The robust business environment of Dubai opens vast business opportunities for the global business community. The reason that we see many foreign businesses and investors choose to set up their business in Dubai. But with so many benefits comes a set of risks, leading to immense damage and uncertainties. It can further turn out to be costly mistakes by investors. Though risks are an integral part of every step we take in starting a business and cannot be avoided entirely, one can reduce them if one is aware of them.
Here in this blog, we will discuss the five most avoidable common mistakes while starting a business in Dubai, UAE so you can protect your business from all kinds of misfortunes and increase your chances of success.
1. Wrong Company Structure
Most of the time, startups and new entrepreneurs are not aware of different company structures in Dubai and choose the wrong one. You must try to find out what company structure is appropriate for your business model — different company structures as different benefits. The table below will help to find the main differences between three different structures – free zone entity, onshore entity and offshore entity.
|Basis For Comparison||Free zone Entity||Onshore Entity||Offshore entity|
|Foreign Ownership||100% Foreign ownership||100%* Foreign ownership||100% Foreign ownership|
|Repatriation of Profits||100% of repatriations of profits||10%* of profits have to be transferred to statutory reserves||100% of repatriations of profits|
|Import/Export Duty||No import and export duties||5% import duties on most goods (excluding food, beverage, alcohol, and tobacco)||No import and export duties|
|Need of Office Space/Visa||Yes (Flexi Desk option is also available)||Yes||No|
|Right to do Business||Yes||Yes||No|
|Freedom to do Business throughout the UAE||No (only within the free zone)||Yes||No|
*Terms and conditions apply
You will have to choose your company structure based on your business model. There are advantages and disadvantages to each of the company structures, but in the end, it depends on your business needs.
2. Choosing Wrong Right Free Zone
UAE has over 50 different free zones. Therefore, those who are new in Dubai or business might find choosing the right zone quite daunting. Extensive options to choose from make it challenging to pick just one free zone that is right for your business. Do keep yourself aware of the fact that once you have signed with a particular Freezone, your business can operate only within that while in the UAE. Therefore, it is essential to do your complete research before choosing a free zone company structure for your business.
It would be better to hire a professional business setup company in Dubai that can guide you and help you to find the proper business structure, the best free zone for your business in Dubai, and much more.
3. Not Aware of Dubai’s Legal Formalities
Knowing the law of the land is essential when you plan to start a business there. It is crucial to understand what laws can protect your business and which ones can create problems, conflicts and even penalise you. Moreover, you will also need to know the employee recruitment laws to protect both parties interests. Not complying with the labour laws can invite additional expenses and penalties to your business. In many cases, you might be forced to shut down completely. We recently saw a set of rules and regulations announced by the Dubai Government during the COVID-19 Pandemic in the interest of employers, employees and the organisation as a whole. Not following the law can land you in a difficult situation.
4. Lack of Written Agreements
Written Agreements is one of the most common mistakes that many startups and entrepreneurs make. They fail to imagine the importance of a written contract and overlook many crucial points while doing business with known people or friends and land up in a terrible situation. You should not underestimate the significance of an accurate and valid contract with whomever you are doing business with. It is in the interest of both parties (peers and business partners) to avoid any future conflicts, disputes, or disagreements or miscommunication. Your agreement carries every important detail in written form and keeps your business relationships healthy and strong.
5. Hiring a Wrong Business Setup Consultant
Hiring an unprofessional or fraudulent business setup consultant can lead to a considerable disadvantage for your business or company. If your consultant is not aware of the process and not experienced in the field, you will end up with unexpected situations and financial losses. It can also lengthen your business setup, trade licensing, company formation and company registration processes, etc. Therefore, ensure you must hire a professional business consultant company to help you set up your business in Dubai smoothly. Experts can help you through the entire process and ensure that you are on the right path to success.