Mainland Company
Mainland company refers to a business entity that operates within the boundaries of the local jurisdiction and is subject to the laws and regulations of that jurisdiction. It is commonly known as an onshore company. Unlike free zone companies, which are established in designated free zones with their own regulations and benefits, mainland companies have broader access to the local market and can trade with both local and international customers.
Setting up a mainland company in the UAE involves following certain procedures and meeting specific requirements. Here is an overview of how it works:
- Business Activities: Determine the nature of your business activities and ensure they are permitted within the UAE mainland. Certain activities may require special licenses or approvals from relevant government authorities.
- Local Sponsorship: Even though you may hold 100% ownership of a mainland company, Establishing a mainland company with certain business activities in the UAE still requires a local sponsor who is a UAE national or a UAE-owned company. For such business licences the local sponsor holds a minimum of 51% ownership in the company. This sponsorship arrangement is mandated by the UAE Commercial Companies Law.
- Choosing a Legal Structure: Select a legal structure that suits your business needs. The most common types of legal structures for mainland companies are Limited Liability Company (LLC) and Sole Proprietorship. An LLC is the preferred option for most businesses, as it offers more flexibility and protection for foreign investors.
- Trade Name and Initial Approval: Choose a unique trade name for your company and seek initial approval from the Department of Economic Development (DED) in the respective emirate. This step ensures that the proposed trade name is not already registered and complies with the local regulations.
- Memorandum of Association (MOA): Prepare the Memorandum of Association, which outlines the company’s activities, ownership structure, and other key details. This document should be drafted in Arabic and must be notarized by a notary public.
- Office Space: Secure an office space that meets the requirements set by the DED. The office should be suitable for the intended business activities and must comply with local regulations.
- Licensing and Approvals: Obtain the necessary licenses and approvals from relevant government authorities, such as the DED, Ministry of Economy, and any specific industry regulators. The requirements may vary based on the nature of your business activities.
- Registration and Trade License: Complete the company registration process with the DED by submitting the required documents, including the MOA, lease agreement, and other supporting documents. Once approved, you will receive a trade license, which allows you to legally operate your business activities.
- Visa and Labour Approvals: As an employer, you will need to apply for employee visas and labour approvals through the Ministry of Human Resources and Emiratisation (MOHRE). This process involves fulfilling certain requirements, such as providing employment contracts, medical tests, and relevant documentation for each employee.
- Ongoing Compliance: After the establishment of the mainland company, you must comply with the ongoing regulatory and legal requirements. This includes maintaining proper accounting records, renewing licenses, filing annual financial statements, and adhering to labour laws and other regulations.
It is important to note that specific procedures and requirements may vary slightly between different emirates within the UAE. Consulting with Inchub professionals to ensure compliance with all the necessary procedures and regulations when establishing a mainland company in the UAE.
Important Facts on the Mainland company
Local Sponsorship
Even though you may hold 100% ownership of a mainland company, Establishing a mainland company with certain trading activities in the UAE still requires a local sponsor who is a UAE national or a UAE-owned company. For such business licences the local sponsor holds a minimum of 51% ownership in the company. On the other hand for all professional activities it is mandatory to have a local service agent (a UAE national or a UAE-owned company). However this local service agent doesn’t hold any shares or ownership in the company. This sponsorship arrangement is mandated by the UAE Commercial Companies Law.
Access to Local Market
Mainland companies have broader access to the local market and can trade with both local and international customers. They can freely conduct business activities within the UAE mainland without restrictions.
Trade License Flexibility
Mainland companies can obtain different types of trade licenses, depending on their business activities. The licenses can be for trading, professional services, industrial activities, tourism, and more. Each license has specific requirements and fees.
Diverse Business Activities
Mainland companies can engage in a wide range of business activities, including commercial, industrial, professional, and service-oriented activities. The UAE government encourages economic diversification and supports various sectors.
No Geographic Limitations
Unlike free zone companies, mainland companies are not limited to a specific geographic area or free zone. They can set up their offices and operate in any location within the emirate where they are registered.
Flexibility in Hiring
Mainland companies have more flexibility in hiring employees compared to free zone companies. They can hire employees from the local market, as well as from international talent pools. There are no restrictions on the number of employees a mainland company can hire.
