When starting a new business, entrepreneurs are faced with a number of important decisions. One of the first that you’ll need to make when setting up in the UAE is choosing which business activity you are going to trade under.
Essentially, this is a question of the industry you are going to trade in and the types of activities you wish to undertake. While not the most taxing of tasks, it can be particularly daunting as there are over 3,000 permitted activities to choose from in the UAE, as specified by the Department of Economic Development (DED) and the country’s free zones. Depending on the nature of your business, you may wish to choose a single activity or a range of activities under a single licence.
Your chosen activity will determine not only the type of business you are permitted to carry out but also, in some cases, the area in which you can set up. For example, some free zones – such as Dubai Media City which is open to media-related companies – only allow certain business activities. As this is such an important, and potentially confusing part of the company formation process, it is advisable to work with a company formation agent or a lawyer who can advise on what activities best cover your business.
Understanding UAE Business Licences and Activities
There are several licence types to choose from in the UAE including professional services, commercial, industrial, and trading – each with a number of permitted activities within them. The professional licence covers everything from electrical fittings services to car registration; commercial licences span a number of areas from carpentry to health food trading; and industrial licences tend to cover manufacturing activities such as printing and packaging fabrication.
If you are undertaking trading activities it is possible to trade under a general trading licence. While this approach offers more scope as you are able to trade any commodity permitted in the UAE, it can cause problems when opening corporate bank accounts as most banks require more specific details. The other option is to choose a specific trading activity under another licence – such as auto parts trading which falls under the commercial licence. This approach will limit you to that specific type of trading, however, it will be far easier to open your business bank account.
If you are undertaking trading activities it is possible to trade under a general trading licence.
It is also worth noting that certain commodities require special approval to trade from the UAE authorities. These include food items, tobacco, alcohol, pharmaceuticals, oil and gas, diamonds, gold and precious stones/metals.
Choosing the Activity That is Right For You
In many countries, such as the UK for example, listed business activities on official forms are often vague. For example, a company registered to undertake ‘public relations and communications activities’ is permitted to carry out any number of services loosely linked to that field, such as marketing, events, public relations and so on. In the UAE, this is not the case.
If you are offering a service in a field not listed as an activity on your license you may encounter issues when it comes to audits and may face questions from suppliers, venues or clients. You may even run the risk of fines and legal action.
UAE federal law is very clear on this, stating that all companies ‘shall obtain all the approvals and licences as required for the activity to be conducted by the company in the State prior to commencement of its activity.’
To avoid such reprimands, it is vital that you include all of your intended business activities on your licence. In most cases, you are also permitted to undertake multiple activity types – commercial, professional, industrial etc – under one licence. As the Dubai Department of Economic Development explains: ‘When the license combines several activities, the largest activity which is the industrial activity is taken into consideration followed by the commercial activity and then the professional one. For example, if a license contained both commercial and professional activities, the type of the license should be commercial since it’s the larger activity.’ (It’s worth noting that many free zones also allow for multiple activities under one licence.)
What’s Next?
Choosing your business activities is just one of a number of key decisions you’ll need to make when setting up a business in the UAE. You’ll also be required to decide on a business name – which again comes with its own quirks and intricacies unique to the UAE. With these initial decisions made, it’s time to make your application – either to the DED or to one of the country’s many free zones.
Choosing your business activities is just one of a number of key decisions you’ll need to make when setting up a business in the UAE.
Every one of these early decisions can have a huge bearing on the type of business you are permitted to carry out and where you are allowed to trade. That’s why it is highly advisable to work with an expert in company formation who can guide you through every step of the process from choosing a business activity and company name to registering with the relevant authorities, opening corporate bank accounts and processing visa applications. A slight error at any one of these stages can lead to delays and possibly even the rejection of your licence application, so it pays to get it right the first time.
When setting up with a formation expert, all that’s usually required on your part is some basic documentation – such as passport copies and often a business plan – and a few hours of your time. In some cases, it may even be possible to register your business without visiting the UAE.
Setting up your own business has never been easier. Virtuzone takes care of it all so you can focus on what matters – building your business. For more information about company formation in the UAE mainland or free zones, please call us on +971 4 457 8200, send an email to info@virtuzone.com, and click here.
