Starting a Business in Dubai: A Guide to Mainland vs Free Zone Company Setup

How to Setup a Business in Dubai

Starting a business in Dubai offers an exciting opportunity for entrepreneurs and investors around the globe. Thanks to its strategic location, world-class infrastructure, and business-friendly regulations, Dubai has transformed into a thriving international hub for trade and innovation.

Whether you’re a foreign investor, a startup founder, or an SME looking to expand, launching a company in Dubai can open the door to a dynamic market with vast growth potential. So, if you’re planning a new business setup in Dubai or expanding an existing venture, understanding the local requirements and choosing the right setup is crucial.

In this guide, we’ll cover the benefits of launching a company here, explain the difference between mainland and free zone business formation in Dubai, outline the key steps for setting up a business in Dubai, and show how working with experienced consultants can make your journey smoother.

Key Takeaways

• Dubai is a world-class business hub: Starting a business in Dubai is attractive because of the emirate’s strategic location, stable economy, and pro-business policies (including 100% foreign ownership and zero personal tax).
• Mainland vs Free Zone: Entrepreneurs have two main options for company formation in Dubai. Mainland companies (onshore) let you target the local UAE market and require adhering to DET regulations (with most activities now allowing full foreign ownership).

Free zone companies offer full ownership, tax exemptions, and simpler setup for international or specialized businesses, but come with restrictions on directly engaging in the mainland market. Choose the setup that aligns with your customer base and expansion plans.

• Understand licensing and regulations: Every business in Dubai must have a valid business license in Dubai corresponding to its activity – be it a commercial, professional, industrial, or tourism license.

Ensure you select the right license type and get all necessary approvals.

• Follow the step-by-step process: The business registration in Dubai involves clear steps: deciding your business activity and legal form, choosing the jurisdiction (mainland or free zone), reserving a company name, applying for the license, securing office space, and finalizing the company incorporation.
• Get professional support for a hassle-free setup: Partnering with experienced business setup consultants in Dubai can significantly simplify your company formation journey.

The best consultants provide end-to-end assistance – from initial advice and paperwork to post-launch support – ensuring you avoid pitfalls and save time.

Rather than juggling government forms and regulations on your own, you can focus on your business strategy while experts handle the rest.

Why Start a Business in Dubai?

Dubai’s pro-business environment makes it one of the best places to start a business.

Here are a few key reasons why entrepreneurs worldwide are flocking to Dubai for their ventures:

• Strategic Location & Global Market Access: Situated at the crossroads of Europe, Asia, and Africa, Dubai offers unparalleled connectivity.

It’s a gateway to a massive global market, enabling businesses to easily reach customers in the Middle East and beyond. This strategic location is ideal for international trade, logistics, and regional headquarters.

• 100% Foreign Ownership & Investor-Friendly Policies: Recent reforms now allow full foreign ownership of companies in most sectors, even for a company setup in Dubai mainland.

This means you no longer need a local sponsor owning 51%, letting you retain complete control of your business.

The government actively welcomes foreign investment through initiatives like one-stop licensing platforms and streamlined visa processes for entrepreneurs.

• Tax Advantages: Dubai offers a tax-friendly economy – there is no personal income tax on earnings and no capital gains tax for individuals.

Corporate tax is a low flat 9% only on profits above a certain threshold (applicable from 2023), and many small businesses won’t hit that limit initially.

Plus, Dubai free zones provide 0% corporate tax and allow 100% profit repatriation, making it highly attractive from a financial perspective.

• Ease of Doing Business: The city consistently ranks among the top global cities for ease of doing business.

Company formation procedures are efficient, with many steps available online or through single-window systems.

Setting up a business is faster and simpler here than in many other countries, thanks to clear regulations, English-friendly documentation, and responsive government agencies.

• World-Class Infrastructure & Talent: Dubai boasts state-of-the-art infrastructure – from modern office spaces and reliable utilities to excellent transportation and telecom networks.

You’ll also find a diverse, skilled talent pool and professional services to support your business. The stable political environment and strict rule of law provide confidence that your business will operate in a secure, well-regulated setting.

Mainland vs Free Zone: Choosing Your Business Setup in Dubai

Dubai offers two primary jurisdictions for company formation: Mainland (onshore) and Free Zones.

