A Sole Establishment:
Law No. (13) of 2011, concerning the regulation of economic activities in the Emirate of Dubai, defines a sole proprietorship as an establishment owned by a natural person to conduct business activity in the emirate. Its personality does not separate from its owner, who is responsible for all financial obligations towards third parties. This means that a single individual owns the company under a commercial license issued in his name. This business setup implies that the company or the establishment cannot own the business, and the owner is personally liable for business activities, including company obligations and debts that creditors can claim as compensation.
A sole establishment (also known as a sole proprietorship) refers to the ownership of a business entity by one person with a commercial license issued in that person's name. It does not have legal personality or financial liability separate from its owner, who is responsible for fulfilling its financial obligations, whether sued personally or in the name of the establishment, or jointly when claiming the obligations as part of their financial liability. This also means creditors can demand the owner's personal assets to settle the establishment's debts.
A Limited Liability Companies (LLC):
Federal Law No. (32) of 2021 concerning commercial companies defines a Limited Liability Company (LLC) as a company with a minimum of two partners and a maximum of fifty partners. The partners' liability is limited to their share in the company, and the capital is not divided into shares or tradable. Management is carried out by one or more managers, not exceeding eleven members on the board of directors. A single natural or legal person can own an LLC, and the owner is only accountable for the company's obligations up to the capital stated in its incorporation contract. LLCs are subject to the provisions of this decree-law, which do not conflict with its nature.
LLCs are among the most common business entities in the UAE, suitable for various commercial, industrial, and professional purposes. The setup costs for an LLC are reasonable compared to other companies requiring minimum capital. Additionally, foreigners can own 100% of an LLC.
Difference between Sole Proprietorship and Limited Liability Company:
Sole proprietorship is owned by one person, whereas LLC ownership is limited and involves multiple individuals and legal entities.
A single individual cannot own an LLC.
Unlike sole proprietorships, LLC owners are not personally liable for company debts; liability is limited to the shareholder's investment in the company's capital.
LLCs should keep separate accounts from personal ones, unlike sole proprietorships where the owner can manage personal accounts.
Like sole proprietorships, there is no minimum capital requirement for LLCs, and they can obtain multiple residence visas and purchase real estate without restrictions.
ILS CONSULTANCY team of specialized consultants, offers constructive advice and clear legal consultations to all companies on how to take appropriate actions in establishing companies and providing all necessary services to ensure smooth business operations across the United Arab Emirates.
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