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NEW COMPANY SETUP IN DUBAI AND THE U.A.E.
Dubai and the UAE rank among the top highest globally from 183 countries in trading across borders; they constantly attract investors from across all continents. The UAE offers an excellent opportunity for business owners and new entrepreneurs given its strategic location within South Asia. Businesses are strategically located to access the Middle East, Asia, Africa and European markets from this hub. The tax laws are very encouraging and have seen many start-up companies establish their base here and grown to mega corporations around the world.
Unlike most international jurisdictions, the key driver is the stable political climate and the multicultural business climate that allows companies to prosper. The regulatory framework provides for a well-coordinated and incentivizing environment for new and existing businesses. However, to succeed in the UAE’s booming economy and to take advantage of new market entries in to neighbouring markets, new investors must carefully consider their setup options. This starts from the very first basic step of picking a business name, its legal format and location.
The Seven Wise Men can assist you right from the moment you set foot in to the UAE and guide you through till you achieve your objectives. That is, become a profitable business, or build a top brand or whatever other goals you have set for yourself and your business.
The UAE provides three major jurisdictions for new business registration.
- Onshore or Mainland
- Free Zone (over 50 free zones within the country)
Once a promising business idea is hatched and necessary planning has been completed, it’s time to make it happen and get the licenses required to operate. Choosing the right jurisdiction is critical to ensure the company can operate smoothly. Usually, this choice hugely varies among clients and depends on a multitude of elements such as your business activity, business model (local or international business) among many others. However, other needs must be considered such as the time to set up the new business, need to start making a profit, the headcount needed, operating and non-operating costs, the regulatory framework, and competition intensity and so on. All of these factors are important to choose the right jurisdiction to set up a new company.
More than getting just a new business setup service, it’s advised that you strive to find a long term business partner that offers onshore and offshore jurisdictions.
– Click this link to read more about the rules and regulations applicable in Dubai and the U.A.E., including a FAQ section that addresses the majority of your questions.
LISTING OF ALL FREE ZONES IN THE U.A.E.
- What is the average time taken to erect a company in UAE?
It partly depends on the rules and regulations of the free zone, and partly if the business has individual or corporate shareholders. However, the average time taken to get a business up and running is in between 3-6 weeks.
- What is the minimum investment required to start a business in free zones?
To start a free zone limited liability company with the least capital, you need to consider first the level of activity your company does. According to the latest cost analysis, the current minimum cost ranges from AED 20.000 – 25.000 per year.
- Which legal form is recommended for registering a business in the UAE free zone?
Choosing the legal format of a company depends on your business activity, number of owners, the nationality of owners and ownership criterion. Three most common forms are:
- Free Zone Establishment (FZE) which allows only one shareholder
- Free Zone Limited Liability Company (FZ-LLC) in which allows multiple shareholders
- Branch Office
HOW TO EVALUATE A POTENTIAL BUSINESS ACQUISITION.
There's nothing simple about estimating the value of a business you want to acquire. Valuating a business is not a simple exercise, nor is it an exact science. It simply provides a theoretical value that will give you an idea of the fair price to pay for a business.
You mustn't rely only on the judgment of your accountant or of the seller. It is recommended that you have an expert, who specializes in business valuations, produce an independent report.
In general, you will rarely be able to compare your potential acquisition with a similar transaction. There is little information available on such transactions and they may not even apply to your specific conditions. Also, the terms may be too closely related to a particular sector to be useful.
3 degrees of assurance
According to the CICBV, there are three types of reports, they vary from the most general to the most detailed:
Calculation report: Provides an approximate valuation for initial planning.
Estimate report: Ideal for preliminary negotiations, succession planning, and situations involving important issues that are subject to budgetary constraints.
Comprehensive report: Appropriate in situations that involve high risks, important issues, or when there are legal proceedings.
To prepare their reports, evaluators look at the facts and financial data, formulate a conclusion, and the possible impacts on the estimated value. They will also add a disclaimer regarding the scope of the mandate, which varies with the quality of the report provided.
To produce a calculation report, the valuator reviews and analyzes the financial information and may meet with management.
The estimate report takes the same approach but is more exhaustive.
In the comprehensive report, the valuator provides an opinion. It is a more in depth analysis of the business and it reviews:
Patents, bylaws, and shareholder agreements
Business' economic situation and sector
Market conditions and the competition
Clientele and any contracts, backlog of orders
Suppliers contracts and commitments
Visit to the business
Financial and forecast data
Rationale for the choice of discount and capitalization rates using accepted financial models
Basic valuation principles
The first step in the process of establishing a price consists of determining the fair market value of the business. The three main valuation principles are:
Value is dependent on expectations
Value is dependent on future cash flows
Value is dependent on tangible capital assets
There are two basic ways of determining the value of a business:
Book value: Company's net worth, which is equal to assets minus liabilities. What is shown in the financial statements.
Liquidation value: Assumes that the business sells all its assets, pays off all its debts, including taxes, and distributes the surplus to its shareholders.
Earnings and Cash flow
Discounted cash flow: Value is based on the future cash flows of a business.
Going concern value: Assumes that the business will continue operating and compares the current cash flows with future inflows to make projections.
Some of the most common techniques used to calculate a business value include:
Capitalization of typical net earnings: A value can be attributed to future earnings resulting from the acquisition. To obtain the going concern value, a capitalization multiple is applied to these earnings and non-operating assets are added.
Capitalization of typical cash flows: The same as above with the exception that cash flows, rather than earnings, are capitalized.
Discounting of expected future cash flows: Consists of determining the most likely future cash flows and discounting them at the valuation date.
Determination of adjusted net assets: Liabilities are subtracted from the determined fair market value of the assets. It is used for businesses, such as those in the real estate sector, whose value is asset-related rather than operations-related.
In some sectors of the service industry the value of a business is based on a multiple of revenues. For example, an insurance brokerage firm can be worth 1 to 1.5 times the commissions received over a period determined by negotiation.
In the final analysis, purchase conditions and the final price paid will be determined in your negotiations with the vendor.