Key takeaways
- A UAE limited liability company (LLC) is a separate legal company: its shareholders are liable only up to their share of the capital, and under Article 71 of Federal Decree-Law No. 32 of 2021 it can have 2 to 50 shareholders or a single owner.
- A UAE sole establishment is owned by one individual, and that owner takes on all of its financial liabilities personally, so the owner's own assets sit behind every debt of the business.
- A UAE branch of a foreign company is not a new company at all: the foreign company itself trades in the UAE, and it needs Ministry of Economy approval plus a licence from the local emirate authority before it starts (Ministerial Resolution No. 138 of 2024).
- UAE corporate tax treats the three differently: an LLC pays 9% on taxable income above AED 375,000, an individual running a sole establishment is only taxed once business turnover exceeds AED 1,000,000 in a calendar year, and a foreign company's branch is assessed through the permanent establishment rules.
- VAT does not depend on the structure: any business, whichever form it takes, must register once taxable supplies and imports pass the AED 375,000 mandatory threshold (FTA, checked 3 October 2026).
What is the difference between an LLC, a sole establishment and a branch in the UAE?
The difference comes down to who the legal person is. An LLC is its own legal person owned by shareholders, a sole establishment is one individual trading under a licence, and a branch is a foreign company operating directly in the UAE.
| Feature | LLC | Sole establishment | Branch of a foreign company |
|---|---|---|---|
| Who owns it | 2 to 50 shareholders, or one person (Federal Decree-Law No. 32 of 2021, Article 71) | One individual | The foreign parent company |
| Liability | Limited to each owner's share of the capital | The owner bears all financial liabilities personally | The foreign company is the trading party; the branch is not a separate company |
| Corporate tax | 9% on taxable income above AED 375,000 | Taxed only if the individual's business turnover exceeds AED 1,000,000 in a calendar year | Foreign company taxed on its UAE permanent establishment |
| Approvals | Licence from the emirate or free zone authority | Licence from the emirate or free zone authority | Ministry of Economy approval, then a local licence, then Ministry registration |
Requirements shift by emirate and by free zone, so treat the table as the federal baseline and confirm your licensing authority's rules for your activity.
How does liability differ between the three?
In an LLC, a shareholder is liable only to the extent of their share in the capital. In a sole establishment, the owner is liable for everything the business owes, and in a branch the foreign company itself carries the exposure.
The federal Commercial Companies Law says each LLC member "shall only be liable to the extent of his membership interests in the capital" (Article 71). Abu Dhabi's ADSME hub states the opposite for an individual establishment: the owner "assumes all its financial responsibilities including its financial liabilities." That difference is why SMEs with staff, leases and supplier credit usually choose an LLC even though a sole establishment can look cheaper. The counter-case is a low-risk, owner-operated service business with no staff or credit exposure, where an LLC's extra formality buys little.
Who can own each one, and can foreigners hold 100%?
Foreign investors can hold up to 100% of most mainland LLCs. Federal Decree-Law No. 26 of 2020 removed the requirement for 51 per cent Emirati ownership or a local agent for most activities, with exceptions for activities of strategic impact (u.ae, checked 3 October 2026).
The u.ae portal lists sectors where full foreign ownership is not permitted: security, defence and military, telecommunications, banking, insurance and financial services, plus commercial agencies, Hajj and Umrah organising, and fishing. Free zones set their own ownership rules. Whether a foreign national can hold a sole establishment in a given emirate depends on the activity and the licensing authority; no federal rule we could verify settles it, so ask the Department of Economy and Tourism (DET) or your emirate's equivalent before you plan around it.
How are the three taxed differently?
Corporate tax follows the legal form. A UAE LLC is a juridical person taxed at 9% on taxable income above AED 375,000; an individual is taxed only on business turnover above AED 1,000,000 in a calendar year; and a foreign company is taxed through its UAE permanent establishment.
| Structure | Corporate tax position | Threshold or test | Source |
|---|---|---|---|
| LLC | Resident juridical person | 0% up to AED 375,000, 9% above (as of October 2026) | FTA Corporate Tax General Guide, section 4.2 |
| Sole establishment | Individual taxed on business income only if turnover is high enough | Total turnover from Business or Business Activities above AED 1,000,000 in a calendar year | Cabinet Decision No. 49 of 2023, Article 2, effective 1 June 2023 |
| Branch | Foreign company with a permanent establishment | Business conducted through a fixed or permanent place in the UAE | FTA Corporate Tax General Guide, section 5.4.1 |
Wages, personal investment income and real estate investment income are excluded from the individual's turnover test under Article 2(2) of that Cabinet Decision. The FTA's guidance says an individual with turnover not exceeding AED 1 million should not register for corporate tax. If you'd rather not track these dates by hand, the UAE compliance calendar is a free calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
AED 1,000,000: total turnover from business activities in a calendar year above which a natural person becomes subject to UAE corporate tax. Source: Cabinet Decision No. 49 of 2023, Article 2(1), checked 3 October 2026.
