The UAE has been a popular destination for businessmen, investors, and entrepreneurs for quite some time now. Consequently, there are a lot of options for first times to get confused about when starting a business in the UAE.

For example, two of the most popular choices for a company structure that first times get confused about is Sole Proprietorship vs LLC. So, today we are going to take a look at which company structure in the UAE is perfect for you.

What is a Sole Proprietorship in Dubai?

A Sole Proprietorship is a business that has only one owner. Additionally, this business is not a separate legal entity. This means that the owner is responsible for the debts and legal obligations that the business might have during its lifetime.

And if the business were to liquidate in the future, then the owner will have to meet these obligations even if it is through this personal finance. A Sole Proprietorship can be easily converted to other types of businesses in the future.

For example, if you decide to take a partner in your business then your Sole Proprietorship will be converted into a General Partnership. Alternatively, you can convert your Sole Proprietorship into a Limited Liability Company if you choose to in the future.

Sole Proprietorship is mainly for the people who do a lot of solo contractual work or run general stores. For example, solo work can include freelancing, consulting, personal training, etc.

These individuals can start providing their services quickly with Sole Proprietorship. This is because Sole Proprietorships are quick and easy to set up in Dubai.

Additionally, Sole Proprietorships are very cheap to set up in Dubai. Last but not the least, you can easily convert the company into other forms if your business kicks off.

Advantages of a Sole Proprietorship in Dubai

Here are the advantages of starting a Sole Proprietorship in Dubai:

• A very easy formation process in Dubai requires a minimal amount of paperwork and effort.
• Any taxes that need to be filled in will be done through the owner’s personal tax return. Since Dubai has no personal taxes, you do not need to worry about it.
• The UAE recently changed its ownership laws, so you do not need to look for a local sponsor even when starting a business on the mainland.
• You can easily change the Company Structure to other forms in the future when your business kicks off.
• You can receive several benefits from the government of the UAE for starting a Sole Proprietorship.

Disadvantages of a Sole Proprietorship in Dubai

Here are the disadvantages of set up a Sole Proprietorship in Dubai:

• There is no protection against the liabilities of the business. This means that you will need to meet the debts, lawsuits, and other obligations of the business through personal assets.
• It is hard to finance the business if the Sole Proprietorship needs capital to expand or meet its debts. This is why people choose to change to other company structures in the future.
• It is hard to obtain business loans from the bank for Sole Proprietorship. Alternatively, you can take a loan against your personal assets.

What is a Limited Liability Company in Dubai?

An LLC, or Limited Liability Company, is a company structure where the owner or owners of the business is considered separate from the business itself. This is because the Limited Liability Company is considered as a separate business entity that is subjected to its own laws and regulations.

As a result, the owners will not be liable for the debts and obligations of the Limited Liability Company. Additionally, the owners will have a stake in the business equal to the capital they invested in it.

Usually, Limited Liability Companies are taxed twice. Firstly, the Limited Liability Company itself is taxed since it is a legal entity. Secondly, the owners are taxed for their drawings from the Limited Liability Company.

However, since the UAE has no personal taxes, you can set up a Limited Liability Company in Dubai without having to pay taxes twice. Furthermore, if the earnings of the Limited Liability Company do not exceed a certain threshold, then you do not need to pay taxes at all.

If the Limited Liability Company was to liquidate, then the owners will only lose the capital that they have already invested in the business and their personal assets will be safe. This is because the creditors cannot legally take action against the owners of the Limited Liability Company.

They can only take action against the Limited Liability Company itself which is a separate legal entity.

Advantages of Limited Liability Company in Dubai

Here are the advantages of set up a Limited Liability Company in Dubai:

• You will get liability protection against the business’s creditors, lawsuits, and other obligations as the owner of the company.
• The Limited Liability Company’s creditors cannot take legal action against you or go for your personal properties.
• You can easily finance the operations of the business or take business loans for the Limited Liability Company.
• A Limited Liability Company can have multiple owners and all of the owner’s stakes in the company will be limited to the capital they have invested in the company.

Disadvantages of Limited Liability Company in Dubai

Here are the disadvantages of starting a Limited Liability Company in Dubai:

• A Limited Liability Company is harder and costlier to set up than a Sole Proprietorship. Additionally, it requires more documentation during formation.
• Ownership is harder to transfer in a Limited Liability Company than in a Sole Proprietorship.
• Limited Liability Companies have more regulations than a Sole Proprietorship.

How can Company Setup Consultants help you?

If you want to start a business in the UAE but do not know where to get started, then you are in the right place. Company Setup Consultants have started numerous businesses with different business structures all over the UAE.

Furthermore, if you are confused about which company structure will be better for you between Sole Proprietorship vs LLC then you can get in touch with Company Setup experts. Contact us today and hi the ground running.

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