What activities can be conducted under an Establishment or Sole Proprietorship?

Expatriates are allowed to form sole establishments only for practicing professional services, such as management, medical, engineering and IT consultancies or similar services.

Can a bank account be opened for an Establishment or Sole Proprietorship?

Yes. A business bank account can be opened with any of the UAE banks.

UAE Establishment Or Sole Proprietorship

About a UAE Sole Establishment or Sole Proprietorship

A UAE business that is owned and operated by one individual with the trade licence that is issued in his or her own name is known as a ‘Sole Establishment’ – also often known as a ‘Sole Proprietorship’ – in the UAE.

You should consider operating as a Sole Establishment if your business is small and the capital investment is minimal. Unlike a limited liability company, the owner of a Sole Establishment is solely responsible for all the business liabilities and financial obligations of the entity.

Establishments that practice professional services and do not extend to any commercial business are exempt from the provisions of the UAE Commercial Companies Law (CCL), but are required to be licensed by the relevant Emirate’s Department of Economic Development (DED).

Unlike a Limited Liability Company (LLC), which in many cases still requires that at least 51% of shares must be in the ownership of a UAE/GCC national sponsor, a qualified foreign investor that sets up a Sole Establishment to practice a professional service is permitted 100% ownership in the company.

Establishments that are owned by foreign nationals are required to appoint a Local Service Agent, which must be a UAE national individual or a 100% UAE national-owned corporate entity. Sovereign is authorised to act as a Local Service Agent in Dubai.

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Key steps to setting up a Sole Establishment

01

Depending on the professional service activity to be practised, special approvals may be required from relevant ministries or government departments. e.g. law firms in Dubai must obtain a professional licence from the Dubai Legal Affairs Department.

02

An application for a licence should be made to the DED or the licensing authority in the relevant Emirate.

03

There should be a relation between the trade name and the commercial activity that the Sole Establishment is undertaking on its licence.

04

In addition to the Local Service Agent agreement and tenancy contract for office space (Ejari), the required documentation for registration and approval will include but is not necessarily limited to:

Certified passport copy for the shareholder;
Copy of the UAE residence visa, if applicable;
No Objection Certificate (NOC) from current UAE residence visa sponsor, if applicable;
Proof of education, professional qualification or experience, if required;
Certified passport copy for the General Manager;
2 x Certified proofs of address for the General Manager;
1 x CV for the General Manager;
1 x Professional / bank reference letter for the General Manager.

Advantages of a UAE Sole Establishment

01

Foreign professionals are permitted to retain 100% ownership in a UAE Sole Establishment

02

A Sole Establishment can legally practice professional services anywhere in the UAE, including Free Zones

03

The owner of a Sole Establishment retains all the profits

04

Sole Establishment setup costs are low

05

Establishing and operating a Sole Establishment is simple

06

A Sole Establishment offers maximum privacy

07

It is straightforward to change the legal structure or wind up the business if circumstances change

08

The government has permanently waived any paid up capital requirements

Disadvantages of a Sole Establishment

01

A individual conducting business under a Sole Establishment has unlimited liability for debts because there is no legal distinction between private and business assets

02

The capacity of the business to raise capital is limited

03

The owner is entirely responsible for making day-to-day business decisions

04

There is a limitation to the number of managers that a sole establishment can appoint

05

Retaining high-calibre employees can be difficult

06

The life of the business is limited

07

It generally takes longer to set up a Sole Establishment than a Free Zone company; typically eight to 10 weeks