Key takeaways
- For most established UAE family businesses, the best structure is an LLC registered as a family company under Federal Decree-Law No. 37 of 2022 and run under a written family charter.
- Under Article 8 of Federal Decree-Law No. 37 of 2022, a UAE family company's sale of shares to a non-family buyer needs approval from partners holding at least three-quarters of the capital (as of October 2026).
- A family foundation (DIFC or ADGM) suits holding family investments, not running a trading business; the Federal Tax Authority (FTA) grants it tax transparency only if it meets five conditions, including no business activity.
- UAE corporate tax applies at 0% on taxable income up to AED 375,000 and 9% above it, and a family structure does not change that rate for a trading company.
- The usual best answer is layered: an operating company under a family charter, with a holding company or foundation above it once the family holds assets beyond the business.
What is the best structure for a family business in the UAE?
For a family that runs a trading or services business, the best starting point is a standard UAE company registered as a family company, with a family charter on top. The legal form is a separate decision from the family governance layer.
A family company is not a different kind of entity. Federal Decree-Law No. 37 of 2022 defines it as a company formed under the Companies Law where most shares are owned by persons of a single family. Public shareholding companies and general partnerships are excluded, so an LLC or a one-person company can qualify. Our guide to LLC, sole establishment and branch differences covers those forms.
The counter-case: if one founder owns everything, a registered family company adds paperwork before protection. It earns its place once two or more family members hold shares.
What does the UAE family company law add to an ordinary LLC?
The family company law adds optional governance tools and share transfer rules that an ordinary LLC lacks. Federal Decree-Law No. 37 of 2022 took effect on 3 January 2023, per the Ministry of Economy's published text. The main additions, as of October 2026:
- Family charter (Article 6): an optional document covering ownership, profit distribution, who qualifies as a member and dispute resolution, approved by a majority of the family council (or of the partners if there is no council).
- Register (Article 4): a unified Family Companies Register kept by the Ministry of Economy with the local authorities. Ministerial Decision No. 109 of 2023 deals with registration.
- Share transfer limits (Article 8): a partner who wants to sell must offer the shares to family members first; a sale to a non-family buyer needs approval from partners holding at least three-quarters of the capital; remaining partners get 60 days to redeem shares acquired by a third party.
- Inheritance (Article 24): an heir may stay on as a partner in proportion to the inherited share, or sell it.
When does a family foundation make sense, and how is it taxed?
A family foundation makes sense when the family wants to hold investments for beneficiaries under a charter, separate from any operating business. It is a poor fit for a trading company.
DIFC and ADGM each have a foundations regime: DIFC Law No. 3 of 2018 and the ADGM Foundations Regulations 2017. Both create a foundation with its own legal personality, run by a charter, a council that acts like a board, and an optional guardian. ADGM states founders can commit initial assets of as little as USD 100 and lists a registration fee of USD 200 (ADGM, accessed October 2026).
For corporate tax, the FTA's Family Foundations Guide says a foundation can apply for transparent treatment only if it meets all five Article 17(1) conditions:
- It is established for identified or identifiable natural persons, a public benefit entity, or both.
- Its principal activity is to receive, hold, invest, disburse or manage assets or funds associated with savings or investment.
- It conducts no activity that would be a Business Activity if a natural person beneficiary did it.
- Its main purpose is not avoiding corporate tax.
- If a public benefit entity is a beneficiary, income is exempt or distributed within 6 months of the end of the Tax Period.
The foundation must first register for corporate tax, apply to the FTA before the end of the relevant Tax Period, and confirm annually within 9 months of that period's end (FTA Decision No. 5 of 2025). Ministerial Decision No. 261 of 2024 also lets entities wholly owned and controlled by a qualifying foundation apply for similar treatment, retroactive to 1 June 2023.
How do the main family business structures compare?
The structures differ in purpose: running a business, governing family ownership, or holding family assets. The table compares them as of October 2026.
| Structure | Legal basis | Best for | Key condition | Corporate tax position |
|---|---|---|---|---|
| Ordinary LLC | Federal Decree-Law No. 32 of 2021 | One operating business | Memorandum and licence | Taxable person: 0% to AED 375,000, 9% above |
| Registered family company | Federal Decree-Law No. 37 of 2022 | Governing family ownership | Most shares held by one family | Same as the underlying company |
| Sole establishment | Licensing authority rules | One owner, small scale | Taxed only above AED 1,000,000 yearly turnover (Cabinet Decision No. 49 of 2023) | Natural person rules |
| DIFC or ADGM foundation | DIFC Law No. 3 of 2018; ADGM Foundations Regulations 2017 | Holding family investments | Charter, council, registration | Transparent only if FTA approves; otherwise taxable |
Accurate as of 07 October 2026. Fees and licensing costs vary by authority; check the registry before you budget.
