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One of the most crucial choices a business owner must make is the appropriate business structure. Business structure can have an impact on the safety of private property, taxes, and the smooth operation of the company when ownership changes. In Dubai, the majority of businesses are founded as sole proprietorships or LLCs (Limited Liability Company). A&A Associate provides business consultancy services in Dubai and is here to examine the distinctions between a Sole Proprietorship vs LLC to see which might be the best option for your company.
The right business structure must be chosen when beginning a new company. Many small business owners favor sole proprietorships and limited liability companies as their preferred business forms due to their simplicity and flexibility. This article goes into great length about what an LLC is, what a sole proprietorship is, and how they differ from one another. Entrepreneurs can choose between a sole proprietorship and an LLC for their business structure from a variety of possibilities. To take advantage of 100% firm ownership, 100% repatriation of capital and earnings, no currency limits, and 100% import and export tax exemption, you could choose to open a business in one of the many free zones. You could choose to establish your business on the mainland, which has a variety of advantages, including the ability to conduct direct business with the UAE market. Indeed, launching a business on the mainland may first seem a little more difficult than doing so in a free zone, but it does not have to be that way. Setting up a mainland is simple with the appropriate assistance. Read on to know more about Sole Proprietorship vs LLC.
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What is LLC?
The proprietors of a Limited Liability Company (LLC), a specific kind of business, are referred to as members. Since the corporate entity is separate from the members and is, therefore, the only party that may be held liable if the company is sued or unable to pay its debts. A Limited Liability Company (LLC) combines aspects of a corporation, partnership, and sole proprietorship.
What is a Sole Proprietorship?
An individual who owns and manages an unincorporated business is known as a sole proprietor. You are not regarded as a sole proprietor, however, if you wish to handle your domestic LLC (Limited Liability Corporation) as a corporation. If you need assistance, do not hesitate to contact A&A Associates.
Sole Proprietorship vs LLC
There are typically two alternatives available to business owners establishing operations on the UAE’s mainland: Sole Proprietorship or LLC. In this case, there is no right or wrong choice. Your business activity, license type, firm size, scope, and personal circumstances will all influence the form of business that is best for you. The most crucial considerations to bear in mind when making your decision, however, are your financial and legal exposure. A sole establishment entails limitless liability, which includes all of your earnings, whereas an LLC limits your total exposure to the amount you invested in the company. Setting up an LLC is likely to be the best option, and there is a reason it is the most common type of business establishment in the UAE unless you have a specific reason for choosing sole proprietorship. However, before making any such choice, take the time to talk over your needs with a company formation specialist. They will be able to point you in the direction of the best course of action.
However, a sole proprietorship can be established far more easily than an LLC. No further paperwork or taxes need to be filed. The sole requirements for proprietors are to choose an appropriate name and pay a registration cost. There are more steps in the LLC formation process. A partnership agreement is required, together with the selection of a registered agent and compliance with other legal and tax obligations.
If you are the sole owner of your company, you do not need to file separate tax returns for your business; rather, all income is reported on your taxes. If you choose to create an LLC, you will also need to pay annual state filing fees.
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Setting up a Sole Proprietorship
Choose between a sole proprietorship and an LLC in the first stage to determine the sort of business you want to launch. Due to the minimal initial fees and the ability to create a business with just one shareholder, a sole proprietorship can be a viable choice for entrepreneurs looking to strike out on their own in the United Arab Emirates. Additionally, with the aid of a Local Service Agent (LSA), it is feasible to keep 100% of your company’s ownership.
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Setup is simpler than you might imagine:
In the UAE, opening a sole establishment is just as simple as opening any other kind of business. In actuality, submitting an application to open a business on the mainland may be simpler than doing so in a free zone. Select your company activity and license type, then submit your application directly to the Department of Economic Development (DED). The entire process takes just 90 minutes if you meet the requirements for registration, thanks to recent measures that have made setup exceedingly simple.
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Low-cost setup:
Establishing a sole establishment in the UAE is a simple, quick process that is also low-cost. The starting fee for license applications is AED 17,000, and since extensive premises are probably not necessary, overall launch expenditures are typically very inexpensive.
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Having a sponsor:
You must find a UAE national to sponsor the business and offer them 51% ownership in order to conduct direct commerce with the local market when establishing any kind of business on the UAE mainland. An LSA will be sufficient in the case of a single establishment. LSAs, in contrast to local sponsors, have no ownership investment in your business, enabling you to keep full control. LSAs are not involved in making decisions or managing the day-to-day operations of your organization. They only perform administrative duties including processing license, visa, and permit applications in exchange for a specified price. Your LSA must either be an individual from the UAE or a company with 100% UAE ownership.
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Opening a corporate bank account is simple:
You can open a corporate bank account as soon as you have established your sole establishment in the UAE and obtained your business license. Application procedures are quick and easy. If you would like, a company formation specialist can help you choose the right bank for your needs and even set up in-branch meetings for you. You are also welcome to contact any local or foreign bank on your own.
5. Sponsor dependents’ visas:
As the proprietor of a sole establishment in the UAE, you are eligible to apply for your visa. However, it is also very simple to sponsor your dependents’ visa applications. The procedure consists of four easy steps: obtaining entry permission, adjusting your status, taking a medical fitness test, and finally registering for a UAE ID and getting your visa stamped. Remember, though, that males typically find this process to be a little bit simpler than women. The majority of women who want to sponsor dependents will need a divorce certificate, though each situation is examined individually. Considering how crucial this process is, consulting a setting up professional is an excellent choice.
Hope you get some information on Sole Proprietorship vs LLC
Contact us for proper guidance
You have come to the right place if you want to start a business in the UAE but are unsure of where to begin. All around the UAE, A&A Associate has launched countless enterprises using various business forms. Additionally, you can contact A&A Associate if you are unsure about whether a business structure—a sole proprietorship or an LLC—will work best for you. Reach out to us right now to start a conversation. Call us at +971 50 483 6190 or send us an email at info@aaconsultancy.ae if you would like further information or advice from one of our knowledgeable business consultants.
