Starting a Small Business in Abu Dhabi

1 Starting a Small Business in Abu Dhabi Introduction Abu Dhabi has a thriving economy and is home to thousands of local and foreign companies. It is renowned for having a business environment that supports successful entrepreneurship. For a UAE citizen planning to set up a small-sized business in Abu Dhabi, it is crucial to comply with legal and government procedures by following the procedures outlined by the Department of Economic Development (DED). When starting a business, it is important to understand the most suitable business structure that safeguards the business against risks and enhances the success of the business. This paper examines the procedures that an entrepreneurial UAE citizen seeking to set up a small travel company in Abu Dhabi would need to follow. It evaluates the most suitable form of company and also lists the licenses that will be required from the Department of Economic Development.

The Six Steps There are six essential steps when starting a business in the Abu Dhabi. The first step is to specify the primary activity that the business will be involved in. The economic activity of the business will determine the rules, regulations, licenses, and location of the business.

The economic activity, in this case, is to provide travel advice to foreigners touring the UAE. The second step in the process is to define the legal nature of the business.

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2 In this step, it is crucial to outline whether the business is a partnership, limited liability company or an establishment (ded.abudhabi.ae., 2018). The third step is the registration of the name under which the business will trade. The business name must suit its nature of business and should not be identical to the name of another separate business. The fourth step involves getting the initial authorization from the relevant authorities to transact under the specified trade name. There are various documents that the entrepreneur requires to present to the authorities at this stage. These are; the authorized business name, a valid copy of the citizen's ID or passport, receipt of acknowledgment of payment of the registration fees and the initial authorization certificate. The fifth step is to obtain approval from the specific authority under which the business is classified. In the case of the travel advising company, the authority concerned is the Ministry of Tourism (Government.ae., 2018). The sixth and final step is to obtain the commercial license which provides the final approval for the business to begin transacting legally with the public. A tourism license is required for the travel advising business; it is obtained from the Abu Dhabi Tourism and Culture Authority.

Best Form of Business In Abu Dhabi there are four types of business facilities available to entrepreneurs.

There are; an establishment, a branch, a company or a cooperative society. An establishment, also known as a sole proprietorship, is owned and run by the owner of the business. A branch is owned by a local or international facility and performs the same business activities as the main facility. Ownership of an establishment is usually restricted to UAE citizens, however foreigners are allowed to set up an establishment under specific conditions such as having a local sponsor. There is no minimum capital requirement for this type of business. A company is formed from the union of two or more people to engage in a legally-recognized activity

3 whose aim is to generate a profit. Individuals of all nationalities are allowed to form a company, however, there should be significant participant of UAE nationals at the management levels of the organization (Low, 2012). A cooperative society is formed by a group of people who work collaboratively to provide certain goods and services to the market, and in the process increasing their wealth. The company, branch and cooperative business facilities require all the individuals involved in setting up the business to provide their identification documents, and to present a Memorandum of Association to the Department of Economic Development. Out of all these, the best business facility for the small business owner is to operate the business as an establishment because it allows the individual to operate the business solely.

Advantages of an Establishment An establishment is operated by one person; the sole proprietor, who is licensed to operate an economic activity, which in this case is tourism advising. An establishment defers from the company, branch and cooperative forms of business in five main ways. Firstly, the sole proprietor has full control of the business and is solely responsible for all the decisionmaking with regard to the business. The sole proprietor does not have to confer with other people when making a decision, making the process faster and easier. Secondly, the sole proprietor is the financial manager of the business and therefore retains all the profits or losses made by the business. Thirdly, the sole proprietor is not obligated to reveal the financial statements and other information about the business unlike a company, branch or cooperative which operate as public entities and are therefore required to disclose their information to their stakeholders (Spraggon & Bodolica, 2014). Fourthly, there are less legal and government regulations for a sole proprietorship than for the other forms of business; this

4 makes it easier to begin and operate. The fifth key feature that distinguishes a sole proprietorship from other forms of business facilities in the UAE is that the government relinquished the capital requirements of establishments, therefore the business can be started without a substantial amount of capital.

In Abu Dhabi, an establishment can only be founded by a citizen of the UAE. If a noncitizen wishes to form a sole proprietorship, they are required to have a sponsor who can either be a UAE citizen or company. Additionally, they are also required to have a valid resident permit. To set up the establishment, the sole proprietor requires a business application form, licensing application form, proof of professional experience or qualification in the business field, a passport or national identification card and a registered business location (Steingold, 2017). In Abu Dhabi, the sole proprietor’s trade license is issued in the name of the business owner, which indicates that the individual is personally liable for the assets and liabilities of the business.

Conclusion Abu Dhabi is one of the tourist hubs of the United Arab Emirates. It receives a large number of tourists every year, therefore starting a travel advising company is a feasible business idea. However, to succeed it is crucial for the entrepreneur to determine the most appropriate company structure for the business and to follow the procedures required to set up a legally and government-recognized business by complying with the relevant laws and regulations.

5 References ded.abudhabi.ae. (2018). [online] Available at: https://ded.abudhabi.ae/en/our-services/service-guide/start-new-business [Accessed 22 Nov. 2018].

Government.ae. (2018). [online] Available at: https://www.government.ae/en/informationand-services/business/planning-to-set-up-a-business [Accessed 22 Nov. 2018].

Low, L. (2012). Abu Dhabi's vision 2030. Singapore: World Scientific.

Spraggon, M., & Bodolica, V. (2014). Managing organizations in the United Arab Emirates.

Palgrave Macmillan.

Steingold, F. (2017). Legal guide for starting & running a small business. Nolo.