The United Arab Emirates (UAE) is one of the best places to start a business. It offers unmatched advantages in terms of tax rates, infrastructure and more. However, some business owners still are unable to make the most of these opportunities because of some common mistakes that can be easily avoided. In this article, we will discuss 8 common mistakes made when setting up a business in the UAE. And we will also suggest ways to avoid them.
1. Inadequate market research Market research is going to impact most decisions you make while setting up a business in the UAE. It will help you identify the business opportunities, emerging trends, competitive landscape, customer segments and more. If your market research is inadequate, it will eventually lead you to multiple wrong decisions and jeopardise the business even before it gets traction. 2. Choosing the wrong jurisdiction There are multiple jurisdictions within the UAE for you to register the business. These jurisdictions come with their own set of regulations and hugely impact the nature and capacity of your business operations. The jurisdictions to set up a business in the UAE are primarily classified into mainland, free zone and offshore. And then there are more specifications. For instance, there are more than 40 free zones in the UAE where you can set up a business. Failing to choose the right jurisdiction for your business can be detrimental. It impacts everything right from your ability to trade to determining how much profit you can take home. 3. Choosing the wrong business activity and licence The second most important business decision after choosing the jurisdiction is going to be about the business activity and licence. Each jurisdiction in the UAE allows for a specific set of business activities. While it might sound simple, there are nuances to it. You will have to get the licence and relevant permits based on the business activity you choose. Failure to do so correctly can eventually lead to business disruptions and penalties. 4. Doing it all yourself No matter how confident you feel about your research on business setup in the UAE, there are some things best left to professionals. If you are new to the UAE market, there are potentially many things you can do wrong. Especially, if all the source of your information is just the internet. Try getting help from professionals who are well aware of all the regulations. Suppose you are seeking guidance to set up a business in Ras Al Khaimah Economic Zone (RAKEZ), they have business development professionals who can guide you on everything, right from licence type to choosing a suitable facility. This is a much better option than relying on random websites that do not factor in the nuances of various jurisdictions and activity types. 5. Lack of financial planning When setting up a business in the UAE, it is extremely important that you pay great attention to financial planning. You need to understand the initial costs, decide whether to buy or lease land, account for warehouse rent, take licensing costs into account and more. Make sure you have proper financial planning in place. Have a good understanding of cash flows. Prioritise requirements and allocate budgets accordingly. Failure to plan finances properly could lead to business slowdown and other unwanted issues. 6. Incomplete or incorrect documentation Documentation is going to be important at every step of the way of setting up a business in the UAE. You will have to submit documents at the time of applying for a licence, visa, trade permit, bank account and more. Failure to provide correct documentation at the right time could lead you into all sorts of trouble. For most procedures, there is going to be a clear list of all the essential documents you need to provide. Make sure you go through these carefully and have all the necessary documents ready to prevent any hiccups. 7. Violation of employment agreements The UAE has a clear set of regulations when it comes to labour laws and employment agreements. One of the common mistakes made by new businesses is that they fail to follow some of the regulations because of a lack of knowledge. You do not want to be one of those businesses. Make sure you follow all the employment-related regulations. This includes compliance with local laws, employee rights and entitlement, termination procedures, health and safety considerations and more. 8. Not developing an understanding of local business laws Understandably, you would be unaware of local business laws at the start. But as you set up your business in the UAE and continue with operations, it is important that you start learning about the local laws and regulations. Doing so would not only save you from hiccups but it will also help you identify business opportunities that could go unnoticed otherwise. So start updating yourself on the local laws with the goal of developing a sound understanding of business regulations.
Business owners are susceptible to making mistakes when starting because of the lack of knowledge and proper guidance. But you can significantly reduce the chances of making such mistakes by consulting with a competent authority. If you are planning to set up a business in RAKEZ, then our experienced Business Development professionals will guide you through all the initial challenges. They can prepare a customised package based on your specific requirements so that you do not run into any issues while starting. Contact us today to know more.
Q: How can choosing the wrong jurisdiction affect my business in the UAE? Ans: Each jurisdiction in the UAE has its own set of regulations that impact the nature and capacity of your business operations. Choosing the wrong jurisdiction can affect your ability to trade, profit margins and overall business success. Q: What are the consequences of selecting the wrong business activity and licence? Ans: Incorrectly choosing the business activity and licence can lead to business disruptions and penalties. Each jurisdiction allows specific business activities, and obtaining the appropriate licence and permits is essential for smooth operations. Q: What are the risks of incomplete or incorrect documentation? Ans: Incorrect or incomplete documentation can cause delays and complications during the business setup process. It is crucial to ensure all necessary documents are ready and submitted on time to avoid any procedural hiccups. Q: What should I know about employment agreements and labour laws in the UAE? Ans: The UAE has strict labour laws and employment regulations. Violations can result from a lack of knowledge. Compliance with local laws, employee rights, termination procedures and health and safety regulations is essential to avoid legal issues.
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