Dubai is a vibrant hub for entrepreneurs, offering various opportunities for business setup.
One of the key decisions you'll need to make when starting a business here is whether to establish your company in a free zone or on the mainland.
While free zones have their appeal, mainland licenses offer distinct advantages, particularly for those looking to tap into the broader UAE market.
However, several myths surround mainland licenses that can cloud the decision-making process.
In this article, we’ll debunk these common myths about mainland licenses in Dubai to help you make a well-informed decision.
Myth 1: Mainland Licenses Are Only for Large Corporations
One of the most pervasive myths about mainland licenses in Dubai is that they are only suitable for large corporations with massive budgets. This misconception often deters small and medium-sized enterprises (SMEs) from considering a mainland setup.
Fact: The reality is that Dubai's business environment is designed to accommodate companies of all sizes. Whether you're a solo entrepreneur, a startup or an established company, a mainland license can be tailored to your needs. In fact, the Dubai government actively encourages SMEs by offering various incentives, making mainland licenses an attractive option for businesses of all scales.
Myth 2: Mainland Business Setup is Expensive
Another common myth is that obtaining a mainland license in Dubai is prohibitively expensive compared to free zone options. This belief often leads entrepreneurs to choose free zones without fully exploring the costs and benefits of a mainland setup.
Fact: While the cost of a mainland license can vary depending on the nature of your business, it's important to consider the long-term benefits. A mainland license allows you to operate anywhere in Dubai and the UAE, bid for government contracts and engage in a broader range of activities. When you factor in these advantages, the investment in a mainland license can offer greater returns over time.
Myth 3: A Local Sponsor Controls 51% of the Business
Perhaps the most misunderstood aspect of mainland business setup in Dubai is the belief that a local sponsor must own 51% of the company, leaving the foreign investor with only 49% control. This myth has discouraged many from considering a mainland license.
Fact: While it's true that certain business activities require a local sponsor who holds 51% of the shares, recent legal reforms have introduced a 100% foreign ownership option for many sectors. The UAE government has identified a list of business activities where full foreign ownership is permitted, eliminating the need for a local sponsor.
Myth 4: Mainland Companies Have Limited Business Activities
A widespread misconception is that mainland companies are restricted in the types of activities they can engage in compared to free zone companies. This myth often leads businesses to assume that free zones offer greater flexibility in operations.
Fact: On the contrary, a mainland license in Dubai provides extensive flexibility, allowing companies to engage in a wide range of business activities. Mainland companies can trade directly with the local market, unlike free zone companies, which require a local distributor to operate outside their designated free zone. Furthermore, mainland businesses can also bid for lucrative government contracts and participate in public sector projects, providing them with significant growth opportunities.
Myth 5: Mainland Companies Can't Operate Internationally
Many entrepreneurs believe that mainland companies are confined to the UAE market and cannot expand their operations internationally. This myth can lead businesses with global aspirations to overlook the advantages of a mainland license.
Fact: Mainland companies in Dubai are fully equipped to operate on a global scale. With a mainland license, businesses can engage in international trade, open branches abroad, and access global markets with ease. Dubai's strategic location, world-class infrastructure, and favorable trade agreements further enhance the global reach of mainland companies, making them ideal for entrepreneurs looking to scale their businesses internationally.
Mainland vs. Free Zone: Making the Right Choice
When considering a Dubai business license, it's essential to weigh the differences between mainland and free zone setups.
While free zones offer benefits such as tax exemptions and 100% ownership, mainland licenses provide unparalleled access to the UAE market, government contracts and broader business activities.
Understanding the facts behind common myths can help you make an informed decision that aligns with your business goals.
Conclusion
Choosing the right license for your Dubai business setup is a critical decision that can shape the future of your company.
By debunking these common myths about mainland licenses in Dubai, we hope to provide clarity and empower you to make the best choice for your business.
Whether you're a startup, an SME or a large corporation, a mainland license offers a host of benefits that can drive your success in the UAE and beyond.
If you’re considering setting up a business in Dubai and want to explore the benefits of a mainland license, contact our team today for expert guidance tailored to your specific needs.