Located in the Middle East, Abu Dhabi is the capital and the second largest city in the United Arab Emirates. Along with well-known multinational corporations, the offices of the federal government are also situated here.
Although the UAE is rich in oil and gas reserves, the government is now diversifying and investing in sectors such as tourism, retail, industry and real estate. With new reforms in place, the country also offers a favorable environment for startups and new ventures.
So today we’ll take a look at what you need to know about starting a business in Abu Dhabi.
1. Market Research
It’s important to carry out a market research before starting a business. This study helps you decide if the business idea is viable or not.
A market research consists of two parts i.e. the primary research and the secondary research. The primary research studies your potential customers while the secondary research studies information someone else has collected about your customers. Primary research can be carried out via online polls or through telephone interviews. Many companies also use their own sales reports as a source of primary information. Secondary information can be obtained through reports compiled by other organisations and even via blogs written by people working in that particular industry.
There are several firms in Abu Dhabi who can help you in carrying out a market research. Healy Consultants, the Middle East and Africa Monitor and Commit are some of the well-known companies providing these services.
2. Free Zone vs. Onshore
You’ll also have to decide where to set up your venture. You can establish it in the Free Zones or on the mainland.
Abu Dhabi has four free zones i.e. Khalifa Industrial Zone Abu Dhabi, Masdar City free zone and science and Technology Park, Abu Dhabi Airport free zone authority and the Mussafah Industrial area.
The Free Zones cater to companies from specific sectors. This allows them to provide goods and services to one another. Companies in the Free Zones can be completely owned by foreign management. There are no custom duties in these areas. Firms set up here also enjoy the added benefit of zero taxes and zero profit sharing.
The main limitation of incorporating in the Free Zones is that companies are legally bound to operate in that geographical area.
You can also choose to set up your company on the mainland. However, an onshore venture cannot operate without a local partner.
3. Trade License and Local Partner
Every business needs a trade license to operate in the city. There are three main legal structures to choose from i.e. Limited Liability Company (LLC), Representative Office and Foreign Branch Office.
Many startups get an LLC license. These companies also need to engage with an Emirati who acts as their Sponsor. In the case of a Representative Office or Foreign Branch Office, the Emirati or local partner plays the role of a National Service Agent.
The Local Sponsor holds a 51% share in the LLC and is also liable for Labour and Immigration visas. An active sponsor funds his 51% share and also takes 51% of the profits. On the other hand, a nominee sponsor does not fund his 51% share but acts as a silent partner until the foreign party decides to transfer, sell or liquidate the company. The nominee sponsor is also liable for the Labour and Immigration visas and takes a fixed annual fee.
While incorporating an LLC you will need to have a capital of AED. 150,000/-. Even though this requirement was officially removed in 2009, small and medium enterprises still need to show this amount before they can apply for a trade license.
5. Premises and Office Space
All companies need to have an appropriate office space in Abu Dhabi. For example a consultancy firm should be located in a professional building while a trading company should have a warehouse or a store.
You cannot operate your venture from a house because it is not allowed (unless you’re running a beauty salon or a nursery). The authorities will inspect your premises during the incorporation process so you need to make sure that it is large enough for your staff and suitable for your business activities.
FindMyWorkspace.com can help you find offices in Abu Dhabi as well as in other cities across the UAE. Go here and start your search today.