If you are a start-up and are not blessed with a high start-up capital, you have to budget your cash flow properly. Bearing the local payment behavior in mind your start-up cash flow should cover minimum 18 months of operational costs. Most new companies, which started off with extremely good ideas or innovative service offers surrendered their business within the first year of operation. The main reason for their closure is lack of cash flow. If asked why this happened, a common answer of the respondents was that they underestimated the actual payment time. Even though payment terms were agreed upon, but the actual payment turnaround took by far longer. Here is the first pitfall – not enough cash flow to cover operational costs.
In a lot of cases the proprietor looks at his/her local partner for assistance. And here is the second pitfall companies or individuals get trapped in – the legal company set up or structure. The most important part of opening a business in the UAE is finding the appropriate legal structure. The Department of Economic Development recognizes 13 legal company structures. Here lawyers in UAE should be consulted as not all legal structures recognized are suitable for a business. Some people might be naturally anxious of lawyers, if you belong to this category of people business consultants in Dubai could also assist. However, such a decision is most likely the most important decision one will take at the beginning of their business venture. This makes it imperative that an attorney in Dubai should be consulted. A good and experienced lawyer such as Motei and Associates will review the business, check all applicable legal structures and suggest the best, most relevant and appropriate legal set up for each individual business and situation.
Once the legal structure is decided, the next step is the locality. Also, here, the consultation of Dubai law firms should be looked at. The leasing or rental laws of commercial properties in the UAE are different and some might even say unique. This is the third and most underestimated pitfall. The UAE and here Dubai has several freehold and leasehold areas. To review these areas and compare to “regular” commercial property offers should be left to an expert. An experienced law firm like the aforementioned Motei and Associates will review the structure of the leasing contract highlight possible pitfalls and will negotiate a lease agreement which will suite a start-up company.
Motei and Associates is a Dubai-based law firm boasting vast experience in disputes resolution and general corporate, commercial transactional services.
