LLC, sole establishment or branch: choosing a legal form in Dubai

For most foreign founders on the Dubai mainland, the answer is a limited liability company (LLC). It can be 100% foreign-owned for most activities, it can have a single owner, and your risk is limited to the capital you put in. A sole establishment is simpler, but you are personally liable for everything the business owes.

This guide compares the mainland forms, the free zone equivalents, and the choice a foreign company faces between a branch and a subsidiary. The rules come mainly from the Commercial Companies Law, Federal Decree-Law No. 32 of 2021, amended by Federal Decree-Law No. 20 of 2025. It is general information, not legal advice; for a specific structure, speak to a UAE-qualified lawyer.

The main forms at a glance

The legal form must match your activity, so check what DET allows for your activities first. Our guide to Dubai trade licence types explains how activities, licence types and forms connect.

Limited liability company (LLC)

Under the Commercial Companies Law, an LLC has between 2 and 50 partners, or a single owner, and each partner is liable only up to their share of the capital. Since 2021, foreign investors can own 100% of a mainland company for most activities. The exceptions are the activities with strategic impact listed in Cabinet Resolution No. 55 of 2021, such as security and defence, banking, exchange houses, insurance, telecoms, and Hajj and Umrah services, where full foreign ownership is not available or special licensing controls apply.

Points founders often miss:

• The annual audit. Every LLC must appoint an auditor and have its accounts audited each year, whatever its size.
• The statutory reserve. An LLC sets aside 5% of its net profit each year until the reserve reaches half of its capital.
• Capital. The law asks for capital sufficient for the company's purpose, stated in the memorandum of association (MOA).
• The 2025 changes. Federal Decree-Law No. 20 of 2025 lets LLCs create different classes of shares, adds drag-along and tag-along rights, and lets a company change its legal form or move its registration between emirates and free zones without being wound up. Some of this depends on implementing decisions, so check what your licensing authority offers today.

A Dubai mainland LLC can trade anywhere in the UAE, which is why it is the default for businesses selling to local customers.

Sole establishment and civil company

A sole establishment is a business owned by one individual. It is not a separate company, so there is no limit on your liability: if the business cannot pay its debts, creditors can pursue your personal assets. Because it is not a company, the Commercial Companies Law's audit requirement for LLCs does not apply to it.

A civil company is a partnership of professionals practising together, such as engineers or consultants. It signs an MOA like a company, but its partners can be personally liable for its debts.

Both forms carry an extra step for foreign owners. If a sole establishment or civil company is wholly owned by non-GCC nationals, it must appoint a local service agent: a UAE national who handles government paperwork, owns no part of the business, and is appointed through an agreement attested by a notary or court.

A sole establishment can make sense for a professional working alone on modest contracts. For a business that will sign large contracts, employ people or hold stock, the personal liability is a poor trade for the simplicity.

Free zone companies: FZE, FZCO and FZ-LLC

Free zone companies are governed mainly by their free zone's own regulations rather than the Commercial Companies Law. The names vary by zone. The Ministry of Economy and Tourism lists three common forms: the Free Zone Limited Liability Company (FZ-LLC), the Free Zone Company (FZCO) and the Free Zone Establishment (FZE). RAKEZ, for example, registers FZ-LLCs with 1 to 50 shareholders, while DMCC's standard company needs at least one shareholder, who can be an individual or a company.

The suffix matters less than the free zone behind it. What changes your business is location: a free zone company is set up to work within its zone and with customers abroad, not to trade directly on the mainland. The 2025 amendments allow free zone companies to open branches elsewhere in the UAE where their own zone's rules permit, which widens the options for growing into the mainland later.

Branch or subsidiary: the choice for foreign companies

A foreign company that wants a Dubai presence can open a branch or set up a subsidiary, usually an LLC or a free zone company.

A branch is the parent operating in Dubai. It needs the parent's paperwork: a certified and attested certificate of the parent's registration, the parent's decision to open the branch and the appointment of its manager, all translated into Arabic. DET licenses the branch after the Ministry of Economy and Tourism gives initial approval, and the branch is then entered in the Ministry's register of foreign companies, renewed every year with accounts audited by a UAE-registered auditor. The old federal requirement for a foreign branch to appoint a UAE national service agent was removed in the 2021 reforms.

A subsidiary ring-fences risk. It is also easier for local banks, customers and future partners to understand, because it stands on its own.

Choose a branch when the Dubai office will do exactly what the parent does and the parent's name is what wins the work. Choose a subsidiary when you want to limit risk, or the Dubai business may develop its own activities, staff and partners. The choice is not permanent: the law allows a foreign company's branch to convert into a UAE company. Tax treatment in the parent's home country matters as much as the UAE rules, so take advice on both sides.

Representative offices and offshore companies

A representative office is limited to studying the market and production capabilities, with no commercial activity. It suits a first look at the market, not a business that wants to invoice.

If what you need is a vehicle to hold assets or shares rather than a trading business, look at offshore companies in the UAE, which have their own rules and limits.

Mistakes to avoid

• Choosing for setup cost alone. A sole establishment can be simpler to set up, but signing a large contract through it puts your personal assets behind every obligation.
• Forgetting the LLC audit. It is a legal requirement, not an optional extra.
• Adding a corporate shareholder late. Its documents need attesting and translating, which can delay everything else.
• Opening a branch for a young or thinly capitalised parent. Banks and customers look through a branch to the parent, so a weak parent makes a weak branch.

Choosing the form is the third decision in the setup sequence. If you want to compare the options for your own case, our business setup team can talk you through them.

Sources

• Ministry of Economy and Tourism: companies legislation, including Federal Decree-Law No. 32 of 2021 and No. 20 of 2025
• UAE Government portal: full foreign ownership of commercial companies
• Ministry of Economy and Tourism: establishing companies
• Ministry of Finance: Federal Decree-Law No. 47 of 2022 on corporate tax, as amended
• RAKEZ: legal entities
• DMCC: open a branch