What is a Free Zone in Dubai? How to Start a Business in Dubai Free Zone?

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A Dubai Free Zone is a special economic zone where startups and businesses operate at higher level. These free zones have special privileges over other business avenues or any other normal place of business. Such privileges are rendered in order to boost business growth, boost the investor confidence, attract FDI, help startups grow and to create more job finally pushing the economic growth of a country.

There are many free zones operating in Dubai that are aimed to provide some opportunities and advantages to new businesses. In Dubai, free zones are called Free Trade Zones and there are 30 such FTZs operating in the country with different specialties.

These FTZs are basically made in order to facilitate business and investment opportunities to expatriate investors who get concession of taxation, methods of incorporating business, custom duty concession and ease in cross border trade.

There are also many restrictions which are lifted from the businesses that are operating in FTZs. The Free Zone Authority offers licenses to open a business in that zone. All such FTZs which are around 30 in number offer different kinds of business opportunities for different kinds of business sectors.

Now if you are interested in starting business in a free zone then you must be aware about the procedure which is required to open any of the businesses in any of the free zones especially designated for it.

Let us be very clear on the basics that are required to start a business in Dubai free Zone. It is obviously important that you hire an advisor in order to incorporate your business but this article will serve the basic purpose of understanding Free Zones and their operations.

Starting a Business in Dubai Free Zone:

It is evident that know will have to do some basic paper work for starting your business in free zone. You will require to take some key steps which are as following:

  • Choosing a legal entity for your business
  • Getting a trade name
  • Applying for license and other such permissions
  • Get other types of approvals from authority
  • Choosing an office space
  • Getting financed for your business
  • Opening your bank account and getting ready with all such documents

Apart from these, you will also require help for everyday work while incorporating your business. For this you can take assistance from a legal and business advisor who will help you out during hassle and while dealing with authorities. It will also help you in reducing wastage of time in things which could be done efficiently.

Choosing a Legal Entity:

While doing business in free zone you would be required to choose a legal entity for your business. Unlike normal business entity, a free zone offers different types of business entities. But there are few which are quite common. They are;

  • Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
  • Free Zone Establishment (FZE)

Since there are more than 30 free zones, each of them have different ways of incorporating business entities. It also depends upon number of shareholders, percentage of shares they hold and also whether the shareholders are normal persons or legal persons. According to Wolf business setup consultant, you need to get details related to legal entity for each free zones or at least in the zone in which you are interested. You can take help from your advisors.

Choosing your Trade Name and Business Specialization:

Choosing your trade name isn’t that tough but you need to take care regarding intellectual property rights. For this your legal advisor would come to your rescue. It is obvious that your business will be specific. Even before you have started your business you would have made your mind regarding what kind of business would be profitable for you.

Related article:- 20 best business ideas in Dubai

A general feasibility analysis will help you find that out which will contain every possible details related to your business. Capital investment, return on investment, time period, etc. all can be found out doing a small analysis. After it is done you should go for creating a business plan that will be the founding stone of your business.

Since you are investing in a foreign country, be specific in everything and always plan for your venture so that you don’t get into trouble.

Getting Licenses and Approvals:

Free zones operate on their own terms and conditions and thus avoid technicalities and other complex process. For specific business types there are specific free zones. For example, if you incorporating a business for manufacturing of motor vehicles then you will have to choose certain free zones.

For services you have different free zones. You need to do some research on this in order to find the appropriate free zone for yourself. There are around 3000 types of businesses that can be incorporated in different free zones.

So if you have found the specific free zone for your business you will require to take some permissions and approvals from the relevant authority. You may also require to take license. Some of them are:

  • Commercial and Trade
  • Consultancy and Services
  • Media
  • E-commerce
  • Industrial
  • Educational
  • Freelancer
  • Warehousing and
  • Manufacturing

For each such business types you require a license and some approvals and for this you need to furnish documents which are asked. Free zones operate on their own rules and thus have simple requirements which can be furnished easily.

You will also need office space for your business. Based on your requirement and business and also your capital investment you can choose your business space. You can rent or own your office space. For this you need to be an incorporated business duly registered with the concerned free zone.

Initial Approval of Documents and Requirements:

For incorporating your business you will require some set of documents. These documents call for visa details, investment details, identity, business type, objective, business plan, etc. Here is a details list of required documents.

  • Duly Filled application form
  • Your business plan
  • Copy of existing trade in case you have other businesses operating in UAE.
  • Signature of shareholders, Managing directors and appointed managers
  • Colored photograph of the shareholders, directors and managers
  • NOC from current sponsors if you are an individual
  • 2 years audited report of your corporation and bank statement
  • Unit title deed
  • Letter of intent
  • Registry identification code form for manager/director

In case of freelancers, the document requirement is quite less. They will need to submit:

  • Application form
  • Bank statement
  • CV and
  • RIC form

Second Step and Incorporation of your Business:

As you get approval of your initial application, you will need to complete the second step as well. Here is what you need to do.

  • Completed application for registration
  • Specimen signature of managing director
  • Photograph in colored against white background of managing director
  • Memorandum and articles of association
  • Power of attorney given to manager or director
  • Board resolution appointing director or manager
  • Share capital information

All such documents shall be notarized and duly attested at the time of submission. You will also need to pay the required fees for registration and also for obtaining various types of licenses. Each free zone has different fee structure.

License and Visa Process:

The concerned authorities will prepare the lease agreement. After that trade license will be issued. Later on visa process will start. One should note that certain permissions are granted by external authorities and it may take some time and can also be beyond the control of zonal authority.

Some Important Points to Remember:

The basic aim of such free zones was to create a business friendly environment that also reduces the complexity of starting a business. A hassle free business startup is well appreciated when it also has that simple procedure for closing down a business. Insolvency and bankruptcy are common words we hear in business world.

Free zones thus provide mechanism that is friendly to businesses and makes entry and exit quite easy. It also has simple rules and regulations for opening and running a business. If you are interest to start, you can just register your business online by filling the application form and uploading the various required documents.

Starting business in such free zones offer various advantages. Some of them are:

  • Exemptions on tax related to export and import
  • Low rates of custom while exporting and importing certain goods that the free zone offers
  • Reduction in income tax rate
  • Easy way to get bank loans with lower interest rates
  • Office space can be easily managed at lower cost
  • Great connectivity with the rest of the city
  • Such free zones provide incentives to business. They by various programs support startups in building up their own base.
  • Lastly, the business environment in such free zones is business friendly.

Authorities too are business friendly and always cooperate with startups. Operating in such free zones adds up chance of success and it also provides security in business. Product and service specific free zones add advantages as they push specific businesses thus ensuring maximum chance of success. Before you start your business in such free zones, always do ample research and take consultation before you set up your foot.

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