Welcome to DhanGuard. Can I help you?
/ Blogs / Company Formation / Benefits Of Sole Proprietorship Company Setup In Dubai

Benefits of Sole Proprietorship Company setup in Dubai

By Shivangi - 13 Dec 2021 Last Updated: 06 May 2022
Benefits of Sole Proprietorship Company setup in Dubai

Table of Contents 

  1. 1. What is a Sole Proprietorship Company?
  2. 2. How will the setup of Sole Proprietorship Company in Dubai benefit the owner?
  3. 3. What are the disadvantages associated with the Setup of the Sole Proprietorship Company in Dubai?
  4. 4. Conclusion

Dubai is considered as one the most attractive Emirate in the UAE the government support has been playing an important role in uplifting businesses across the nation. Strong financial policies and an easy registration process are some of the key factors supporting the fact. Also, moderate initial fees are further motivating young and emerging entrepreneurs to start their own companies. Additionally, only a UAE national or a Gulf Cooperation Council national can start a sole proprietorship company in Dubai (GCC). Establishing a sole proprietorship as a non-UAE national would necessitate a residence Visa and a local sponsor. They could be a Dubai resident or a business. If the sole proprietor wishes to engage in professional or commercial activity, he or she must first obtain the necessary license. Thus, foreign nationals are also allowed to start their companies in the emerging market in the Emirate.

What is a Sole Proprietorship Company?

A sole proprietorship is a business owned and operated by one person who has complete authority and accountability for the company. He can hire staff and pay them compensation, but the lone proprietor is legally responsible for the company's responsibilities. In practice, this means that an owner gets the entire profit (after costs), but he is also personally liable. This is because a proprietorship is not a separate legal entity; rather, the business and its owner are grouped together. For example, no separate tax returns are required to be filed by the business and the proprietor must disclose the income from his business in his personal income tax return itself. This type of business is best suited to firms where the nature of the business is simple, financial risk is low, no large debts are required, and the market for the product is tiny. Sole proprietorships are ideal for businesses with low capital requirements and low risk.

How will the setup of Sole Proprietorship Company in Dubai benefit the owner?

The key benefits of setting up a sole proprietorship company in Dubai are discussed in detail below:

Cost-Effective

Setting up a sole proprietorship is comparatively less costly because no official registration is required. Operating the business from a separate location, on the other hand, will necessitate obtaining business-specific registrations such as trade Shops and Establishment Registration and, in some jurisdictions, a trade license. If the company's revenue exceeds a specific threshold, additional income tax and service tax registrations may be necessary. Moreover, a minimal fee is to be paid to the DED for obtaining a trade license as well.

Ownership

Because the business is owned by one person and he has complete authority, he can always make quick decisions and be adaptable. Also, foreign nationals can retain 100% foreign ownership in the business. Moreover, the owner need not make judgments based on shareholder desires or legal partner obligations. He/she can change your plan as needed and grow your business in any direction you want.

Minimal Restrictions

As per the rules and regulations laid down by the DED and other regulatory bodies there are no restrictions on where the corporation can rent or buy Office Space.

Strong Government Support

This is one of the key advantages for the setup of a sole proprietorship company in Dubai since the Emirate's regulatory bodies have played an essential role in facilitating the formation of entities within Dubai. Furthermore, because a foreign business is given the ability to possess 100 percent of ownership, this has helped to attract FDIs from several foreign investors as well. Furthermore, the expansion of SMEs has boosted Investment, since the country's strong government backing for the growth of SMEs has attracted a slew of new investors. For example, Dubai SME, a Department of Economic Development (DED) integrated division, provides counseling and training to potential businesses. It also exempts start-ups from paying license fees for nearly five years. It also assists in the issuance of the Intelaq license for Dubai residents who seek to operate a business from home. However, there are some terms and conditions that must be met in order to meet the criteria.

Flexibility in Operations

As the business is owned by one person and he has complete authority, he can always make quick decisions and be adaptable. Additionally, the fact that the owner has entire control over the company's finances, with all profits going to him, means that this type of corporate structure provides a strong incentive for the owner to work with higher morale.

Read More: Comprehensive Guide on Opening an Investment Company in Dubai

What are the disadvantages associated with the Setup of the Sole Proprietorship Company in Dubai?

Like advantages, some disadvantages are associated with the setup of a sole proprietorship company in Dubai as well. Some of the key disadvantages are mentioned below.

Unlimited Liability

Sole proprietors have unlimited liability, which implies that if a sole proprietor fails to honor his debts or company responsibilities and a customer files a lawsuit, the proprietor's personal property may be disposed of off to clear off the debts. When a business has a high turnover and transaction size, this might be a problematic structure because the financial risk is higher; in these cases, a Limited Liability Partnership (LLP), a one-person corporation, or a private limited company is considered a better option.

Difficulty in Employee Retention

Expansion of the firm beyond a certain point becomes difficult as the proprietor is not considered to be an expert in every part of business management, which necessitates the hiring of more staff. However, due to the individual-focused approach that characterizes sole proprietorship, good quality employees are considered to be a bit on the complex side of retention.

Complexity in Setup

In the case of a Freezone corporation, the establishment may take up to 8 to 10 weeks. Additionally, the DED does not recognize Virtual Offices, and office space is often required.

Conclusion

Dhanguard provides assistance to its clients for the management of complex paperwork and registration processes from the start to the end. If you require Business Setup services in Dubai, please contact us and we will gladly assist you.

Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.

Dhanguard provides the company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free offshore company formation services and company formation services in Mainland and Freezone in UAE.

Get Instant Advice