Free Zone Company vs Free Zone Establishment: Key Differences

The glittering city of the Emirates, Dubai, is reinforcing its reputation as a global business hub by constantly attracting investors and business owners across the country and beyond. Among the various business structure options offered by this commercial hub, Free Zone Company and Establishment are the two most popular choices of foreign investors and business owners. 

Both these business structures present lucrative opportunities for a Dubai company setup by offering benefits like tax exemptions, simplified business setup, complete ownership, etc. However, certain primary distinctions between them are essential to understand. This blog will feature key differences in Dubai’s FZE and FZC and let you explore their benefits.

What is a Free Zone Establishment in Dubai?

What is a Free Zone Establishment in Dubai

A Free Zone Establishment can be described as a business entity owned completely by a single shareholder, which can be a corporate body or an individual. An FZE conducts operations in one of Dubai’s designated free zone jurisdictions. This type of business structure particularly attracts entrepreneurs who wish to establish their startups and achieve sole proprietorship in the city. 

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What is a Free Zone Company in Dubai?

What is a Free Zone Company in Dubai

Similar to FZE, a Free Zone Company is a limited liability company, which operates and conducts business in one of the free zones in the city. However, it can be owned or managed by multiple shareholders. FZC is provided with the benefit of more flexible opportunities for networking, partnerships, and joint ventures. Additionally, the multiple shareholders can hire a manager to manage the FZC if they don’t want to do that themselves. 

Benefits Offered by FZE and FZC in Dubai

Benefits Offered by FZE and FZC in Dubai

Business owners and investors benefitted from similar advantages from both FZE and FZC largely, as both these business structures operate in the same free zone legal framework.

Key similar benefits offered by FZE and FZC are: 

1. Foreign Ownership: 

Both FZEs and FZCs provide the significant benefit of complete foreign ownership to foreign investors and business owners in Dubai without the necessity of partnering with a local Emirati partner. 

2. Tax Exemptions 

Both these business structures allow foreign businesses to enjoy tax incentives or benefits like exemption from corporate and income tax, and import-export duties for up to a period of 50 years. 

3. Streamlined Business Setup Process

Both FZCs and FZEs operated within the same legal framework, i.e., free zone. Therefore, both offer the benefit of streamlined business setup procedures with fewer and fewer documentation requirements than the mainland and offshore business setup in Dubai

4. Capital and Profit Repatriation

Apart from easy and quick freezone company formation, these business structures offer the benefits of 100% repatriation of earned capital and profits without any restriction to a business’s home country. 

5. Access to High-end Infrastructure Facilities

Both FZEs and FZCs allow businesses to access high-end infrastructure facilities like diverse office spaces equipped with modern networking facilities. 

6. No Currency Restrictions

Both these business structures operating in free zone jurisdictions benefit from no currency restrictions, which allows businesses to conduct transactions in any currency. This greatly supports international trade.

7. Visa Sponsorship

Businesses established in FZEs and FZCs are allowed to easily hire talented foreign professionals, as they are eligible sponsors for residency visas of their international workforce.

Key Differences Between FZE and FZC in Dubai

Key Differences Between FZE and FZC in Dubai

Both Free Zone Company and Establishment are registered business entities in Dubai free zones, jurisdictions where a business entity can be completely owned by an expatriate without a local Emirati partnership. However, there is a major distinction between their shareholders’ structure.

Some key differences between FZE and FZC in Dubai are:

1. Number of Shareholders: FZE is designed to be owned by a single shareholder however, an FZC can be owned by a minimum of 2 and a maximum of 5 shareholders. This distinction greatly influences the ownership and operational structures of business entities.

2. Suitability and Type: A Free Zone Company is a single-owner business type and typically attracts entrepreneurs. However, FZE is a more suitable choice for SMEs with multiple shareholders.

3. Flexibility: Both these business structures offer similar choices in case of available Business license options that include industrial license, service license, trading license, etc. However, a business can conduct operations with more flexibility in FZE as compared to FZC.

Three Key Factors When Choosing a Free Zone Business Entity in Dubai

Three Key Factors When Choosing a Free Zone Business Entity in Dubai
  • Business Activity: While choosing a free zone business entity in Dubai, you must keep in mind that the chosen business structure (FZE or FZC) must align with the business’s operational needs.
  • Cost Considerations: Compare the costs of a freezone company setup in UAE offered by both these free zone business structures and secure the best option that aligns with your budget needs. 
  • Legal and Regulatory Framework: Understanding how the chosen business structure will impact the legal and regulatory framework of a Dubai company setup is essential before choosing a business entity.

Conclusion

With similar lucrative benefits offered by both FZEs and FZCs, it might be overwhelming to choose the right business entity for your business. At Start Any Business, India, guidance and assistance from business setup specialists can help you secure a well-informed decision aligning with your business needs. 

Our years of expertise and constant reputation as the Emirates’ leading business consultant In Dubai firm make us a reliable partner to establish a successful business venture in Dubai’s dynamic business environment. From navigating legal framework documentation to better financial planning, we can offer help in several ways for an efficient freezone company formation in the Emirates.

Also read: How to Obtain an Import Export Code in Dubai: A Complete Guide

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