If you are considering starting a business in the Middle East, the UAE is among the best places to consider. The UAE is a global hub with many opportunities for various industries and nationalities. It offers a business-friendly environment that is highly appealing to international investors.
However, before you set up your company, you must decide whether to set it up on the Mainland or in the free zone. But what is the difference between the two, and how do you ensure you make the right choice?
Both have their advantages and disadvantages. The best choice will be determined by the needs of your business and the investment opportunities available. This post will help you understand the difference between Mainland and the free zone and how to choose the best option for you.
What Is A Mainland Company?
A mainland company is an onshore entity registered with the emirate registration government body. The DED (Emirate’s Department of Economic Development) issues the business trade license, a crucial feature for a mainland company. The trade license means no restrictions on the business’ commercial activities. However, you must note that you will need a UAE national or local sponsor to partner with the company for some business activities.
What Is A Free Zone Company?
A free zone company is the perfect option if you want to own 100% of your company. Free zones were opened in UAE in the 1980s and have since grown in scope and size. There are over 45 free zones across the UAE, and each free zone is managed and managed by its own regulatory body and functions under its laws and regulations.
What Is the Difference Between a Free Zone and Vs Mainland?
The main difference between a free zone company and a mainland company is the jurisdiction. Each one of the companies has a distinct corporate structure. Here are their main differences to help you choose which one is the best for you.
- Business scope: The main difference between a mainland company and a free zone company is that the free zone companies cannot perform any business activity outside the free zone without the help of a local agent. However, the restriction does not apply to mainland companies since they are allowed to operate anywhere in the UAE.
- Ownership: Before, a foreign investor would only establish a foreign company on the Mainland with the help of an Emirati sponsor who owned 51% of the company, leaving the rest 49% for the investor. However, the law has since changed, and the UAE government now allows 100% of foreign ownership for a selection of business activities in the Mainland.
- On the other hand, free zones do not have such restrictions and do not need local sponsors’ help since they enjoy complete ownership.
- Workspace: Mainland companies must have a minimum of 200 sqft for their physical office, and only after securing the required space will the DED issue a license for your company. On the other hand, free zone companies are not required to have a physical location since many free zones allow virtual workspaces.
- Business set-up approvals: For a mainland company, you will require clearance from several government agencies, including the Department of Economic Development, the Mistry of Labor, and the Municipality of Dubai, among others.
- For the free zone companies, each free zone allows its laws and regulations for all new businesses established within their jurisdiction. You do not need government authorities’ permission to set up your business in a free zone area.
- Visas: Mainland companies are not restricted to the number of visas issued. However, the number is dependent on the workspace area leased. Your company must acquire a larger working space if it requires additional visas.
H2: Work with ICONS Business Setup
We hope you now understand the difference between a free zone company and a mainland company, and you can choose which fits your business activities better. Whether you start your business in the free zone or Mainland, ICONS Business Setup will help you set up your business fast and efficiently. We are a team of professional business consultants who will handle all your government-related work to ensure a hassle-free business setup.