Dubai’s favorable business climate for investors remains unchanged, thus attracting more businessmen from all over the world. To the surprise of many, most people think that starting up a business in this busy city is very costly. However, there are various methods to effectively establish your business with little capital investment. In this guide, you will discover exactly what steps need to be taken to establish a low cost business set up in Dubai in 2024 without spending much money.

Step 1: Choose Your Business Activity

The first important factor to consider when setting up your business in Dubai is the nature of the business you want to undertake. The good news is that Dubai permits many kinds of activities; however, you have to ensure that the activity you select complies with the requirements of the Free Zone or Mainland law.

Common low-cost business activities include:

  • E-commerce (online selling)
  • Consultancy services
  • Freelancing
  • Import/export businesses

Depending on the activity you opt for, you will be issued a different type of license, and you will be allowed to operate in a specific area only.

Step 2: Select the Jurisdiction (Mainland vs. Free Zone)

In Dubai, there are two primary business setup options: Mainland and Free Zones. In terms of cost, Free Zones are usually cheaper than other options because their setup fees are relatively low, and formalities are less complicated.

  • Mainland: It is possible to conduct business not only within the UAE but also globally. However, Mainland setups are generally more expensive at the start (with local sponsors needed in some cases).
  • Free Zones: These regions are created to encourage direct investment from foreigners, with no taxes and complex procedures on licenses. Stocks in Free Zones are restricted to selling in the Free Zone or across the globe if a local distributor is not employed. Some of the low-cost Free Zones are IFZA (International Free Zone Authority), Dubai South, and RAKEZ, which offer affordable packages suitable for startups looking for a low cost business set up in Dubai.

Step 3: Choose the Right Free Zone

Dubai has over 30 Free Zones, separated by the kind of industries they cater to. Some of the most affordable Free Zones in 2024 are:

  • IFZA (International Free Zone Authority): Cheaper to set up than others, especially with the monthly flexible packages. The license fees range from AED 11,000 and include various business activities.
  • Dubai South: Provides affordable solutions for business incorporation, focusing on transport, trade, and aerospace industries.
  • RAKEZ (Ras Al Khaimah Economic Zone): Although established in Ras Al Khaimah, RAKEZ is cost-effective and offers numerous activities at reasonable rates.

Step 4: Choose a Business Structure

This brief discusses the distinct forms of business structures and the steps that a businessperson should take in choosing the correct legal framework for their enterprise. The most common types for small businesses are:

  • Sole Proprietorship: Owned and operated by a single person, suitable for freelancers and consultants.
  • Limited Liability Company (LLC): The most preferred structure for SMEs. It supports many shareholders but costs a bit more to register compared to a sole trader.
  • Branch Office: May be established by companies that already have a presence in another country, with significantly lower costs than forming an LLC.

Step 5: Apply for a Trade License

The next step after selecting your business activity, jurisdiction, and legal structure is applying for a trade license. The type of license depends on your business activity:

  • Commercial License: For trading activities involving the purchase and sale of goods in a specific region.
  • Professional License: For services, consultancy, or freelancing.
  • Industrial License: For manufacturing products or use in production processes.

If you want to set up a business in a Free Zone, the application can be made directly through the Free Zone authority’s website or with the assistance of business setup consultants.

Step 6: Decide on an Office Space

Even if you plan to establish a company with minimal capital investment, you will require a registered office address. Free Zones provide flexible options such as:

  • Virtual Office: Most suitable for companies and self-employed professionals. This saves costs by offering a registered address without the need to own or rent an office building.
  • Shared Office: Virtual office spaces where you can reserve a working desk or an office for a relatively small fee compared to conventional commercial property rentals.
  • Flexi-desk: A plan that allows access to a shared office whenever needed, as well as business address and meeting room privileges.

Opting for a virtual office space or a flexi-desk significantly reduces overhead costs, making it easier to achieve a low cost business set up in Dubai.

Step 7: Obtain Necessary Approvals

In some cases, due to the nature of business activities, there may be additional official permissions from the government. For example, media businesses must obtain permission from the National Media Council (NMC). Organizations like financial or consultancy firms might need to deal with approvals from the Dubai Financial Services Authority (DFSA).

Your Free Zone authority will advise you on whether any external approvals are necessary.

Step 8: Open a Corporate Bank Account

Once you obtain your trade license, the next procedure is to open a corporate bank account. Some local banks have begun to ease their procedures for account opening for Free Zone businesses, although the process might sometimes take time.

You will typically need the following documents:

  • Your trade license
  • Shareholder passport copies
  • Proof of residency in the UAE
  • Formation documents of the company, like the Memorandum of Association
  • Preparing all the documents in advance reduces the time spent.

Step 9: Apply for Visas

Once your business is licensed, you can apply for residence visas for yourself, your employees, and any dependents that may accompany you. The number of visas allowed will depend on the office size and the Free Zone regulations. The visa application process generally includes:

  • Entry permit application
  • Medical fitness test
  • Emirates ID application
  • To reduce costs on visas, you could initially employ fewer employees and expand as your business grows.

Step 10: Consider Corporate Taxes and Value-Added Tax

Dubai’s tax efficiency is a significant advantage. The new 9% corporate tax commences in 2024, with only businesses earning profits of AED 375,000 or less excluded from this tax. For small businesses, this means you can operate without incurring taxes until your profits reach a certain threshold. Additionally, the 5% VAT is one of the lowest in the region, ensuring low operation costs.

Step 11: Renew Your License Annually

All business licenses in Dubai must be renewed yearly. This process is straightforward but requires good planning to avoid penalties. Most Free Zones offer special renewal rates that are cheaper if you remain within the Free Zone. Keep in mind that renewal fees are usually lower than initial setup costs. Different agreements specify the renewal of a virtual office or flexi-desk if utilized.

By following these steps, you can establish a low cost business set up in Dubaieffectively, taking advantage of its friendly business climate. Dubai remains one of the most suitable places for investing in business due to its low taxes, well-developed infrastructure, and favorable economic climate. With careful planning, you can embark on your business journey in 2024 successfully.

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