Each option has its own advantages and considerations, so it’s important to choose the one that best fits your business goals:

Business Setup in Dubai Mainland (Onshore):

Mainland companies are licensed by Dubai’s Department of Economy and Tourism (DET) and can operate anywhere in the UAE.

Opting for a company setup in Dubai mainland means you can trade without geographic restrictions within the country and even bid on government contracts. Mainland businesses can work with clients across the UAE freely, which is ideal if your target market is local or you plan to have a physical storefront.

In the past, mainland setup required partnering with a local Emirati sponsor who held 51% ownership, but recent regulations allow 100% foreign ownership in most industries – eliminating that hurdle for most new businesses.

Do note that mainland companies typically must rent a physical office space in Dubai (even a small flexi-desk in some cases) and must comply with all DET rules and UAE local regulations.

Business Setup in Dubai Free Zones:

Free zone companies are established within designated economic zones governed by their own authorities (for example, JAFZA, IFZA, MEYDAN, Dubai Internet City, or DMCC).

These zones offer attractive benefits to encourage investment. In a free zone, you automatically have 100% foreign ownership from day one, with zero corporate or income taxes (usually guaranteed for 50 years or more).

The setup process in free zones is very streamlined – often with packages that include licensing and office facilities – making it ideal for new company formation in Dubai when your business is focused on international markets.

Free zone businesses can trade globally and within their zone, but generally cannot trade directly in the UAE mainland without appointing a local distributor or agent and paying a duty or fee.

On the upside, free zones often have lower upfront costs and flexible office requirements (e.g. you can use a shared desk or virtual office address to meet the legal requirements).

Each free zone caters to specific industries or business types; for instance, business setup in DMCC Dubai (Dubai Multi Commodities Centre) is popular for commodities traders and blockchain startups, while Dubai Media City is tailored for media companies.

When choosing a free zone, consider factors like the allowed business activities, visa quotas (how many residency visas you can get for employees, often tied to office space), and any niche benefits of that zone.

Which to choose? If you need to serve local UAE customers or want the flexibility to expand onshore, a mainland company is the way to go. If your business will be export-oriented or online and you value maximum ownership and tax savings, a free zone setup might be your best bet.

Many foreign entrepreneurs actually start in a free zone to take advantage of lower cost and simplicity, and later expand to the mainland as their business grows.

It’s also possible to have a free zone company and still do business in Dubai by using distributors or obtaining special permissions. Ultimately, evaluate your business model and expansion plans to decide on the jurisdiction that aligns with your goals.

Step-by-Step Guide to Setting Up Your Business in Dubai

While the exact procedure can vary slightly depending on the jurisdiction, the process to start a business in Dubai follows a general set of steps.

Below is a simplified step-by-step guide for company formation (for both mainland and free zone):

1.Determine Your Business Activity and Legal Structure:

Begin by deciding what kind of business you want to run and the legal entity type.

Dubai’s authorities will issue your license based on your business activity (or activities), so be as specific as possible (e.g. restaurant, marketing consultancy, IT services, general trading, etc.).

There are over 2,000 permitted activities in Dubai, covering almost every industry. Also, choose a legal structure for your company such as a Limited Liability Company (LLC), sole establishment, branch office, or civil company.

Most new foreign-owned businesses choose an LLC structure for flexibility and liability protection.

Tip: If your company will trade in a wide range of products rather than a single line, you might opt for a general trading license in UAE.

A general trading license (a type of commercial license) allows you to import, export, and sell diverse goods under one license, which is ideal if you plan to deal in multiple product categories.

Determining these fundamentals (business scope and structure) early will make the next steps much smoother.

2.Choose Between Mainland or Free Zone:

Based on your goals, decide where you want to set up. As discussed, Business Setup in Dubai can be done either on the mainland or in one of the many free zones.

If reaching the local UAE market is critical for you (for example, opening a shop or offering services to local clients), then go with a mainland company under DET.

If your focus is more on international trade or e-commerce without a need for a local storefront, a free zone can offer cost savings and full ownership.

Research the different free zones if you opt for that route – each free zone has its own specialization, costs, and benefits.

