Major Business Problems You Can face While Launching a Business in UAE 2021

Dubai is also known as the “City of Gold” because of its exponential growth from a rudimentary Gulf port to the present world-renowned business crossroads within the span of a single generation. Known for its welcoming business environment, favorable tax system, legal framework, and abundance of raw materials, UAE is a favorite for many businesses to establish and flourish. The fact that UAE is a global hub for many international connection flights between the west and east is a cherry on top of the cake. But setting up a business has its own share of difficulties. This article highlights the major business problems you can face while launching a business in UAE 2021.

1. Company Ownership

Under the Commercial Companies Law of UAE, only 49% of an LLC that is operating as an onshore UAE business can be owned by foreign shareholders, regardless of the country of their origin. The law requires an Emirati citizen or even an exclusively Emirati-owned company to hold the remaining 51% majority share, thereby acting as the local sponsor. UAE laws also state that trading names selected by the company should not be previously registered and honour public morals while complying with the legal status.

If you are new to UAE, identifying a suitable sponsor for the company with the understanding of the UAE law, market knowledge, and capability to handle the local operations can be a demanding task.

There are however exceptions to this rule for companies that restrict their operations pertaining to trade of goods and services to specific allotted space within each Emirate called the free trade zones. They were developed to boost foreign investments in the country by offering 100% ownership by foreign shareholders. Recently there have been talks of extending the complete ownership outside of the free trade zones as well considering the current aftermath of the pandemic.

2. Project Funding

With all its glory, setting up a business in UAE will cost some big bucks and if your company is in the starting phase, obtaining any funding from UAE banks would be highly difficult. The audited balances of at least three years with positive figures and practical growth indicators are a few primary requirements for any application for business loans in UAE.

Unless you are backed by well-established funding, running the operations smoothly may not be feasible in the long run. The other option is finding a local investor which is often challenging because of the trust factor.

3. Money management

Efficiently managing money is an acquired skill and can extend beyond your business life. Dubai is an incredible place attracting millions of tourists to relax and have fun with extravagant ways to empty their pockets like fast cars, watches, fine dining, fashion, luxury...the list goes on.

The same analogy applies to your business spending too like impressive office spaces and overindulgence in branding.

Another important factor is the implementation of Value Added Tax(VAT). VAT is a 5% indirect tax applicable to all goods and services, with education, healthcare items, and basic food essentials as exceptions.

As per the study by the Association of Chartered Certified Accountants, 82% of startups fail as a result of poor profit and loss management. So unless you want your business venture to be a short stint in the UAE, taking hold of your revenue management early on will be advisable.

4. Job Market & People management

The workforce available in UAE is vast and diverse in culture. People of different ethnicity and background makes it a challenge for business owners to increase their levels of cultural awareness and sensitivity. With huge talents available in the job market, finding the right resource for your business can be an exhausting task.

In order to hire employees, UAE has set specific rules and regulations like legal UAE work visa and Emirates ID which is mandatory. Besides, the labour laws governing UAE nationals and expatriate workers are quite different. Prior consent of the Department of Labour and a work permit need to be obtained before an ex-pat can be hired. This could a time-consuming endeavor, so plan well in advance to avoid a delay in productivity.

Every employer registered with the Ministry of Human Resources and Emiratisation (MoHRE) must subscribe to Wages Protection System (WPS) and pay salaries to their employees through the WPS on or before the due dates. WPS is an electronic salary transfer system that organisations in the private sector use to pay an employee's wages through banks & other approved financial institutions.

Also, avoid getting buried in work yourself to prevent getting burned out. Burnout is above tiredness or exhaustion and has a devastating effect. It is a state of chronic stress that eventually blurs your thought process, impairs your cognitive function, and in extreme cases can lead to depression. Finding a work/life balance is the key to ensuring your sanity while adjusting to Dubai life otherwise all the effort taken so far would be in vain.

5. Organized workflow

Since there are plenty of rules and regulations and no corruption, many Dubai-based businesses struggle to stay organized over a long time which eventually leads to wipeout.

Information split across several systems along with patch-worked CRMs and limited accountancy software, project management tools and Excel spreadsheets which are initially used has to be upgraded with the growth of the company. Proper management of resources and company assets is key to maintaining a well-organized workflow.

In spite of the hurdles, running a business in UAE is highly rewarding and many new ventures come to UAE every year because of the positive attributes. With proper planning and guidance, one can stay one step ahead of the roadblocks that come when starting a business in UAE.