Saturday, 7 September 2013

Franchise In Dubai Business Guide Operations

Dubai describes itself as the fastest-growing metropolis on the planet and there is no disputing the fact that it is one of the world's most desirable business centers, with very low or zero taxation, attractive investment incentives, a stable economy, superb communications, well-educated workforce, state-of-art infrastructure, robust economic cluster of technology, media, finance and healthcare hubs. All these make Dubai a viable and attractive proposition for any business and providing investors with a unique and comprehensive value added platform.

Legal Structures for Business

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation, which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. The seven categories of business organisation defined by the Law are:

• General partnership company

• Partnership-en-commendam

• Joint venture company

• Public shareholding company

• Private shareholding company

• Limited liability company (LLC)

• Share partnership company

 Out of these seven activities LLCs are more commonly used by the foreign investors.

 Apart from these seven categories, FDIs are encouraged through Branches and representative offices of foreign companies and 100% foreign owned professional firms. 100% foreign ownership is permitted in the Free Trade Zones too.

 Limited Liability Company

 A Limited Liability Company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the Company's capital. Most Companies with expatriate partners have opted for this Limited Liability Company, due to the fact that this is the only option which will give maximum legal ownership i.e. 49% to the expatriates for a trading license.

 51% participation by UAE nationals is the general requirement for the Limited Liability Companies. Therefore the normal shareholding pattern for an LLC will be:

 Local sponsor - 51% and

 Foreign Shareholder (s) - 49%

 The minimum capital requirement is AED 300,000 (US$ 82,000), contributed in cash. While foreign equity in the Company may not exceed 49%, profit and loss distribution can be mutually agreed. Responsibility for the management of a Limited Liability Company can be vested in the foreign or national partners or a third party.

 The time required to form a company will be approximate 1-2 weeks from the date of receipt of all the documents. The procedure and cost break up will be given upon request.


Except for foreign companies operating under special licences within duty-free areas in the State, foreign companies shall not practice their main activities or establish offices or

Branches thereof in the State until permit to this effect be obtained from the Ministry after prior approval of the Concerned Authority had been obtained. The issued permit shall specify the activity which a company is authorized to carry out.

Such permit shall be issued if the company engages an agent to be a natural person holding the state nationality or a company fully owned by natural citizens, and whose entire partners be nationals too.

The Agent's responsibilities towards the company and third parties shall be limited to rendering necessary services to the company without his h\bearing any financial liabilities or obligations related to the company or its branches and offices inside and outside the State.

Foreign Companies licensed to operate within the state, under the preceding para, shall not start their business except after registration at the Ministry in the Foreign Companies

Commercial Register.

Entries in the said Commercial Register as well as control of same Foreign Companies' accounts & balance-sheets shall be regularized vide a ministerial decision to be issued in this respect.

 The Foreign Company's officer or branches shall be governed by the laws applied within the State.


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A foreign company or its offices or branches referred to in the preceding Article shall not

commence their activities in the State except after entry in the Register of commerce.

They shall have a separate balance-sheet, a separate profit a-and loss account and shall appoint auditors.

Now what happen if you need to trade in UAE while you are a foreign entity?

 Say you are a foreign entity trying to relocate your Commercial Business in Dubai; only companies who are into professional activities can only get a license in Dubai. But if you are a commercial trade company targeting Local exposure like DHL, Coco Cola, channel, Adobe to say the few you need to Franchise.

 A franchise acts like a license for rapid expansion, a brand’s recognition and provides a consistent method to deliver your brand‘s promise. Franchises are based on a financial relationship between the franchisor and franchisee.

This guide summary looks at what is franchising, how it works, why franchising is growing as a way of doing business and what makes a good franchise. Aside from a basic understanding of franchising, the guide considers the benefits given by a franchise and provides basic guidance to allow businesses to benefit from innovation.

Franchising is not restricted just to fast food outlets and gardening contractors. There are now franchises for mentoring managers and sportspeople and franchises for internet shopping.

In the future the Dubai economy will more likely be filled by innovative and creative franchises which seek to capitalize on their market lead and intellectual property advantage. Franchises fill a market need and therefore, are the fastest growing way of doing business.

The 1980’s and 1990’s brought radical changes to the employment market and the way people work. The oil-shocks and stock market corrections, the opening up of the world economy, reduction in subsidies, government deregulation and downsizing thrust into the job market capable, energetic and resourceful people who work on their own.

Franchisees are people who have been employed in the past by someone else and a franchise opportunity is seen as a more relaxed way of making the transition from working for an employer to being self-employed. The risk factor of a proven business is also seen as a better option than breaking totally new ground. Thus, franchises are taken up by people prepared to invest in themselves, their personality and their skills who look for freedom and the rewards of hard work. Franchises are a personal investment, in the equity invested in the business, in the time and energy required to achieve success. Therefore, it is important to take a few commonsense precautions when selecting a franchise.
For more information please client here
Winston Wambua

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