What are the Differences between a Mainland Company and Free Zone Company?
Each jurisdiction offers a different approach regarding the following aspects.
- Ownership of business
As a business owner or foreign investor, you want to have full control and ownership of your business. In this sense, the two jurisdictions differ greatly. Let’s observe:
- With a professional license as a Mainland company, expats can own 100% of shares but it’s still necessary to have a local service agent (depends on activity, there are some exceptions).
- Expats running Free Zone companies can enjoy the complete ownership of the company, for this reason you don’t need a local service agent.
As you can see, the Free Zone Company is better for those who want to have complete ownership, but it’s also important to consider all other aspects.
- Office Space
Another main difference between Mainland and Free Zone licenses is the office or work space.
- Mainland Company: the business should have a physical office space that complies with a minimum of 200 sq. ft. It’s important to lease the area so you can get the license for your business or coworking space (depends on the nature of activity).
- Free Zone Company: it doesn’t necessarily need to have an office space. It means that you can opt for a virtual office or you can work without an office as it’s not a requirement.
In this regard, a Free Zone Company is a cost-effective solution for setting up your business if you don’t want to rent an office space.
- Scope of Business
When it comes to the scope of business, there are some differences between a Mainland Company and Free Zone Company.
- Mainland Company: A main advantage of this jurisdiction is that allows companies to carry out business anywhere in the UAE. It means that you can do business within the UAE and outside as well.
- Free Zone Company: there are restrictions for trading from Free Zone to Mainland B2C but it is possible for B2B.
- Visas
Another important difference between Mainland vs free zone is visas.
- Mainland Company: You won’t have any restrictions in terms of visa eligibility. However, the area of your workspace determines the number of visas issued. All visas are for 2 years.
- Free Zone Company: Some restrictions for visa eligibility apply. It varies depending on each Free Zone regulations but usually it ranges from 1 to 6 visas issued. It means that if you need more visas you should then lease out an office space. All visas are for 2 years.
- Audit
When it comes to company audit, it’s important to understand the following differences:
- Mainland Company: At the end of the financial year you’re obliged to prepare an audit.
- Free Zone Company: Not all companies must deal with audit. However, some entities may be required to do it. It varies depending on the Free Zone jurisdiction.
- Capital Requirement
The capital requirement is another difference between Mainland Company and Free Zone Company licenses, highlighted below:
- Mainland Company: The legal structure determines the minimum capital requirement of the business.
- Free Zone Company: The Emirate in which the company is formed is in charge of determining the minimum capital requirement. Most of the time paid up capital is not required.
- Approval from Government Authorities
- Mainland Company: your company requires standard approvals such as the license issued by the DED, and from other government bodies like Ministry of Labour, Dubai Municipality, etc.
- Free Zone Company: the approval from government authorities varies depending on the Free Zone, since each one has its own set of rules and regulations. It may be necessary to get external approvals from concerned government bodies and agencies.
- Company Set-up
Mainland: Physical presence is required for incorporation and initial visa process.
Free Zone: Incorporation and initial e-Visa can be done remotely. The concerned party still needs to come to the country to complete visa stamping and EID. However, the time can be minimized.