Incorrect advice on structures
The most crucial part of the company setup process is receiving the correct advice on your company structure. If your company is setup incorrectly, it can cost you thousands of Dirhams and weeks or months to correct – delaying your ability to start earning profits. It could also see your company miss out on lucrative contracts because customers cannot award your company business. Ensure the advice you are receiving doesn’t come from a sales pitch, rather from years of commercial experience and reputable qualifications.
Not recognizing value for money
With so many company structures to select from, it can be overwhelming to understand which is the perfect fit for you. There are more than 50 free zones to choose from and onshore companies have more than 2500 business activities available. The cheapest option is not always the correct option. The best value you can find is a compliant company structure that maximizes your profit potential, both now and in the future.
Setting up a company that lacks credibility
Some banks are now refusing to issue corporate bank accounts to companies established in certain jurisdictions. This could render a newly established company worthless if it cannot open banking facilities. Check thoroughly before committing yourself to ensure you will have appropriate banking options to suit your business.
Putting shareholders investments at risk
Having the wrong shareholding structure for your company could mean you do not have control, putting your investors’ money at risk. For a Dubai mainland / onshore company, you need know what to look out for and how to recognize and appoint a safe corporate nominee. Likewise, free zone companies can eliminate their risk if their shareholdings are structured correctly. With several options available to safeguard shareholder investments, this is a risk that can be reduced by more than 85% if the correct advice is followed and implemented.
Not planning for the future
Establishing a company based purely on today’s requirements could see you incurring the cost of another company setup in a years’ time. Research shows that 64% of companies incur unnecessary costs to amend their business licenses between 18-24 months of establishment due to poor forward planning. Save your time and money by setting your company up correctly from the outset, safe in the knowledge that it will be suitable as your operations grow.
Errors on company trade licenses
Nearly 1 in 3 companies have errors on their trade licenses. Mistakes like this can be expensive to the shareholders, costing on average AED 10,000 to correct. These errors come from setting up the company incorrectly, not keeping current on changing regulations and not fully understanding the operations and requirements of your business to begin with. Make sure you are getting the correct trade license and activities for your business before incorporating.
Operating with the incorrect license
Your company needs to have the correct license when operating. Getting this wrong could lead to fines of up to AED 100,000. Not only can the company face fines, the General Manager can be personally liable and fined. To protect your shareholders, company and General Manager, ensure you company setup is correct for the type of trading you will be doing.
Not maximizing profitability opportunities
¾ of all companies established in 2018 missed opportunities that could have boosted their profitability. When setting up your company, an in-depth knowledge of government processes and regulations will ensure that you receive the greatest number of activities on your trade license. This gives access to additional target markets and revenue streams to boost profitability and returns to investors.
Not understanding local laws and regulations
An Australian woman faced imprisonment for 6 months and fines for allowing employees to work for her company without the correct visas. It is imperative that you are aware of the laws and regulations you will be required to abide by. As soon as your company is setup, make sure you have an expert familiarize you with the relevant laws so you avoid expensive mistakes.
Not keeping up to date with current and changing regulations
Like all countries, UAE regularly changes and updates rules and regulations that affect company owners. To avoid fines, jailtime or worse, it is vital that you understand the laws that you must abide by and know when changes will impact you, your business and your shareholders. The Federal Law No. (2) of 2015 on Commercial Companies in the United Arab Emirates (UAE) is just one of the many laws that investors and managers must follow. You must keep up to date with all of these changes.