For example, tech startups might consider Dubai Internet City or Dubai Silicon Oasis, while trading companies might prefer DMCC or Jebel Ali Free Zone.

Choosing the right jurisdiction at this stage will determine which authority you deal with and what specific regulations apply.

3.Reserve a Company Name and Get Initial Approvals:

Next, you will need to choose a company name and obtain initial approvals from the authorities.

Dubai has strict naming guidelines: the name should be unique, not violate public morals or already be registered, and it shouldn’t include certain words (for instance, avoid offensive terms or names of religions, and if it includes a person’s name it must be the full name, not initials).

Come up with a few name options in case your first choice is taken. Once you decide, you will apply to reserve that trade name with either the DET (for mainland) or the free zone authority.

At the same time, you’ll submit an initial approval request for your business activity. This initial approval is essentially the government saying “we have no objection for you to start this business”. It’s a preliminary green light that allows you to proceed with the formal business registration in Dubai.

At this stage, for mainland setups, if your activity is regulated by an external ministry or department (for example, healthcare, legal services, financial services, etc.), you might need additional special approvals – but for most common activities, the DET’s initial approval is sufficient.

4.Prepare Documentation and Apply for Your License:

With your name and initial approval secured, it’s time to file the official license application.

Prepare the required documents, which typically include:

• Shareholder passport copies, visa copies (if applicable)
• A No Objection Certificate (NOC) from a current sponsor if you’re on a UAE visa already, and other forms provided by the authority.

Mainland LLCs will require drafting a Memorandum of Association (MOA) outlining the shareholding structure (and involving a UAE local partner or agent if needed), which must be notarized.

Free zones will have their own application forms and might require a business plan for certain activities. Submit your license application to the relevant authority (DET for mainland, or the specific free zone authority).

Choose the appropriate business license in Dubai: License types include:

• Commercial License (for trading businesses, e.g. retail, general trading)
• Professional License (for services and consultancy businesses)
• Industrial License (for manufacturing or industrial activities), or specialized licenses like a Tourism License.

Select the category that best matches your activity – this will determine what operations you’re legally allowed to do. If unsure, a business setup consultant can advise the right license for your business activity.

Once everything is in order, pay the license fee to the authorities. After approval, you will receive a payment voucher and then the business license in Dubai will be issued. This license is essentially your company’s birth certificate – it confirms your company is legally established and allowed to operate.

5.Arrange Office Space or Address:

To finalize the company setup, you’ll need to secure a legal address for your business.

In Dubai, having an office or workspace is a mandatory requirement for registration. For mainland company setup in Dubai, you must lease a physical office or shop and obtain a tenancy contract (Ejari) as proof of address.

The office size can be small (even a flexi-desk or shared office can qualify for smaller licenses), but it should meet the minimum space required per visa if you plan to sponsor employees.

Free zones offer more flexibility here: many free zones provide flexi-desk packages or virtual office solutions that satisfy the address requirement without the cost of a full office. Choose an office option that fits your budget and needs.

Once you have your lease or office agreement, you will submit a copy to the authorities. The office space not only legitimizes your company in the eyes of the law but also determines how many visas you can get (the bigger the space, generally the more visas you can sponsor, especially on the mainland).

6.Finalize Registration and Collect Your License:

With your office arrangements in place and all approvals done, you will finalize the company registration.

This involves submitting any remaining documents (such as the signed MOA, the lease agreement, and final government forms) to the relevant authority.

Pay the final fees for registration and issuance if you haven’t already. The government will then issue your trade license and official company registration certificate.

Congratulations – your company is now legally established! You can collect your license documents physically or download them digitally from the portal (many free zones and DET now provide electronic licenses).

At this point, your business is fully registered in Dubai. Be sure to also register with other authorities if applicable – for example, you may need to register for VAT (Value Added Tax) if your business will cross the mandatory revenue threshold (AED 375,000 per year as of this writing).

For most new small businesses, VAT registration won’t be immediately required, but keep it in mind as you grow.

7.Handle Visas and Bank Account Opening:

After your company is formed, you’ll likely need to obtain UAE residence visas for you (and any partners or staff).

Company owners are eligible for an investor visa (also known as a partner visa), which allows you to live and work in the UAE as the business owner.

