Sole Proprietorship Vs. LLC: Things You Need to Know
Sole Proprietorship Vs. LLC:
Selecting the right business structure is one of the most important decisions a business owner has to make. Taxes, the seamless transition of ownership within the firm, and the security of personal property can all be impacted by a company’s structure. The majority of companies in Dubai are established as LLCs (Limited Liability Companies) or sole proprietorships. IBR Group offers business consulting services in Dubai and is available to discuss the differences between an LLC and a sole proprietorship in order to determine which would be the best choice for your particular firm.
When starting a new business, the appropriate business structure needs to be selected. Due to their simplicity and flexibility, limited liability companies and sole proprietorships are the favored company structures for many small business entrepreneurs. This essay goes into great detail explaining the differences between an LLC and a sole proprietorship. From a range of options, entrepreneurs can decide between a sole proprietorship and an LLC for their business form. You could decide to create a business in one of the numerous free zones to benefit from 100% firm ownership, 100% repatriation of capital and earnings, no currency limitations, and 100% exemption from import and export taxes.
One option is to locate your company on the mainland, which offers several benefits such as the capacity to deal directly with the UAE market. It is true that starting a business on the mainland could initially appear a little more challenging than doing so in a free zone, but this need not be the case. Establishing a mainland is easy if you have the right help. Continue reading to learn more about Sole proprietorships and LLCs.
What is LLC?
Members are the owners of a Limited Liability Company (LLC), a particular type of business. The only party that may be held accountable in the event that the business is sued or unable to pay its debts is the corporate entity, as it is distinct from the members. The elements of a corporation, partnership, and sole proprietorship are all combined into an LLC.
What is a Sole Proprietorship?
A sole proprietor is a person who owns and operates an unincorporated business. If you want to manage your domestic LLC (Limited Liability Corporation) as a corporation, you are not considered a sole proprietor. Please do not hesitate to contact IBR Group if you require assistance.
Sole Proprietorship vs LLC
When starting a business in the UAE’s mainland, entrepreneurs usually have two options: LLC or sole proprietorship. There is no right or incorrect decision in this situation. The ideal sort of business for you will depend on a number of factors, including your personal circumstances, firm size, scope, type of license, and commercial activities. But as you make your choice, the most important things to keep in mind are your financial and legal exposure. An LLC restricts your entire exposure to the amount you invested in the business, but a sole proprietorship carries unrestricted liability, which includes all of your earnings.
Unless you have a specific reason for going solo, setting up an LLC is probably the best option—there’s a reason it’s the most popular kind of business establishment in the UAE. However, spend some time discussing your needs with a Company Formation specialist before making any such decisions. They are going to be able to advise you on the ideal course of action.
But it’s much easier to start a sole proprietorship than an LLC. There is no need to file taxes or additional paperwork. All that is required of proprietors is that they select a suitable name and cover the registration fee. The procedure of forming an LLC involves additional steps. It is necessary to have a partnership agreement, choose a registered agent, and follow other legal and tax requirements.
If you are the only owner of your firm, all of your income is recorded on your taxes, so you do not need to submit separate tax returns for your business. You will also have to pay yearly state filing fees if you decide to form an LLC.
How to Establish a Sole Proprietorship?
First, decide what kind of business you want to start by weighing the advantages and disadvantages of an LLC vs a sole proprietorship. For entrepreneurs wishing to go it alone in the United Arab Emirates, a sole proprietorship can be a good option because of the low startup costs and the capacity to form a company with just one shareholder. Additionally, you can maintain complete ownership of your business with the help of a Local Service Agent (LSA).
1) It's easier to setup than you might think
In the United Arab Emirates, starting a single institution is as easy as starting any other type of business. As it happens, applying to start a business on mainland might be easier than applying in a free zone. Choose the license type and business activity, then send your application straight to the Department of Economic Development (DED). Thanks to recent initiatives that have made setup incredibly simple, if you meet the registration requirements, the entire process takes just 90 minutes.
2) Minimal setup costs
In the UAE, opening a single location is an easy, quick, and affordable process. Application fees for licenses begin at AED 17,000, and since large facilities are presumably not required, launch costs are often quite low.
3) Getting a sponsor
Establishing any form of business on the UAE mainland requires you to find a UAE national to sponsor the enterprise and offer them 51 percent ownership. Only then can you engage in direct business with the local market. For a single establishment, an LSA will be adequate. Unlike local sponsors, LSAs don’t own any part of your company, thus you maintain complete control. LSAs do not manage the day-to-day operations of your firm or make decisions. For a fee, they solely handle administrative tasks such as processing applications for permits, licenses, and visas. Either a UAE-based person or a business with 100% UAE ownership may be your LSA.
4) It is easy to open a corporate bank account
Establishing any form of business on the UAE mainland requires you to find a UAE national to sponsor the enterprise and offer them 51 percent ownership. Only then can you engage in direct business with the local market. For a single establishment, an LSA will be adequate. Unlike local sponsors, LSAs don’t own any part of your company, thus you maintain complete control. LSAs do not manage the day-to-day operations of your firm or make decisions. For a fee, they solely handle administrative tasks such as processing applications for permits, licenses, and visas. Either a UAE-based person or a business with 100% UAE ownership may be your LSA.
5) Sponsor visas for dependents
You are qualified to apply for your visa as the owner of a single business located in the United Arab Emirates. On the other hand, sponsoring your dependents’ immigration applications is also quite easy. Getting entry authorization, changing your status, passing a medical fitness test, and finally registering for a UAE ID and having your visa stamped are the four simple procedures that make up the procedure. But keep in mind that men usually find this process a little easier than women. A divorce document is typically required for women who wish to sponsor dependents, though each case is considered separately. Choosing to contact with a setting up professional is a great option, especially given how important this procedure is.
Sole Proprietorship vs LLC
We hope this helps you learn more about LLCs vs sole proprietorships.
Get in touch with us for appropriate direction.
If you want to start a business in UAE but don’t know where to start, you’ve come to the correct spot. IBR Group has started numerous businesses employing a variety of business structures all around the United Arab Emirates. If you are undecided which business structure—a sole proprietorship or an LLC—will be best for you, you can also get in touch with IBR Group. Send us a message to begin a conversation right now.