages, and more elements.

And lastly, you’re free to request any other services to improve your business operations. For instance, you can upgrade several HR tasks with services like payroll, HR consultancy, staff outsourcing, and many more. Feel free to get in touch with our team and we will fulfill your business requirements.

Would you like to contact Connectfz to know more about the LLC business setup and other types of company formation in the UAE? If you have any questions, call us on +97143316688. You can email us at info@connectfz.ae, and you will talk to one of our representatives who will answer your questions.