You can also sponsor visas for your employees, and even family members (spouse, children, parents) once your own visa is in place.

The visa process involves medical tests, Emirates ID registration, and visa stamping in your passport – typically handled through Dubai’s immigration department or free zone immigration services.

At the same time, you should open a corporate bank account for your new company so you can start transacting.

Dubai has many local and international banks; requirements vary, but generally you’ll need your incorporation documents, passport, and a business plan or description of your business activities to open an account.

Pro tip: This is another area where business setup companies in Dubai assist – they often have banking partners to help expedite account opening. Once visas and banking are sorted, you are all set to officially launch your business operations in Dubai!

(Keep in mind that the above steps can sometimes be completed in a slightly different order or concurrently – for example, you might secure your office space earlier in the process for mainland companies. Working with a knowledgeable consultant or PRO can help coordinate these tasks efficiently.)

The Role of Business Setup Consultants in Dubai

Starting a business in a new country can be complex, but you don’t have to do it alone. Many entrepreneurs choose to work with business setup consultants in Dubai to navigate the process.

These consultants are experts in UAE company formation and can manage the heavy lifting for you, from preparing paperwork to liaising with government authorities.

Here’s how the best business setup consultants in Dubai can add value:

• Local Expertise & Advice: Business setup advisors understand the ins and outs of UAE regulations, latest laws, and the nuances of both mainland and free zone setups.

They can provide personalized advice on the optimal jurisdiction and license type for your business model.

• Streamlined Process: A consultant will handle all the tedious paperwork and procedural steps on your behalf.

This includes preparing application forms, drafting legal documents (like MOA and power of attorney), getting translations and attestations done, and submitting everything to the right government departments.

Because they do this daily, they know the fastest way to get approvals and how to avoid common pitfalls.

You won’t have to run around government offices or keep track of numerous requirements – your consultant will manage it efficiently.

• End-to-End Services: The business set up companies in Dubai typically offer end-to-end solutions beyond just the company registration.

They can assist with additional necessities such as opening your corporate bank account, obtaining visas for owners and employees, applying for VAT registration, and even setting up utilities or finding office space.

By having a one-stop shop, you ensure continuity and speed – one team is coordinating every aspect of your launch.

• Compliance and PRO Support: Even after your company is established, there are ongoing compliance tasks – license renewals, visa renewals, reporting requirements, etc.

A good consultant will continue to support you as a PRO (Public Relations Officer) service, handling government paperwork so you remain in good standing.

This ongoing relationship lets you focus on growing your business while they take care of formalities in the background.

• Peace of Mind: Perhaps most importantly, partnering with a reliable firm gives you peace of mind.

The UAE has its specific processes and culture of business – if you’re new to it, it can be overwhelming.

Knowing that experienced professionals are guiding you and preventing any missteps is invaluable. It reduces stress and gives you confidence that everything is being done correctly and legally.

When choosing a partner, look for the best business setup consultants in Dubai with a proven track record, strong client reviews, and deep knowledge of the latest regulations.

Many consultants promise results, but only a few deliver the level of transparency and efficiency that you need. Corporate Business Services (CBS), for example, is a leading Emirati-owned consulting firm with nearly two decades of experience in Dubai company formation.

Working with a trusted team like CBS means you have experts who will ensure a seamless journey from the planning phase all the way to the successful launch of your new company.

Ready to Start Your Dubai Business? – Let’s Make It Happen!

If you’re excited to start a business in Dubai, having the right partner by your side makes all the difference. Corporate Business Services (CBS) is here to turn your Dubai business vision into reality.

With 18+ years of experience as a top business setup company in Dubai, we handle every aspect of the formation process for you. From choosing the optimal mainland or free zone setup, to securing your business license in Dubai, and taking care of visas and bank accounts – our team of experts manages it all seamlessly.

Don’t let paperwork or unfamiliar regulations hold you back from tapping into Dubai’s incredible opportunities. Book a free consultation with CBS today or give us a call to discuss your plans. We’ll provide friendly, professional guidance tailored to your needs.

Launching in Dubai can be simple, quick, and stress-free when you have a trusted partner on board. Contact us now and let’s get your UAE business started!