Flexibility in Office Locations
Mainland companies have the freedom to choose their office locations within the emirate where they are registered. They can select areas that suit their business needs, such as commercial districts or industrial zones.
Local Sponsor/Local Service Agent’s Role
The local sponsor’s role is primarily to fulfill legal requirements and represent the company with government authorities. However, it’s important to note that the local sponsor does not have direct involvement in the day-to-day operations or management of the company.
Compliance with Local Laws
Mainland companies must comply with UAE federal and local laws, including labor laws, taxation requirements, and other regulations. They are subject to inspections and audits by relevant authorities to ensure adherence to legal obligations.
Who should consider setting up a company in Mainland?
Remember to review the specific naming guidelines and regulations of the emirate where you plan to establish your mainland company, as there may be slight variations. Following these guidelines will help you choose a suitable and compliant name for your company, enhancing its visibility and reputation in the market.
Setting up a company in the mainland of the United Arab Emirates (UAE) can be suitable for various types of businesses and individuals. Here are some situations where establishing a mainland company is often considered
Local Market Focus
If your business primarily targets the local UAE market, a mainland company is a suitable choice. Mainland companies have broader access to the local market and can engage in business activities throughout the emirate where they are registered. This is particularly advantageous if your business relies on local customers, suppliers, or partnerships.
Retail and Trading Businesses
Mainland companies are ideal for retail and trading businesses that focus on local distribution, wholesale, or retail operations within the UAE. Setting up a mainland company allows you to easily access and engage with the local market and take advantage of the country’s strong consumer base.
Professional Practices
Mainland companies are suitable for professionals, such as doctors, lawyers, architects, engineers, and other licensed practitioners who want to establish their practices in the UAE. Mainland companies allow them to directly provide their services to local clients and establish professional relationships within the local community.
Employment Flexibility
Mainland companies offer more flexibility in terms of hiring employees. They have the ability to hire both local and international employees without limitations on the number of hires. This is beneficial for businesses that require a diverse and skilled workforce.
Service-Based Businesses
Mainland companies are well-suited for service-based businesses that provide professional services such as consulting, legal, accounting, marketing, engineering, and other similar services. These businesses can establish a mainland company to directly cater to clients in the UAE.
Manufacturing and Industrial Operations
Mainland companies are preferred for manufacturing and industrial businesses that require large-scale operations, access to specialised infrastructure, and proximity to transportation networks. Mainland zones offer comprehensive facilities and support services for such industries.
Access to Government Contracts
Mainland companies often have an advantage in bidding for government contracts and participating in public tenders. Certain government contracts are exclusively open to mainland companies, providing opportunities for businesses seeking government projects.
Branch or Representative Offices
Companies wishing to establish branch offices or representative offices in the UAE may consider setting up a mainland company. This allows them to have a physical presence and engage in specific activities within the UAE mainland.
It’s important to note that the suitability of establishing a mainland company depends on the specific needs and objectives of your business. It’s advisable to consult with us assess your business requirements and guide you on the most appropriate setup option within the UAE.
What are the advantages & Disadvantages setting up company in Mainland
Advantages
1. Access to Local Market. One of the primary advantages of a mainland company is its unrestricted access to the local UAE market. You can conduct business with both local and international customers throughout the emirate where your company is registered.
2. Broad Business Activities. Mainland companies have the flexibility to engage in a wide range of business activities, including commercial, industrial, professional, and service-oriented activities. This allows for diversification and expansion opportunities.
3. Government Contracts. Mainland companies have better access to government contracts and public tenders. Many government projects are exclusively open to mainland companies, providing potential opportunities for business growth.
4. Local Presence and Reputation. A mainland company provides a local presence, which can enhance your company’s reputation and credibility among local clients, partners, and suppliers. It demonstrates your commitment to the local market.
5. Flexibility in Office Locations. Mainland companies have the freedom to choose their office locations within the emirate where they are registered. This allows you to strategically position your business in areas that align with your target market or industry.
