Being a land of opportunities, Dubai has always been attracting foreign entrepreneurs to set up their businesses in the emirate. From an investor’s point of view, establishing a company in Dubai mainland is a golden opportunity due to the pro-active government policies, business-friendly atmosphere, cost-effective business setup solutions and the lack of corporate tax obligation. However, one must not forget that Dubai achieved this status due to a robust system empowered by stringent regulations. This means that the entrepreneurs need to adhere strictly to the system of highly regulated procedures for setting up a business in Dubai. This calls the need for establishing a business in the right way. However, a lack of proper knowledge about the laws and regulations regarding the mainland company formation would affect the smooth functioning of the business and the investors may fall prey to mistakes. Consulting an expert company formation specialist in Dubai is the best way to dodge these mistakes as they are well-versed in all the regulations.
Here is a list of top 10 errors that foreign entrepreneurs are prone to commit while establishing a company in Dubai mainland:
1. Not Obtaining The Right License
Getting a license from the relevant free zone or mainland authority is the first step in starting any business in Dubai. The business owners need to choose the right legal structure and right license that best fits their business activity to form the proposed company in Dubai. However, the entrepreneurs need to avoid choosing the wrong license or legal structure for their company. The activity on the license should match with the activity that you are planning to conduct business.
2. Starting a Business While Legally Employed
Many individuals with entrepreneurial dreams may wish to start a business in Dubai while still legally employed and having a valid employment visa. This is a violation of the job contract and the law. The aspiring entrepreneurs in such cases need to obtain written consent from the employer before jumping on to set up a business in Dubai.
3. Lack of Written Agreements & Contracts
All the business deals and agreements with partners or other allies should be based on written agreements and contracts. Entrepreneurs should avoid giving priority to mutual trust and verbal agreements. Carefully drafted and mutually agreed agreements would help the investors enforce their rights in case any potential legal dispute arises.
4. Not Registering Intellectual Property
Investing in building a strong brand image is crucial for all companies for business growth and further expansion. Trademarks are one of the most intangible assets a company can own and registering them with the UAE Trademark Office should not be overlooked. Dubai is a highly competitive business ecosystem and brand names, logos, designs associated with the company are always vulnerable to potential infringement. A registered trademark gives businesses the power to rightfully oppose infringers. A registered trademark also helps the companies file a lawsuit against counterfeiters. Not registering the intellectual property will lead to creating a bad image and the companies will fall into a business loss. The companies can consult reputed company formation specialists in Dubai who also offer trademark registration services.
5. Penalty For Not Assessing Worst-case Scenarios
The companies need to analyse the worst-case scenarios to identify the risks that are inherent in the business. The entrepreneurs should invest time and resources to identify pain points and the worst-case scenarios should be addressed in advance to mitigate risks. Safety measures can be taken in the form of insurance or contracts to avoid business risks.
6. Failing to Register for VAT and Maintain Books of Accounts
Investors who form a company in the UAE need to ensure that their business is VAT compliant. A business needs to register for VAT if its taxable supplies and imports are more than the threshold of AED 375,000. VAT registration is optional for those businesses whose taxable supplies exceed AED 187, 500 per annum. Further, as per the VAT law and the UAE Commercial Companies Law, the companies are required to maintain the books of accounts for at least 5 years. The businesses can hire one-stop-shop business setup consultants in Dubai who offer accounting and VAT-related services to comply with the laws and regulations.
7. Business Activity At Unregistered Location
The location is a crucial aspect while engaging in the business activity permitted under the trade license. The DED prohibits conducting business activity at an unregistered location. Such a violation will attract a penalty of AED 1,000.
8. Work Hour Permit Non-compliance
The private sector companies are allowed to work 8 hours a day or 48 hours a week under normal conditions. The businesses in Dubai need to secure special permission from the DED to work for additional hours. Working for additional hours without permission attracts a fine of AED 1,000 in Dubai. However, it should be noted that during Ramadan the working hours will be cut by 2 hours and the businesses need to comply with this as well.
9. Changing or Adding Activity Without Permission
Choosing the right business activity is a prerequisite for establishing a business in Dubai. The DED allows more than 2,000 activities and the investors need to choose the activities that best fit their business. The companies are allowed to add or change the business activities on their trade license by applying for business activity amendment with the DED. However, amending business activity without permission will attract a penalty of AED 2,000 in Dubai.
10. Failing to Renew Trade License in Time
The companies are prohibited to conduct business when the license issued by the DED expires. The entrepreneurs need to apply for license renewal to continue business activities and also to avoid penalties. Engaging in business activity on an expired license could lead to a fine of AED 5,000 and failing to renew a trade license on time would attract a penalty of AED 250 per month. Consult the PRO services of the top company formation specialists in Dubai to avoid all troubles related to trade license renewal.
Hire the Services of Business Setup Consultants in Dubai
Setting up a business in Dubai mainland is a strategic decision as the foreign entrepreneurs need to have a piece of good knowledge about the local laws and regulations. Many times the process is complex and it is almost impossible for a foreign entrepreneur to have a firm grasp of all the regulations related to running a business in Dubai. Such situations demand the services of a reputed company formation specialist like Jitendra Business Consultants (JBC) who has helped thousands of clients to set up a business in Dubai in compliance with the laws and regulations.
JBC’s core strength is its team of highly qualified business set up consultants who are well-versed in the local laws and regulations. JBC can assist individual entrepreneurs, SMEs or big corporations to establish a company in Dubai without any hassle. JBC can assist the investors in all stages of company formation right from registration to incorporation. Being a one-stop-shop business consultant, JBC also offers other highly needed services like trademark registration, accounting & bookkeeping and VAT services. By hiring the company formation services of JBC, the investors can dodge all the complex procedures of setting up the business and focus on making robust plans for their growth.