8 Common Mistakes to Avoid When Setting Up a Business in the UAE
Dubai and the United Arab Emirates present booming opportunities for new companies mostly because of its hi-tech infrastructure, low tax rates, pro-business regulations, strategic locations, and other benefits. While industries can thrive here, if you want to set up a company in the UAE, it is crucial to understand the common mistakes to avoid for a smooth journey. In this blog, we will walk you through the errors entrepreneurs make, how to overcome those, and experience an efficient establishment process.
1. Not Choosing the Right Jurisdiction
What directly impacts a business operation and its growth is choosing the wrong jurisdiction among the three available in the UAE - Mainland, Free Zone, and Offshore. Different regulations, restrictions, and advantages apply to each of these. If you opt for professional business setup services in the UAE, they can guide you to the right jurisdiction according to your business requirements.
Let’s understand what the three jurisdictions are about:
Mainland: Setting up a company in the UAE mainland offers several benefits, including access to the local market, the ability to engage in business activities throughout the UAE, and the flexibility to obtain business licenses for a wide range of activities.
Free Zone: If you intend to retain full ownership of a foreign trade without the UAE’s market access, a Free Zone jurisdiction may work for you. However, there will be some restrictions for deals in markets related to the United Arab Emirates.
Offshore: Want to set up a company in the UAE but do not wish to trade within the country? Offshore business is the perfect option here. You can run international operations, hold assets here, and enjoy several other benefits.
Signing up for business setup services can help match your business objectives, goals, and models with the right jurisdiction. So, consider a proper consultation before selecting between Mainland, Free Zone, and Offshore locations.
2. Avoiding Market Research
Not performing thorough market research can cost your business heavily in the United Arab Emirates. Market research helps identify emerging trends, business opportunities, customer segments, the competitive landscape, and more. Inadequacy in this sector will affect your decision-making and plummet your company into a void. So, to set up a company in the UAE, the foremost thing to do is study the market environment and develop a business strategy.
3. Incomplete Documentation and Legal Forms
To set up a company in the UAE, you must have all the required papers and documents, and fill the legal forms correctly. Because of a lack of information, it is possible to miss certain important documents and not provide accurate details in forms, causing delays in approvals or rejections of requests. For instance, not submitting all the documents related to shareholders, wrong trade name registration, etc.
The regulatory bodies may request additional documents based on the business activity. If you get help from business setup consultants in the UAE, you can have a hassle-free experience in paperwork and form filling. They can assist you in getting respite from erroneous details and missing documents by providing your company with the right guidance.
4. Not Understanding Employment and Visa Regulations
The UAE labor laws are mandatory for every business operating in this country to adhere to. Similarly, Visa requirements are also fixed, and you must know the ones applicable to employees, their dependents, and yourself. Hiring business setup consultants in the UAE will solve all the problems and misunderstandings relating to labor laws regarding work hours, employment contracts, employee benefits, visas, etc., and avoid difficulties or fines attracted over non-compliance with these laws.
5. Mistakes in Opening a Bank Account
The KYC (Know Your Customer) procedure is mandatory in the United Arab Emirates when opening a corporate bank account. Not providing detailed information about your business, foreign assets, financial results, and other information can cause problems setting up the account. It is important to maintain transparency about documents and investor details. The UAE credit institutions may penalize the business, adding it to the sanction list if the shared details are false.
This is where business setup consultants in the UAE can assist by suggesting the appropriate bank for your business needs, making you aware of the bank regulations, getting your KYC done correctly, and taking care of the entire journey of opening a bank account successfully.
6. Activities Outside the Legal Scope of a Trade License
Looking to set up a company in the UAE, but not having proper knowledge about the involved trade licenses? Do not worry, we are here to guide you. There are three types of trade licenses — Industrial License (for industrial and manufacturing activities), Commercial License (for trading activities), and Professional License (for service-based companies). Your business should perform activities relevant to the trade license it has been provided.
If not, the company can get in trouble with the regulatory bodies. So that the company does not engage in irrelevant activities outside the legal scope of the trade license, you can take the help of a business consultant in the UAE, who will guide you about the right activities to perform and save you from the risks of license revocation and other disciplinary actions.
7. Insufficient Funds to Manage Business Expenses
One of the common mistakes entrepreneurs make is not having a realistic budget and emergency fund to tackle business costs and expenditures. However, if you connect with business setup consultants in the UAE, you can stop struggling with sketching the budget. You will receive expert guidance on visa costs, initial setup and expansion costs, license fees, legal fees, funds for rental spaces, etc.
After all, to set up a company in the UAE, you should have enough cash flow to start operations running smoothly. Get financial advice, draw an estimate of all the possible costs, and have a business plan in place to avoid any hitches.
8. Inadequate Information About Compliance
The UAE has several compliances structured for businesses, right from company and product registration, trademark, need for accurate account and bookkeeping to adhering to corporate tax and filing VAT returns. There are compliances for following the Economic Substance Regulations, Ultimate Beneficial Ownership declaration, and a lot more. Not meeting the said compliances may result in legal troubles and hassles, which business setup consultants can navigate for you and avoid with the right guidance throughout your company’s lifecycle.
Final Thoughts
While the opportunity to set up a company in the UAE may interest you, there are several procedures, legalities, and regulations to understand to avoid committing mistakes in any of these. This is easy if you have the right business setup consultant to take care of everything from day one, mapping your journey through every nitty-gritty for your convenience. So, consider contacting The First Partner, your guide to a profitable business setup in the United Arab Emirates.
We offer a wide range of services and customized solutions, taking care of compliance regarding intellectual property, accounting, bookkeeping, product registration, corporate tax, VAT, AML, ESR, UBO, etc. Plus, we provide business support for branding, Golden Visa, ISO certification, marketing, HR, documentation attestation, and translation with other services.