Top 8 Things to Know When Starting an Online Business in Dubai

Starting your own business can be a daunting task no matter where you decide to undertake it, but Dubai, in particular, seems to make it even harder – unless you’re informed. There are a multitude of things to take into account when opening an online business here, but we have taken the most important tips and summed them up in a handy list.

1) Financing can be difficult
It seems that banks in the region are still a little reluctant to finance young businesses. Despite numerous initiatives encouraging people to take risks and innovate, which have certainly helped a bit, it can still be quite challenging to get external funding for a venture. It is useful to pool some capital, talk to friends and family, and bootstrap as much as possible, at least at the very start. There are also a number of venture capital firms in the area as well as an increasing number of angel investors and, if presented with an idea that has a lot of potential, would be willing to invest in an ambitious and capable entrepreneur.

2) Administration is a big part of the process
It seems that banks in the region are still a little reluctant to finance young businesses. Despite numerous initiatives encouraging people to take risks and innovate, which have certainly helped a bit, it can still be quite challenging to get external funding for a venture. It is useful to pool some capital, talk to friends and family, and bootstrap as much as possible, at least at the very start. There are also a number of venture capital firms in the area as well as an increasing number of angel investors and, if presented with an idea that has a lot of potential, would be willing to invest in an ambitious and capable entrepreneur.

3) The Investment costs can be large
There are a number of upfront payments when opening a company, such as the trade license, your office, and various other fees. This cost can prove to be too much to bear for many budding entrepreneurs. It’s essential to secure the necessary funding, whether through personal savings or external investors, and also to have a buffer of safety because many unforeseen fees can spring up at all stages of the setup process. It’s also important to consider a warehouse and all the associated costs if your business plans on selling physical goods that need to be stored before delivery.

4) Licensing can be difficult for purely online businesses
The trade licensing process and requirements vary from one institution to another and some have not yet figured out how to treat an online business. It might be extremely tedious to get a license if your business does not have a physical office and fulfils a multitude of other requirements. Some have opted for freelancer visas but this has its limitations when it comes to starting a company as a legal entity and limits the person to providing work. It is important to get all the necessary information and maybe bring along a translator when discussing your trade license in order to be understood and make the process as hassle-free as possible. Time is money after all.

5) Consider cultural values
The UAE is a country where religion and culture play a big part in everyday business affairs. It goes without saying that any business can only provide goods and services that comply with the law here, so products that are inherently not Islamic are either outright banned or strictly regulated. You will need to ensure that all the materials or processes of whatever you are trying to sell are compliant with local laws and regulations. It is, of course, recommended to do this as part of your market research and feasibility analyses before even beginning the procedure of starting a business.

6) Know the ownership rights
The way ownership works in the UAE is that you can own 100% of your business provided you open it in a free zone or you can pair up with an Emirati sponsor to open an LLC and let them legally own 51% of the company (you can agree on a contract that limits their decision making impact or outright removes it.) Operating in a free zone will limit you to doing business within the zone’s bounds and that includes just the activities stated in your license. The advantage is that there is no corporate or import tax and 100% repatriation of profits and capital. Finally, operating in a free zone usually requires you rent an office within it, so keep this in mind when it comes to expenses.

7) Business structure depends on the zone
The way you can structure your business, from number of employees to number of managers and tiers, depends on where and how you classify your company. Registering as an LLC, for example, limits you to 5 managers and 50 shareholders. Companies in free zones often have a quota on the number of visas that they can issue based on the size of their office, and so employing people who might work remotely or in the field will still tap into this limit. While increasing the limit is possible by submitting a request, this only works for one or two extra employees, so plan ahead and make sure to calculate your personnel needs at least a year in advance.

8) Set up a payment gateway
If you want to sell online, you’ll need to set up a payment gateway for your online store. The UAE has access to the usual ones such as PayPal, but there are also more regional alternatives such as Telr or PayTabs. We have an entire article dedicated to selecting the right gateway. More people in the region are finally beginning to trust and accept online payments and so giving them the option and convenience to pay online is now a must. Just compare the prices and commissions that each provider takes and see what works best for your forecasted sales in the upcoming year or two.

While setting up a business will almost always come with certain difficulties, misunderstandings, and time lost, knowing the basics and what to be wary of does go a long way in making the procedure smooth and painless.