Disadvantages
1. Higher Setup and Operating Costs. Compared to free zones, mainland company setup and operating costs can be relatively higher. There are various fees, including licensing fees, visa fees, and office rent expenses. Additionally, the requirement to lease office space can increase initial expenses.
2. Potential Cultural and Language Differences. Operating a mainland company in the UAE mainland may involve dealing with cultural and language differences. It is important to understand and adapt to local customs, business practices, and regulations.
3. Compliance and Regulations. Mainland companies are subject to UAE federal and local laws, which may involve complex compliance requirements. This includes maintaining proper accounting records, adhering to labour laws, filing annual financial statements, and complying with taxation regulations.
4. Potential Competition. Setting up a mainland company exposes you to a potentially higher level of competition, as there are more businesses operating in the local market. This requires careful market analysis and strategic planning to differentiate your company and attract customers.
5. Limited Tax Benefits. While mainland companies enjoy access to the local market, they may have limited tax benefits compared to free zone companies. Mainland companies are subject to corporate tax and may also have Value Added Tax (VAT) obligations.
It’s crucial to carefully consider these advantages and disadvantages in relation to your specific business needs, industry, target market, and long-term objectives. Our experts can provide valuable guidance in making an informed decision about setting up a Mainland Company in the UAE.
Local sponsor or Local Service Agent is a must to setup mainland company?
It is not mandatory to have a local sponsor or local agent to set up a company in the mainland of the United Arab Emirates (UAE). However, it’s important to note that this depends on specific business activities and ownership structures. Here are some scenarios where a local sponsor or local agent may not be required
Professional and Consulting Activities
Certain professional activities, such as legal, accounting, engineering, and consultancy services, may not require a local sponsor or local agent. In these cases, the company can be 100% owned by foreign shareholders, known as a “professional license.”
Branch of a Foreign Company
If you are establishing a branch of a foreign company in the UAE mainland, a local sponsor or local agent may not be required. The foreign company acts as the parent company, and the branch operates under its name and legal structure.
UAE National as a Partner
In some cases, if a UAE national or a UAE-owned company becomes a partner in the mainland company with a shareholding of at least 51%, a local sponsor or local agent may not be necessary.
It’s important to carefully review the regulations and requirements of the specific emirate where you plan to establish your mainland company. The rules can vary slightly between emirates, and certain activities may have different ownership requirements. Contact us to provide accurate guidance based on your specific business activities and requirements.
Legal types available in the mainland company
In the mainland of the United Arab Emirates (UAE), there are several legal forms available for setting up a company. The specific legal forms may vary slightly between different emirates, but here is a list of common legal forms for mainland companies
Limited Liability Company (LLC)
The LLC is one of the most common legal forms in the UAE mainland. It requires a minimum of two shareholders and allows for the flexibility of profit distribution and management structure.
Sole Establishment
A sole establishment is a legal form where a single individual owns and operates the business. The owner is fully responsible for all aspects of the company and its liabilities.
Civil Company
A civil company is typically used for professional activities such as legal, accounting, engineering, consultancy, and other similar services. It involves partnerships between professionals who share the profits and liabilities of the company.
Public Joint Stock Company (PJSC)
A PJSC is a legal form used for larger companies that intend to offer their shares to the public through an initial public offering (IPO). It requires a minimum of 10 shareholders and has more stringent regulatory requirements.
Private Joint Stock Company (PrJSC)
A PJSC is similar to a PJSC but does not offer its shares to the public. It requires a minimum of three shareholders and has more flexibility in terms of management structure and shareholder requirements.
Partnership Company
A partnership company allows for partnerships between individuals or entities. It can be a general partnership where partners share the profits and liabilities, or a limited partnership where there are both general partners and limited partners.
Branch of a Foreign Company
A branch is an extension of a foreign company in the UAE mainland. The foreign company retains its legal identity, and the branch operates under its name. It must appoint a local service agent to act as a representative.
Representative Office
A representative office is similar to a branch but has limited activities. It serves as a liaison office for the parent company and is not allowed to conduct commercial activities or generate revenue.
It’s important to note that the specific requirements, procedures, and regulations for each legal form may vary between the emirates in the UAE. It is advisable to consult with us to guide you on the most appropriate legal form based on your business activities, ownership structure, and long-term objectives.