If you'd rather not track the filing dates for these structures by hand, the free UAE compliance calendar lists them for your company: a free calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
How do you set up a family business structure in the UAE?
Setting up takes five steps, and the order matters because the charter must match the company documents.
- Decide who the owners are and what happens to shares on exit, death or disagreement.
- Form or confirm the operating company with its licensing authority, with a Memorandum of Association that carries the transfer restrictions.
- Draft the family charter under Article 6 of Federal Decree-Law No. 37 of 2022, and approve it by the majority the law requires.
- Apply to the Family Companies Register under Ministerial Decision No. 109 of 2023.
- Register for corporate tax on EmaraTax and, if a foundation holds the family's investments, apply to the FTA for transparent treatment before the end of the relevant Tax Period.
What would change the recommendation?
Scale, the type of assets and your free zone change the answer. Say a SHAMS consulting company bills AED 4m a year and two siblings own it: a clear charter matters more than a foundation. Say the family also holds property worth more than the company: that is where a foundation or holding company earns its cost.
Free zones also differ: whether a free zone company can join the Family Companies Register is not confirmed here, so ask your registrar first.
At least three-quarters of the capital: the approval a UAE family company needs from its partners before shares can be sold to a non-family buyer. Source: Article 8, Federal Decree-Law No. 37 of 2022 (Ministry of Economy published text), checked 07 October 2026.
What most guides don't tell you
- Losing the family company label is automatic. Under Article 23 of Federal Decree-Law No. 37 of 2022, family company status ends if non-family persons acquire the majority of voting shares. An investor taking 51% ends the protections you registered for.
- A foundation can turn taxable by drifting. The FTA says a foundation that stops meeting the Article 17(1) conditions during a Tax Period reverts to taxable status. A foundation that starts running a business risks exactly that.
- Charter and Memorandum can contradict each other. The charter is optional and the Memorandum is not, so draft them together.
- A sole establishment can tax the owner personally. A natural person's business income is taxed once turnover passes AED 1,000,000 in a calendar year; wages and personal investment income fall outside that rule (Cabinet Decision No. 49 of 2023).
Which deadlines apply to your family company?
A family structure adds corporate tax filings and, for foundations, annual FTA confirmations on top of licence renewals. See your own dates in the free UAE compliance calendar.
Frequently asked questions
How do I set up a holding company in the UAE? A UAE holding company is usually an LLC or a DIFC or ADGM company that owns shares in operating companies. Whether dividends and gains from subsidiaries are exempt depends on the participation exemption conditions in the Corporate Tax Law, so check FTA guidance first.
Should I set up an offshore company in RAK ICC or JAFZA Offshore? Offshore companies in UAE registries are generally designed to hold assets rather than to run an operating business onshore, and each registry sets its own rules. For a family business that trades in the UAE, the operating company is normally a licensed LLC or free zone company; confirm the permitted activities with the registry first.
Can a UAE company be owned by a foreign company? Yes, the Companies Law lets companies hold shares in a UAE company, subject to the licensing authority's rules for your activity and emirate. If the owner is a corporate shareholder, ask the Ministry of Economy whether the company can still qualify as a family company, because the law looks at whether persons of a single family own most of the shares.
Can I have multiple shareholders in a free zone company? Most free zones allow more than one shareholder, but the maximum number and the documents required differ by free zone. The family company law sets no minimum number of partners.
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- Federal Decree-Law No. 37 of 2022 on Family Companies, English text (Ministry of Economy)
- Companies' legislations (Ministry of Economy)
- Taxation of Family Foundations Corporate Tax Guide (FTA, 27 May 2025)
- Ministerial Decision No. 127 of 2023 on Unincorporated Partnership, Foreign Partnership and Family Foundation (FTA)
- Cabinet Decision No. 49 of 2023 (Ministry of Finance)
- Federal Decree-Law No. 47 of 2022 on Corporate Tax (Ministry of Finance)
- Corporate tax (u.ae)
- ADGM Foundations regime (ADGM)
Last checked: 07 October 2026
This is general information, not tax or legal advice for your specific situation.