How do you set up a foreign branch, and how is it different from forming an LLC?
A branch is registered by the foreign company in two layers: Ministry of Economy approval first, then a licence from the emirate. An LLC or sole establishment is normally licensed directly by the emirate or free zone authority.
According to law firm summaries of Ministerial Resolution No. 138 of 2024 (issued 30 July 2024, replacing Resolution No. 377 of 2010), the steps run as follows:
- The foreign company applies to the Ministry of Economy for initial approval, which is valid for 8 months.
- The company obtains its licence from the local authority in the emirate where the branch will operate.
- The company completes registration with the Ministry of Economy within one month of receiving the licence.
- The branch appoints a UAE-licensed auditor each year, with registration renewed annually using the audited accounts.
The same summaries report that the earlier AED 50,000 bank guarantee requirement was dropped. We could not retrieve the resolution's own text, so confirm that point with the Ministry of Economy before relying on it.
What most guides don't tell you
Four details catch owners out more often than the headline differences do.
- A one-person LLC is not a sole establishment. The Commercial Companies Law allows one person to own an LLC (Article 71(2)), and Cabinet Resolution No. 77 of 2022 calls it a "limited liability sole proprietorship". It keeps limited liability, whereas an individual establishment does not. Many first-time founders hear "sole" and assume the two are the same.
- Admitting a partner changes the rulebook. Under Cabinet Resolution No. 77 of 2022, Article 16(4), a one-person LLC stops being one when partners are admitted and is then governed by the ordinary LLC provisions, so the shareholders' agreement and memorandum should be drafted with that day in mind.
- Ministry approval alone doesn't let a branch trade. A foreign company may conduct business in the UAE only after it holds both Ministry of Economy approval and a licence from the local emirate authority, so a branch plan needs both timelines, not one.
- The AED 1,000,000 test is about turnover, not profit. An individual whose business turns over more than that is inside the corporate tax regime even if the year ended in a loss, so check turnover in your books monthly rather than discovering it at year end.
Which deadlines apply to your company?
The structure you pick decides which registrations, renewals and tax filings land on your calendar. Get a free calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file, at the UAE compliance calendar.
Frequently asked questions
Can I own 100% of a mainland company in the UAE now? Yes, for most activities. Federal Decree-Law No. 26 of 2020 removed the requirement for 51 per cent Emirati ownership or a local agent for most business activities, but activities the Cabinet classes as having strategic impact are treated differently.
Which business activities still need a local Emirati partner or agent? The u.ae portal says full foreign ownership is prohibited in security, defence and military activities, telecommunications, banking, insurance and financial services, and a short list including commercial agencies and Hajj and Umrah organising (checked 3 October 2026). Because the activity list is set by each emirate's licensing authority, confirm your exact activity code with it before you commit.
How long does company formation take in Dubai? No official source publishes a single fixed timeline, so any figure you're quoted is an estimate. For a foreign branch, Ministry of Economy initial approval is valid for 8 months and registration must be completed within one month of getting the local licence, so those two windows set the outer limits.
Is SHAMS a good free zone for a consulting business? It depends on whether the consulting activity is on the free zone's permitted list and whether most of your clients are on the mainland, because free zone licences have their own activity lists and trading rules. Check the activity list and fee schedule on the Sharjah Media City (SHAMS) site, then compare against a mainland licence for the same activity.
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. 32 of 2021 on Commercial Companies (English text)
- Cabinet Resolution No. 77 of 2022, UAE Legislation portal
- Full foreign ownership of commercial companies, u.ae
- Choosing a type of legal form, Abu Dhabi SME Hub (ADSME)
- Cabinet Decision No. 49 of 2023, Ministry of Finance
- Corporate Tax basis for natural persons, FTA
- Corporate Tax General Guide, FTA
- Registration for VAT, FTA
- Ministerial Decision on registration of branches and representative offices of foreign companies, Afridi & Angell (law firm summary, interpretive only)
- A new regime for branches of foreign companies and representative offices, Hadef & Partners (law firm summary, interpretive only)
Last checked: 03 October 2026
General information, not tax or legal advice for your specific situation.