How to convert a sole establishment to an LLC in Dubai
When initially starting a new business venture, a sole establishment (also known as a sole proprietorship) is one of the quickest and cost-effective ways for setting up a company in Dubai. It’s the simplest form of business structure, has no complex registration or incorporation procedures, has low start-up costs and allows for complete control over all aspects of the business. However, as the business grows and becomes more complex, the owner may want to consider other business structures that offer greater protection and advantages, such as a limited liability company (LLC).
Why use an LLC structure in the UAE?
One of the most significant advantages of forming an LLC is that it provides limited liability protection to the owners. With a sole proprietorship, the owner is personally liable for all business debts and obligations. By forming an LLC, the owners' personal assets are protected from any business debts or legal liabilities. The liability of any shareholder in the company is limited only to the amount of their investment in the company.
As a recognisable business structure, the LLC can also enhance a company's credibility and professionalism which is an important part of attracting customers, investors, and business partners. By converting to an LLC, the business may be better positioned to grow and expand, as it can issue ownership shares, bring on new members, and raise capital through investments.
How to convert a sole establishment to an LLC in the UAE
Change company name
The first step in this process is to apply for a new company name. This is very important because it may be that your existing business name is already registered to another LLC. Since a company’s legal structure is often added on as a suffix to its company name, (e.g. ‘Ltd’ or ‘LLC’) it may mean that when changing from a sole proprietorship to an LLC, it will be necessary to find a new name. You should check whether the name you wish to continue to use is available as an LLC.
Update company documents
As the legal structure of the company is changing, it will be necessary to amend information on documents such as the trade license in Dubai, Memorandum of Association, and immigration, e-signature and labour cards. At this stage, we will also be working to remove the National Service Agent (NSA) from the current licence (if applicable) since new UAE business laws no longer require majority ownership by a national sponsor and allow for 100% foreign ownership.
Open new corporate bank account in the UAE
One of the legal advantages of the LLC structure is that it serves to keep the shareholder/s’ funds separate from those of the company. This means that a new corporate bank account will be needed that reflects this and the changes in structure from a sole proprietorship to an LLC.
Removal of NSA from sole establishment
The following are the required steps for removal of the national service agent from the sole establishment:
- Obtain initial approval for removal of NSA and changing of legal structure from sole establishment to Limited Liability Company (LLC).
- Request No Objection Certificate (NOC) letter from the sponsor confirming payment of NSA fees and any other outstanding amounts.
- Signing in Dubai Economy & Tourism Department.
- A memorandum will be generated by the Department of Economic Development (DED) and existing shareholders’ presence is required for signing.
- Final submission of application to the Dubai Economy & Tourism Department.
- Issuance of new trade license in UAE.
- Update immigration establishment card with the General Directorate of Residency and foreign Affairs (GDRFA) and update the Ministry of Human Resources and Emiratisation (MOHRE) and e-signature card.
1. How long does it take to convert a sole proprietorship to an LLC?
It will depend on the complexity of the business and the number of shareholders to be added to the licence. However, in general the process can be completed in approximately one month.
2. Should I notify my customers and clients of the change?
It's a good idea to let your customers and suppliers know that you are changing from a sole proprietorship to an LLC, as it may affect your business relationship with them. You may want to send out a letter or email informing them of the change and how it may impact your business dealings.
3. Can I market myself under the same brand?
You can retain the same existing marketing materials and market your brand in exactly the same way. You will, however, need to update you trade name on your tax invoices and your office signage.
How can PRO Partner Group help?
Changing the legal structure of your business entity requires significant knowledge of the regulatory environment and the various steps and government processes within the UAE.
PRO Partner Group provides the needed assistance and consultancy to business owners intending to convert the legal structure of their organisation from a sole proprietorship to an LLC. Our team of company formation and legal experts in Dubai will guide you through all aspects of the legal transformation, including the licence elements and any regulatory approvals for the company. Please get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at firstname.lastname@example.org or complete the contact form below and we will be delighted to assist you.