Sole establishment vs LLC UAE [2024 Guide]

Dubai is an entrepreneur’s dream. The United Arab Emirates is one of the most business-forward countries in the world, offering unique opportunities for foreign national entrepreneurs and investors to set up the businesses of their dreams.

A sole establishment (also known as a sole proprietorship) is one of the most popular business structures, but you may be wondering what the differences are when compared with an LLC (Limited Liability Company) in the UAE. Don’t worry – Trade License Zone, the business setup experts, will make everything crystal-clear for you.

In this article, we’ll describe the process that streamlines your business setup:

  • UAE sole establishment – What does it mean?
  • Advantages of a sole establishment or proprietorship in the UAE
  • Disadvantages of a sole establishment or proprietorship in the UAE
  • Sole establishment UAE vs LLC UAE – The difference explained
  • Start a sole proprietorship in the UAE – Step-by-Step
  • Working with Trade License Zone

UAE sole establishment – What does it mean?

Sole establishment means one person owns the business with a trade license issued in their name. This type of business setup means that a company or corporate organization cannot own the business. It also means that the owner is personally liable for the business activities – including company liabilities and debts that creditors can claim in compensation.

Foreign nationals wishing to start a sole establishment in the UAE must apply for and hold a professional trade license. A professional trade license is designed for people providing professional services, such as bookkeeping, IT, consulting, accounting, event management, engineering, marketing, legal, and more. A sole establishment cannot do business in import-export, trading, or real estate development in the UAE.

A Local Service Agent (LSA) is also a legal requirement for all sole establishments with foreign national owners operating in the UAE. The role of the LSA is to liaise between the company and the government. Trade License Zone can help you select and appoint a reputable LSA individual or company.

Advantages of a sole establishment or proprietorship in the UAE

Sole establishments in the UAE offer these advantages for foreign nationals:

  1. Full ownership: Foreign nationals have 100% ownership of their business
  2. Profit retention: Sole establishment business owners retain 100% of their profits.
  3. Affordable and fast setup: Sole establishment setup costs are some of the lowest business types in the UAE, and they require no business capital – and they’re the fastest to set up.
  4. No location restrictions: A sole establishment can operate anywhere in the UAE and has no restrictions on office premises locations.

Disadvantages of a sole establishment or proprietorship in the UAE

Sole establishments in the UAE also have a few disadvantages:

  1. Personal liability: As we have already mentioned, a sole establishment means the business owner is personally liable for the business debts and liabilities.
  2. Office space is mandatory: While sole establishments have no location restrictions, this business setup must operate from a registered business location/office space.
  3. Business Liabilities: If you want to sell your sole establishment, some buyers will not want to take on your business’ liabilities and debts, meaning it will be more challenging to sell your sole establishment.

Sole establishment UAE vs LLC UAE – The difference explained

Sole establishments and LLCs are two of the UAE’s most popular business entity structures.

The most critical difference between sole establishments and LLCs is that one person can own sole establishments, while several people or corporate bodies must own an LLC. An individual cannot own an LLC.

Another crucial difference between the two is that while sole establishment owners are personally liable for business debts, LLC owners are not – the liability is limited to the shareholder’s investment in the company’s capital.

LLC business owners are entitled to several visas without restrictions and can purchase real estate without restrictions. Sole establishment business owners cannot make such purchases in the business’s name.

Start a sole proprietorship in the UAE – Step-by-Step

It is faster and more straightforward than you think to start a sole establishment in the UAE, provided you follow the steps in this guide.

Step 1: Partner with Trade License Zone

The first step in starting a sole establishment in the UAE is to partner with Trade License Zone. Our professional team will manage all aspects of the process so you can get trading as soon as possible.

Step 2: Choose your business activities

Every company in the UAE must state their business activities for their trade license application to operate legally in Dubai. Your license enables you to carry out several business activities – but only those listed on your business license.

You can select the appropriate business activities you wish to pursue on Dubai’s Department of Economic Development (DED) website. Failure to list all your business activities on your trading license may result in penalties. Partnering with a company formation expert such as Trade License Zone will ensure that your license application and business activities are aligned.

Step 3: Initial Approval

You must register your business with the DED. For this step, you must submit three trade name options, of which at least one must be approved for your application to progress to the next step. The DED will then issue you with an Initial Approval, meaning they have no objection to your business.

Step 4: Local Service Agent

After you’ve received your Initial Approval from the DED, partnering with a Local Service Agent (LSA) is required. An LSA must be a UAE national or a corporate entity entirely owned by UAE nationals. LSAs do not hold any shares in your sole establishment business. They are also not involved in the day-to-day operations of your business; their role in your business is limited to administrative functions, such as license, visa, and permit applications for which they are paid a set fee.

Step 5: Office premises

Sole establishments legally require an office space. Trade License Zone can help facilitate this step according to your business needs and budget. You must submit the signed tenancy contract to proceed to the next phase of starting a sole establishment in the UAE.

Step 6: Applying for your trade license as a sole establishment

At this stage, you must submit all documentation related to your sole establishment, Initial Approval, company name certificate, and more.

Once the DED approves your application, you will receive a payment voucher to make your payment. Once this has been settled, you’ll be able to collect your trade license for your sole establishment.

Step 7: Applying for your visa

Once you’ve completed the trade license process, you can apply for your UAE residency visa to live and work in Dubai. This step requires a medical test, biometric scanning, and more. Your trade license may entitle you to sponsor the visas of family and staff, depending on the conditions of the trade license.

Working with Trade License Zone

Business setup in the UAE is streamlined when you work with an expert partner such as Trade License Zone. Partnering with Trade License Zone will save you from unnecessary delays or rejections and simplify the entire sole establishment business setup process.

The specialists at Trade License Zone can get started once you provide us with some basic documentation and a little information about the nature of your business. Then, please sit back and let our team take care of the rest. We’ll manage your trade license application, communicate with all relevant local departments and authorities, and report when you’re ready to begin trading. It really is that simple.

Contact us to get a personalized quotation based on your business activity