There are two ways you can establish a business in Dubai. You can either choose Limited Liability Company (LLC) or sole proprietorship. Of course, before you make a decision, it would be a good idea to learn the difference between the two. Better yet, seek the help of a commercial lawyer in Dubai to ensure you cover all the bases when you start your business.
So, here are the differences between LLC and sole establishment or sole proprietorship in terms of ownership, control, budget, liability, and existence.
Ownership
Obviously, a business that is established under the sole proprietorship scheme is owned by one person. On the other hand, LLC can be owned by multiple people or shareholders. In some cases, it can also be owned by foreign businesses, partnerships, corporations, and even other LLC entities. Dubai law firms can help you establish your business.
Control
Sole proprietors can enjoy having a full control of their business. Whatever you want to do with your business, you can do it without seeking approval from other shareholders.
For LLCs, it could be an advantage to have other people who can share their ideas. Managing a company can be complicated but with the help of multiple people who owns the business, the best course of action is explored.
Budget
It is costlier to set up an LLC in Dubai. For example, if you are going to apply for a business license, you can expect to spend around AED 17,000 (as of 2018). However, if you’re seeking to establish an LLC business, the fee can increase by as much as 30% or more. Seek the help of one of the law firms in Dubai to meet legal requirements.
While it is easier to start a sole establishment business, it is harder to sustain this business model and even raising money for the business is more challenging. With LLC, there are more people who are contributing to the company and thus, expanding your business is more attainable.
Liability
There’s a reason why LLC is called a limited liability company. A sole owner of a business can be liable for lawsuits, debts, and other obligations. So, if your business goes bankrupt, creditors may go after your other possessions.
This is not the case for LLC. Liabilities are distributed throughout the shareholders. Creditors can’t even confiscate personal properties.
When things get more difficult, you might consider hiring an experienced attorney in Dubai.
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