UAE law provides for a number of business forms for investors.

Historically, foreign ownership of legal entities was restricted in the UAE, and a minimum of 51% local participation was required in most cases. Restrictions to foreign participation were partially lifted by Federal Decree-Law No. 19 of September 2018. Effective 1 June 2021, however, a new Federal Decree-Law No. 26/2020 opened up full ownership of a UAE company, including limited liability companies and single-shareholder companies, to foreign investors except in sectors deemed to be of “strategic impact”.

A list of strategic impact sectors where foreign ownership remains restricted is yet to be finalized at the federal level. However, an announcement from the Dubai Department of Economic Development listed the following sectors as restricted activities:

• Security, defence, and military activities;
• Fisheries and associated services;
• Certain financial institutions;
• Printing banknotes;
• Communications; and
• Hajj and Umrah services.

Likewise, the UAE Cabinet approved Cabinet Resolution No.16 of 2020, which provides a positive list of economic sectors and activities eligible for up to 100% ownership through foreign direct investment, which include the following sectors:

• Agriculture;
• Manufacturing;
• Transport and storage;
• Hospitality and food services;
• Information and communications;
• Science and technology;
• Healthcare;
• Education;
• Arts and entertainment; and
• Construction.

Concurrently, the Dubai Department of Economic Development issued a ‘Foreign Ownership Activities’ list consisting of upwards of 1100 activities that are open to full foreign ownership. A similar list has been issued by the Abu Dhabi Economic Development Directorate, also with effect from 1 June 2021. The eligible activities are subject to minimum capital requirement for each activity and certain other requirements such as investment in modern technologies, contribution to research and development, employee headcount, etc.

The main business forms include the following:

Joint Stock Company

Joint stock companies (JSC) in the UAE may be formed as private or public companies.

Key aspects of a Private JSC include:

• A minimum of 2 shareholders/ founding members;
• Chairman and a majority of the board of members must be UAE nationals (up to 29 March 2021);
• Minimum capital requirement of AED 5 million;
• Shares of the company cannot be offered publicly; and
• Private JSCs may be converted into public JSC if the following conditions are met:
  • the company has been in operation for at least 2 or more financial years;
  • share capital is fully paid up;
  • distributable net profits have equaled an average of at least 10% of the capital in the 2 years prior to application for converting; and
  • a resolution to convert is adopted by a majority of the shareholders holding at least 75% of the shares.

Key aspects of a Public JSC include:

• A minimum of 5 founding members;
• Minimum capital requirement of AED 30 million;
• Chairman and a majority of the board of members must be a UAE national (up to 29 March 2021);
• The capital of the company is divided into shares of equal value, which can be subscribed to publicly; and
• This form of legal entity is required for businesses engaged in banking and insurance activities.

Limited Liability Company (LLC)

The UAE allows for the establishment of an LLC, in which each partner's liability is limited to the extent of their contribution to the capital of the company.

Key aspects of an LLC include:

• A minimum of 2 partners and a maximum of 50;
• The law directs partners to specify the value of capital in articles of incorporation but does not require a minimum capital investment; and
• Prescribed minimum capital requirements have been replaced by a test of sufficient capital determined by the Department of Economic Development of the relevant Emirate.

Branch Office

Foreign companies are allowed to establish branch offices in the UAE.

Key aspects of a branch office include:

• Able to conduct business activities in the UAE, including entering into contracts;
• May only engage in business activities similar to that of its parent company;
• The branch office has the same legal identity as its parent company; and
• May not import the products of its parent.

Partnerships

The UAE allows for the formation of both general and limited partnerships.

Key aspects of a general partnership include:

• May be formed by two or more partners, all of which have unlimited liability; and
• Only UAE nationals are allowed to be partners in a general partnership.

Key aspects of a limited partnership include:

• May be formed by at least one general partner with unlimited liability and one limited partner, whose liability is limited to their contribution to the partnership;
• The general partners are allowed to manage the business of the partnerships, while the limited partners may not;
• Only UAE nationals are allowed to be general partners; and
• Limited partnerships may also be formed as partnerships limited by shares - the minimum capital requirement is AED 500,000.

Unincorporated Partnerships

UAE introduced a new federal corporate tax regime effective 1 June 2023. Under the new regime, incorporated partnerships include limited liability partnerships, partnerships limited by shares, and other types of partnerships where none of the partners have unlimited liability. Such partnerships are subject to corporate tax in the same manner as a corporate entity.

Unincorporated partnerships are treated as fiscally transparent entities unless the partners make an application to the tax authority to treat the partnership as a separate taxable entity. Fiscally transparent entity means that an unincorporated partnership is not subject to corporate taxation on its own. Persons conducting businesses as unincorporated partnerships are considered individual taxable persons for corporate tax purposes. These persons are subject to corporate tax on their share of income from the unincorporated partnership and are required to register for corporate tax purposes.

Further, a foreign partnership is treated as an unincorporated partnership if all of the following conditions are met:

• The foreign partnership is not subject to tax under the laws of the foreign jurisdiction;
• Each partner in the foreign partnership is individually taxed on its share of the partnership's income; and
• Any other conditions as may be prescribed by the Minister.

Joint Participation (Ventures)

Joint participation ventures are entities where at least two partners share in the profit and loss of one or more commercial activities conducted by one of the partners in their own name.