What is the Difference Between Mainland, Freezone, and Offshore Companies?
Are you planning to start up a business in UAE? If yes, you need to understand the basic difference between Mainland, Freezone, and Offshore Companies. Sneak out on the details below to get well-versed with the detailed facts.
How Does Mainland, Freezone, and Offshore Companies Differ?
UAE is becoming a big hub for carrying out a large number of business activities. It keeps track of the business-related policies and essential rules for the startup. Setting up a new enterprise is no joke, and you need to take care of various factors for a successful business endeavor.
There are plenty of startup founders who want to run their businesses successfully. Irrespective of the resources you have, there can be game-changing innovations that can help complete the documentation and other legal procedures. It refers to every aspect related to business operations.
Coming up with a startup business is never easy for anyone. It includes coming up with a business idea to set up the physical office and even establish a specific brand in the market. Although the fundamentals remain, there are changes in the format of business practices depending on the region and laws governing that. The legal Framework of Emirates and UAE highly differ from the other business practices carried out in that region. Considering these aspects, you can begin with a successful startup that can last for a longer time frame.
While you plan to begin any business in the UAE, there are several choices that an entrepreneur needs to make. It includes the choice of correct location along with the company form and structure. Business owners need to enter several contractual arrangements with their respective suppliers and the customers. They can also resolve disputes related to it. With a thorough check on the UAE Legal Framework, the business owners can come up with correct decisions, to begin with, fruitful startups.
Difference Between Mainland, Freezone and Offshore Companies
Are you a part of any business startup in the UAE? Then the primary decision you need to take is to choose amongst the Mainland, Free Zone entity, and an Offshore company. It varies on several factors like the targeted customers and the company requirements. Let’s sneak out on all the options here:
Entrepreneurs who are willing to carry out trade within the local markets of UAE often go for Mainland companies. With respect to the Federal Law No.2 from the year 2015 for the commercial companies, the Mainland company can seek establishment in the UAE as:
- Joint Liability Company
- Limited Liability Co
- Simple Commandite Co.
- Public Joint Stick Co.
- Private Joint Stock Co
There are also specific laws with specific requirements related to the company shareholders, capital levels, directors, and other incorporation procedures. In November 2020, major announcement was made by the Presidential Decree to make changes in the ownership rules for the Mainland Companies LLC. From June 1, all Commercial LLC firms of the Mainland Companies received allowance for 100% foreign ownership. Before that, the companies required shareholdings from the UAE nationals. Mainland companies in UAE now allow 100% Foreign ownership for the investors. It means you no longer need to seek Local investors to start up your business activities in Dubai. A few activities get exercised mainly by the UAE nationals.
Few agreements can also get customized to gain more profits with the expat partner. You also need to remember that there is a compulsory existence for the physical office as a part of the Mainland Companies.
Free Zone Companies
It is the following type of establishment that entrepreneurs in the UAE can opt for. The best part about Free Zone establishments is that there is no requirement for the nationals of UAE to partner with you. Its purpose is to pool in a large number of foreign investments so that the Free Zone companies can own 100% stakes in the companies. To seek its complete ownership, the business owners can choose free zone locations.
There are many activities that entrepreneurs can perform here. It comprises distributorship, warehousing, trading, and manufacturing. Apart from this, there are also an array of other activities that people can perform in such zones. The best thing is you can stay exempted from the duties levied on export and import of materials. It does not include the exemption of exports for the mainland UAE.
A specific regulatory authority governs every Free Zone and administers entities as per the norms and regulations of the free zones. The majority of these free zones have an industry focus and tailored for specific free zones. More and more free zones are emerging in the UAE, such as:
- Dubai International Financial Centre (DIFC)
- Jebel Ali Free Zone (JAFZA)
- Khalifa Industrial Zone Abu Dhabi (KIZAD)
- Dubai Creative Clusters (DCC, DIC, DMC.)
- Sharjah International Airport Free Zone (SAIF Zone)
- Ajman Free Zone (AFZ)
- Ras Al Khaimah Free Trade Zone (RAK FTZ)
The next alternative for starting up with businesses in UAE is the offshore companies. It is the right option if you are in no mood to start up with a physical office. For this, you do not have to give any residency visas. Besides, all activities related to the business work from outside of UAE. Offshore Companies can continue with the business operations from other nations but cannot avail permission to commence business from within the country. There is also an option to do interaction with the local banks and have their legal representatives.
Most Offshore companies in the UAE have registration and physical set up in the free zones only. There are mainly two free zones in UAE where such offshore company establishments can take place:
- JAFZA (Jebel Ali Free Zone Authority)
- RAKICC (Ras Al Khaimah International Corporate Centre)
Now you have a clear picture of the difference between mainland, free zone, and offshore companies. In terms of business activities, the Mainland company is a good idea as it helps business owners to commence professional, industrial, and commercial activities over there. In the Free zone areas, foreign investors get the leverage of trading on an international level. There are also differences in the ownership, workspace, visas, and approval for the same. Seek the consultant help to know all about its working. You must check out the individual facts before investing in any enterprise in UAE. Seeking the consultant’s assistance is also a great idea to avoid any glitches or confusion with respect to the business entity.
Q. What is the common difference in FZE and FZCO?
A. There is just a single shareholder for the Free Zone Establishment, and its work is similar to the limited liability company. In a free zone company, there must be a minimum of 2 shareholders
Q. How Do Freezone and LLC Differs?
A. Frrezone Entities have a specific amount of Visa limitations that come in 1-6 visa packages. LLC refers to the electronic quota by the Ministry of Labor (MOL) as per the specific Visa eligibility. For any further requirements, it is a great idea to get physical space for rent in certain free zones.
Q. What Does Free Zone Companies in Dubai Mean?
A. The Free Zone Company is an organization that comes under the special jurisdiction of the specific Emirates. At present, there are 40 Free Zones in the whole UAE, and there are regulations for the Government body known as the Free Zone Authority