Business Strategy Series I - Conducting Business in Dubai

The growth of international businesses in Dubai has made it a major commercial hub for global institutions and companies. The articles below provide an insight into the different types of business organizations in Dubai, and the processes involved in the dissolution, amalgamation, transformation and liquidation of businesses.

Businesses in Dubai do not pay direct taxes on corporate profits or personal income (except for oil companies that pay a flat rate of 55% and branches of foreign banks that pay a flat rate of 20% on net profit generated within Dubai). Customs duties are low at 4% with many exemptions. Businesses can avail 100% repatriation of capital and profits. There are no foreign exchange controls, trade quotas or barriers. A stable exchange rate exists between the US Dollar and the UAE Dirham (US $1.00 = AED 3.678). Liberal visa policies permit easy import of expatriate labour with various skills and expertise.

Foreign investors can choose between several types of cooperation and partnerships for conducting business in Dubai.

The Federal Company Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organization, which can be established in the UAE:

1. General Partnership - formed by two or more partners who will be jointly liable to the extent of all their assets for the company liabilities.

2. Simple Limited Partnership - formed by one or more partners liable for the company liabilities to the extent of all their assets, and one or more limited partners liable for the company liabilities to the extent of their respective shares in the capital only.

3. Joint venture - a company concluded between two or more partners to share the profits or losses of one or more commercial businesses being performed by one of the partners in his own name. Local equity participation must be at least 51%.

4. Public Joint Stock - any company whose capital is divided into equal valuable negotiable shares will be considered a public joint stock company and a partner shall therefore, only be liable to the extent of his share in the capital.

5. Private Joint Stock - a number of not less than three founder members may incorporate amongst them a private joint stock company whose shares are not offered for public subscription. The founder members will fully subscribe to the capital, which must not be less than two million Dirhams.

6. Limited Liability Company (LLC) can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the Company's capital. Most companies with expatriate partners have opted for this LLC, as this is the only option which gives maximum legal ownership.

7. Share Partnerships - a company formed by general partners who are jointly liable to the extent of all their assets for the company liabilities and participating partners who are liable only to the extent of their shares in the capital.

Apart from these seven categories, investors are encouraged through Branches and Representative Offices of foreign companies and 100% foreign owned professional firms.

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