How to avoid mistakes during opening a business in the UAE?
It is commonly believed that to open a business in the Emirates, all one needs is to be in the right place at the right time and stand out. Reality is a lot more nuanced than that. We conducted our own analysis of hundreds of cases and figured out the most common mistakes in starting a business which we now share with you.
How to avoid mistakes during opening a business in the UAE?
How to avoid mistakes during opening a business in the UAE?
It is commonly believed that to open a business in the Emirates, all one needs is to be in the right place at the right time and stand out. Reality is a lot more nuanced than that. We conducted our own analysis of hundreds of cases and figured out the most common mistakes in starting a business which we now share with you.
Mistakes in opening a business in the UAE
Lack of understanding of the market and the needs of the clients
Before starting a business in Dubai one should take their time to research the market. If a company is established in a free economic zone, it should primarily target international markets, with a focus on European consumers. If the local company is started, then it should target the domestic consumer. Ignoring that difference may lead to your product or service failing due to lack of demand.
Wrong choice of location for the company
There are three types of companies in the Emirates: Freezone, local and offshore companies. Each of them has their own advantages and limitations.
For example, opening a Freezone company in the UAE provides the entrepreneurs with quick registration, support of certain economic sectors and tax exemptions. However, business activities may only be conducted within the free zone or internationally. Registering a local company gives the right to work all across the UAE and beyond.
Excessive caution and the wait approach
Business landscape of the UAE is constantly changing. New legislation, economic trends and consumer preferences have significant effects on business activities. In order not to be replaced by more pro-active and confident entrepreneurs you must be able to quickly adapt to changes and react to new challenges in a timely manner. Flexibility and mobility would help your business stay competitive.
Wrong type of license
Starting or relocating business to Dubai requires an obligatory commercial license. Sometimes foreign investors choose the wrong type of license, due to either ignorance or desire to save some money. But that choice only leads to large fines and other strict punishments by the supervisory authorities.
Mistakes in hiring
Every person hired by a UAE company must have a resident visa and a labor card. If the visa was provided by another employer, the new one must get a letter of consent to hire the employee. Failing to follow the law leads to the company being fined.
Bad choice of office or cheaping out on the office space
In order to register the company on the mainland, it must have a physical address. However, opening a business in the UAE free zone allows for a virtual office. Often the entrepreneurs use fake premises lease agreements to save time and money. However, if that comes to light, one might find it hard to open bank accounts, communicate with the migration agencies and MoHRE (Ministry of Human Resources and Emiratisation).
Issues with opening a bank account
In order to register a company in Dubai one must open a bank account. In this process all the required information must be provided, and the paperwork must be filled in correctly. Potential account owners must confirm their reliability and income sources, remove those partners and contractors that find themselves under sanctions or have business in the jurisdictions that are considered unfavorable by the Emirates. Otherwise their application to open a bank account will be denied.
Before starting a business in Dubai one should take their time to research the market. If a company is established in a free economic zone, it should primarily target international markets, with a focus on European consumers. If the local company is started, then it should target the domestic consumer. Ignoring that difference may lead to your product or service failing due to lack of demand.
Wrong choice of location for the company
There are three types of companies in the Emirates: Freezone, local and offshore companies. Each of them has their own advantages and limitations.
For example, opening a Freezone company in the UAE provides the entrepreneurs with quick registration, support of certain economic sectors and tax exemptions. However, business activities may only be conducted within the free zone or internationally. Registering a local company gives the right to work all across the UAE and beyond.
Excessive caution and the wait approach
Business landscape of the UAE is constantly changing. New legislation, economic trends and consumer preferences have significant effects on business activities. In order not to be replaced by more pro-active and confident entrepreneurs you must be able to quickly adapt to changes and react to new challenges in a timely manner. Flexibility and mobility would help your business stay competitive.
Wrong type of license
Starting or relocating business to Dubai requires an obligatory commercial license. Sometimes foreign investors choose the wrong type of license, due to either ignorance or desire to save some money. But that choice only leads to large fines and other strict punishments by the supervisory authorities.
Mistakes in hiring
Every person hired by a UAE company must have a resident visa and a labor card. If the visa was provided by another employer, the new one must get a letter of consent to hire the employee. Failing to follow the law leads to the company being fined.
Bad choice of office or cheaping out on the office space
In order to register the company on the mainland, it must have a physical address. However, opening a business in the UAE free zone allows for a virtual office. Often the entrepreneurs use fake premises lease agreements to save time and money. However, if that comes to light, one might find it hard to open bank accounts, communicate with the migration agencies and MoHRE (Ministry of Human Resources and Emiratisation).
Issues with opening a bank account
In order to register a company in Dubai one must open a bank account. In this process all the required information must be provided, and the paperwork must be filled in correctly. Potential account owners must confirm their reliability and income sources, remove those partners and contractors that find themselves under sanctions or have business in the jurisdictions that are considered unfavorable by the Emirates. Otherwise their application to open a bank account will be denied.
15.11.2024
Stablegrowz: consulting on opening a business in the UAE
Opening a company in the UAE is a great opportunity to bring the most ambitious business ideas into life. But it’s important to keep the potential mistakes and issues that might block that path in mind. In order to avoid them and get professional assistance you can make an appointment for free consultation from the Stablegrowz experts. Our company is a №1 Dubai business consultant, and we offer a wide variety of services for startups and existing companies.
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