Mainland Company Setup: A Comprehensive Guide

Introduction

Starting a business is an exciting yet challenging journey. One of the most critical decisions you will face is where to establish your company. The location can significantly impact your business operations, profitability, and growth potential. For many entrepreneurs, setting up a mainland company is an attractive option due to the numerous benefits it offers. This article will guide you through the process of setting up a mainland company, its advantages, and the key considerations to keep in mind.

What is a Mainland Company?

A mainland company is a business entity licensed by the Department of Economic Development (DED) in the respective emirate. Mainland companies are allowed to operate within the entire region of the country and beyond, without any restrictions. Unlike free zone companies, which are limited to operating within their designated free zone, mainland companies can conduct business both within the country and internationally.

Benefits of Setting Up a Mainland Company

Freedom to Trade Locally and Internationally: One of the main advantages of a mainland company is the ability to trade within the local market. Unlike free zone companies, which are restricted from trading directly with the local market, mainland companies can engage in business activities across the entire country and beyond. This provides a broader scope for growth and expansion.

No Limitations on Number of Visas: Mainland companies do not have restrictions on the number of visas that can be issued. The number of visas a mainland company can obtain is directly proportional to the size of the office space they lease. This is beneficial for companies planning to scale up their operations and hire a larger workforce.

No Restriction on Office Space: Unlike free zone companies that are required to lease office space within the free zone, mainland companies can choose any location within the country. This flexibility allows businesses to select a location that best suits their operational needs and budget.

Ease of Business Setup: The process of setting up a mainland company is relatively straightforward and streamlined, especially with the support of business setup consultants. The government has made significant efforts to simplify the process, making it easier for entrepreneurs to establish their businesses quickly.

Eligibility for Government Contracts: Mainland companies are eligible to bid for lucrative government contracts, which are often not accessible to free zone companies. This opens up a significant revenue stream and growth opportunity for businesses.

100% Foreign Ownership: Recent changes in legislation now allow for 100% foreign ownership of mainland companies in certain sectors, eliminating the need for a local sponsor. This is a significant advantage for foreign investors looking to retain full control of their business.

Types of Mainland Companies

When setting up a mainland company, it's important to choose the right type of business structure. The most common types of mainland companies include:

Limited Liability Company (LLC): This is the most common type of mainland company setup. An LLC can have between 2 to 50 shareholders, and the liability of each shareholder is limited to their shares in the company. This structure is ideal for small to medium-sized businesses.

Sole Proprietorship: A sole proprietorship is owned and operated by a single individual. The owner has full control over the business and is personally liable for all the company’s debts and obligations. This structure is best suited for small businesses or professional services.

Branch Office: A branch office is an extension of a parent company that is based outside the country. The branch office is allowed to conduct business activities similar to those of the parent company and must obtain a license to operate in the local market.

Civil Company: A civil company is owned by professionals such as doctors, lawyers, and engineers. It is a partnership between two or more professionals who are personally liable for the company’s debts.

Steps to Set Up a Mainland Company

Setting up a mainland company involves several steps. Here’s a detailed guide:

Determine the Business Activity: The first step in setting up a mainland company is to decide on the business activity you wish to undertake. The type of business activity will determine the type of license you need to obtain. The Department of Economic Development (DED) has a comprehensive list of business activities you can choose from.

Choose a Legal Structure: As discussed earlier, choosing the right legal structure is crucial. Your choice will depend on the nature of your business, the number of shareholders, and your long-term goals.

Reserve a Trade Name: Once you have decided on the business activity and legal structure, the next step is to reserve a trade name. The trade name should reflect the nature of your business and comply with the naming conventions set by the DED.

Apply for Initial Approval: After reserving the trade name, you need to apply for initial approval from the DED. This approval indicates that the government has no objection to you starting a business. However, it does not grant you permission to start operations.

Draft the Memorandum of Association (MOA): The Memorandum of Association (MOA) is a legal document that outlines the ownership structure and operational guidelines of the company. The MOA must be notarized by a public notary.

Lease Office Space: As a mainland company, you are required to have a physical office space. The size of the office will depend on the nature of your business and the number of visas you plan to apply for. The lease agreement must be registered with the relevant authorities.

Obtain Necessary Approvals: Depending on your business activity, you may need to obtain additional approvals from government authorities. For example, if you are setting up a healthcare facility, you will need approval from the Health Authority.

Submit Documents and Pay Fees: Once you have completed the above steps, you need to submit all the required documents to the DED and pay the necessary fees. The documents typically include the MOA, lease agreement, and copies of the shareholders’ passports.

Receive Your Business License: After the DED has reviewed and approved your application, you will receive your business license. This license officially allows you to start your business operations.

Open a Corporate Bank Account: Once you have received your business license, the next step is to open a corporate bank account. You will need this account to conduct financial transactions for your business.

Register for VAT: If your company’s annual turnover exceeds the mandatory threshold, you are required to register for Value Added Tax (VAT). This is an essential step to ensure compliance with tax regulations.

Key Considerations for Mainland Company Setup

Local Sponsorship (If Required): If your business activity does not fall under the sectors eligible for 100% foreign ownership, you will need a local sponsor. The local sponsor will own 51% of the company, while the remaining 49% is owned by the foreign investor. It is crucial to choose a reliable and trustworthy sponsor.

Cost of Setup: Setting up a mainland company involves various costs, including trade license fees, office rent, visa fees, and government approvals. It is essential to budget for these expenses to avoid any financial strain.

Compliance with Regulations: Mainland companies must comply with various regulations, including labor laws, health and safety standards, and tax requirements. Non-compliance can result in fines, penalties, or even the suspension of your business license.

Business Continuity Planning: It is important to have a business continuity plan in place to address potential risks and challenges. This includes having adequate insurance coverage, a robust IT infrastructure, and contingency plans for unforeseen events.

Hiring Skilled Employees: Mainland companies have the advantage of hiring employees from both the local market and overseas. It is important to hire skilled and qualified employees who can contribute to the growth and success of your business.

Networking and Building Relationships: Building strong relationships with local businesses, government authorities, and industry professionals can greatly benefit your mainland company. Networking can lead to new business opportunities, partnerships, and collaborations.

Conclusion

Setting up a mainland company offers numerous advantages, including the ability to trade locally and internationally, no limitations on office space and visas, and access to government contracts. However, it is important to carefully consider the legal structure, compliance requirements, and costs involved. With proper planning and the right guidance, establishing a mainland company can be a highly rewarding venture, paving the way for business success and growth. Whether you are a local entrepreneur or a foreign investor, a mainland company setup provides the flexibility and opportunities needed to thrive in a competitive market.