Difference Between FZE Company and FZCO Company Explained
An FZE company, also called a Free Zone Establishment, is a single-owner company. Similar to a sole proprietorship, it is managed by a sole individual who is responsible for the management and liability of the business. The sole owner/shareholder can be a single person or a corporate entity.
An FZCO company, which stands for Free Zone Company, is managed by multiple owners. These shareholders can also be companies or a sole person. FZCOs are allowed to have two to fifty shareholders. Like a limited liability company, FZCOs and FZEs both offer limited liability to its owners and are treated like LLCs by government authorities.
5 Questions to Help You Choose a Free Zone Structure
If you’re considering business setup in a free zone but don’t know which legal structure would be the best choice for you, ask yourself the following questions:
What Business Activity are You Conducting?
The type of activity you choose to conduct in a free zone will be a factor that influences your business structure choice. If you’re offering professional services or selling products on a small scale, an FZE will be a perfect fit.
How Many People Are You Going Into Business With?
An FZE company only allows for a maximum of one owner. While they can be a person or entity, UAE law only permits a single name on the trade license. An FZCO company permits a maximum of fifty shareholders. So if you have multiple business partners, go with a FZCO.
What’s Your Budget?
Places like the DMCC Free Zone and DAFZA Free Zone no longer have a minimum capital requirement, while locations like JAFZA still do.
Do You Want to Collaborate on Business Decisions?
Are You Planning to Scale Up Your Business Within the Next Few Months?
Difference Between FZE and FZCO Company
What are the Benefits of Free Zones in UAE?
No corporate taxes
Most free zone companies don’t have to pay corporate tax. Exemption from personal and income tax makes free zones an attractive option for business owners. Companies only have to register for VAT if their taxable income exceeds AED 375,000.
Complete business ownership
Easy business setup process
Businesses in the free zone are much easier to set up than companies on the Dubai mainland. Hiring an experts like our business consultants! can make the process faster and more cost-efficient. Free zones can also pick their own financial year if they get approval from the relevant free authority.
Access to international market
Due to the location of most free zones in UAE, free zone businesses have easier access to ports and airports, making international trade a smoother process.
Network of like-minded entrepreneurs and investors
A&A Associate Makes FZE and FZCO Company Setup Simple
If you work with A&A Associate, we can help you pick the best free zone structure that supports your business goals. Our consultants can streamline your business setup process and make applying for a license, getting visas, and opening a bank account as efficient as possible.
FAQ
FZCO stands for Free Zone Company and can be owned by up to fifty shareholders. FZCOs are the best choice for large scale operations with big budgets as they are easy to scale up and usually require more capital.
FZEs are treated as LLCs by free zone authorities in the UAE, as they both offer limited liability to its owner(s). However, LLCs are set up on the mainland, while FZEs can only operate in their designated free zone and outside the country.
There are about 46 free zones in the UAE, with Dubai housing over 20 free zones. Business setup in a free zone offers investors and entrepreneurs many benefits like easy global market access, minimal tax obligations, and easy business setup.
The full form of FZE is Free Zone Establishment. In the UAE, it is owned and operated by a sole owner, which can be a corporate entity or a person. Unlike a civil company, they do not need a local service agent for the set up process.
Free zone companies can be set up in the form of an FZE (Free Zone Establishment) or an FZCO (Free Zone Company). FZEs are better suited for small businesses and sole proprietors, while FZCOs are better for joint ventures and large companies.
DMCC, or Dubai Multi Commodities Center is a free zone in Dubai that mainly deals with commodities trading. It is located in JLT.
Most free zone companies do not have to pay VAT, but are required to register for VAT if their revenue is over AED 375,000 in the past 12 months.
FZCO stands for Free Zone Company. The difference between FZE and FZCO company is that FZCO allows for a minimum of two and a maximum of fifty shareholders, while FZE only allows one.
You can set up a branch of a foreign or local company, an FZCO (Free Zone Company), a PJSC (Private Joint Stock Company), an FZE (Free Zone Establishment), or a Private Limited Liability Company in a free zone.
An offshore company does not require a physical presence in the country to conduct business activities. It can also only operate outside the country it is established in. An FZCO (Free Zone Company) needs a physical location, but can operate within the free zone and internationally.
An FZE company and an FZCO company both offer limited liability and can only be set up in a free zone. FZE can be owned by only one shareholder, while FZCO can be owned by a maximum of fifty shareholders.
