How to Start Your Business in a Free Zone
Are you interested in starting a business in a free zone? Having trouble finding general information on where to start? If so, this blog post is for you. We will discuss the basics of free zones, as well as details on how to start a business in a free zone. So whether you’re just starting and have questions about what type of company to form or are already registered and looking for help with trade names or other formalities – read on!
The Basics of Free Zones
What is a Free Zone?
Free zones (also known as free economic zones or free economic territories) are a type of special economic zone designated by various countries’ trade and commerce administrations. The term refers to areas where businesses are taxed very lightly – or not at all – to stimulate economic activity.
Mainland vs Free Zone
To better understand a free zone, we need to cover the other side of the coin: the mainland. Around the world, most business is conducted on the mainland. What’s a mainland? Put simply, a mainland company is an onshore company that does not face trade restrictions but has to pay customs and taxes in return. In Dubai, mainland companies receive their licence from the Department of Economic Development (DED).
Free Zones in Dubai
There are several well-known free zones in Dubai where businesses can take advantage of specific benefits. These include 0% income tax, 0% customs duty, and 100% foreign ownership without needing a local partner. Businesses in free zones can trade within and outside their own free zone, but are prohibited from trading directly with customers in Dubai or the UAE mainland.
Some examples of free zones in Dubai and across the UAE include Dubai Media City, IFZA, and Ras Al Khaimah Economic Zone. A spot like Souk Al Marfa is not a free zone; however, it does offer the same opportunities and flexibility that one of the many free zones in the UAE provides.
Now that we’ve covered the basics of a free zone, here are the steps to open your own free zone business in Dubai.
How to Start a Business in a Free Zone
Determine the Company Type (Legal Entity)
While looking into free zones you want to establish your business in, it’s also necessary to decide the type of legal entity your business would take up. In a free zone, you can set up one of two types of companies:
- Free Zone Limited Liability Company (FZ LLC) and Free Zone Company (FZ Co.)
- Free Zone Establishment (FZE)
The differences are in two factors: the number of shareholders, and whether the shareholder is an individual or a legal person (a legal entity). Remember that different free zones might not register both types of companies. It’s important to confirm with the free zone authority of your choice on the kind of company they can register, primarily if they focus on a specific sector (media vs technology, for example).
If you’re establishing the branch office of a foreign company, there is a bit more flexibility in the process, as free zones primarily cater towards these entities.
Choose a Trade Name
In parallel to deciding the type of legal entity your business should take, or afterwards, you should choose a trade name. This is important, as a trade name is the name your business will be identified and advertised as. It cannot be the same or similar to an existing company name.
To avoid any issues, check with the respective free zone authority – or the DED – about permitted trade names and whether the name of your choice has already been registered.
Apply for a Business Licence
Next, you’ll have to apply for a business licence. This is because certain free zones may or may not offer the licence of your choice. The type of licence you need to apply for depends on your business and the activities you wish to conduct. Obtaining your licence will take less than a week and needs to be renewed yearly.
Find an Office Space
As a part of your registration, most free zones require a physical office space. Depending on your business, you might get a Flexi-desk, a shared workspace, or a private office (check out spots like Souk Al Marfa, where you can easily build your business). There are plenty of spaces and sites across Dubai where you can establish and grow at.
Submit Your Documents for Pre-Approval
Depending on the free zone you’d like to enter, review the documents required for pre-approval. Once you have all the necessary documents for pre-approval, you can submit them to the free zone authority.
Register Your Business, and Get Your Licence
And there you have it! Once you follow this general framework for registering your business in a free zone, the rest is smooth sailing. Setting up a business in a free zone is more straightforward than on a mainland. This is because free zone authorities require minimum paperwork and take a shorter duration for processing and approval.
Where to Start Your Free Zone Business?
If you’re seeking an authentic environment with plenty of footfall, Souk Al Marfa is perfect for you. Known as the largest market in the heart of Dubai, located on the Dubai creek, Souk Al Marfa is the leading provider of worldwide smart end-to-end supply chain logistics.
Situated north of Dubai on Dubai Islands, Souk Al Marfa is close to the Dubai airport, Sharjah, and the Northern Emirates, making it the ideal location for those registering in free zones in the area to set up base.
Besides its strategic location (and wonderful seaside view), Souk Al Marfa provides affordable growth opportunities to traders. With over 7,000 shops and several benefits, including 100% foreign ownership of a Trade License, repatriation of capital and profit, logistical ease, access to essential amenities, and minimal paperwork. Any entrepreneur can kickstart their free zone business in Dubai today.