The most commonly incorporated entity used to conduct commercial activities in Dubai is a Limited Liability Company (LLC) . Being a private company its shares may not be allotted to the general public. However, the partners do benefit from the advantage of having limited liability to the extent of their contribution to the share capital. A Limited Liability Company must have a minimum of two shareholders, with a maximum of 50 shareholders.

The maximum shareholding of the foreign party, should be no more than 49% of the paid up share capital. The Companies Law does, however, permit the profits and losses to be shared in a different ratio to that of the share ownership up to a certain extent. The exception to the rule of a minimum shareholding of 51% for the UAE national party concerns other GCC nationals. In accordance with a UAE Cabinet Resolution, GCC nationals may own all the shares in a UAE-incorporated LLC, provided there are no non-GCC national partners in the company. LLC may be operated under one manager or via a board of directors who would usually appoint a general manager for operational purposes.

In the past, the minimum share capital was fixed in the Companies Law at AED 150,000. However a recent amendment to the Companies Law has relaxed this to abolish the need for a specified minimum share capital, and instead stipulates that the capital should be sufficient for the company’s needs.

Branches and representative offices of foreign companies in the UAE may be 100% foreign-owned, however they must appoint a UAE national individual or a 100% UAE owned company to act as a Local Service Agent, commonly referred to as a “sponsor”. The Local Service Agent’s role is to assist the company in obtaining visas and licenses and generally to liaise with government departments.

A branch of a foreign company may only carry out those activities undertaken by that of its parent and in addition must also seek approval and registration in the Foreign Companies Register maintained at the Ministry of Economy.

Representative offices activities are strictly limited to promoting the services or products of their foreign parent company, and they are not permitted to trade as such in these items. A representative office may not generate any income, nor issue any invoices. This generally mean representative offices act as marketing or administrative centers for the foreign company.

Professional firms may take on the form of sole proprietorships or civil companies. Both of these carry unlimited liability and differ significantly in that respect to the limited liability arrangements described above. A UAE national, or 100% UAE-owned Company, must be appointed as a local service agent, although the national party has no direct involvement in the business and is usually paid a lump sum for performing similar services to a sponsor for a branch office.

As UAE is the leading business center in the region, there are various ways in which foreign companies, or individuals, may establish a legal presence in the country. It is a requirement of all the Emirates in the UAE that in order to conduct any form of commercial activity a license is required. There are three kinds of licenses:

• professional license- appropriate for those activities which are of a professional nature.
• commercial license- which covers trading activities.
• industrial license- for manufacturing or industrial activities.