Electronic commerce, also referred to as E-commerce is a process that involves buying and selling of commodities over the internet. Improved internet accessibility and the rise in usage of smartphones have fostered the tremendous growth of the e-commerce industry. Most freelancers in Dubai have opted for this option to avail of their products and services to the masses. Since the internet is the leading platform for connectivity globally, there is a broader consumer market without borders ready for the taking. Managing an e-business is majorly done online and does not require a physical company set up. A significant score for e-commerce is that communication is quick, and deliberations are faster since the customer is in direct conversation with the company.
Online businesses can operate at any given time of day. Customers can visit different company stores available online and shop comfortably without the hustle of physical movement. Consumer experience has significantly improved since the inception of e-business. Like any other business, online businesses also require a valid license to trade. The permit is issued by the government or through a licensing authority acting on behalf of the government.
8 Crucial Steps When Applying For An E-commerce License In Dubai
There are several steps involved in acquiring an e-commerce license in Dubai. The requirement and procedures are in place to cushion the consumers against unscrupulous traders. The government is also able to monitor the number of commercial activities within its jurisdiction and accord the necessary required support to create a conducive environment for the traders and consumers. Below are the steps needed to follow when you want to obtain an e-commerce license in Dubai.
1. Choose a legal structure for your business
Choosing a legal structure is the first requirement to obtain an e-commerce license in Dubai. Legal structure implies the form of business you wish to set up. You can decide whether to initiate a sole proprietorship, partnership, private shareholding, civil company, etc. However, the most common type in Dubai is the Limited Liability Company (LLC) formation and branch office entity. It is important to note that every legal structure has its share of limitations and benefits.
2. Decide on a location
The term location in this context does not imply the physical address of the company but rather the economic zone from where you intend to get your license. Dubai has two broad zones categorically known as the free zone and mainland. A notable distinctive factor differentiating the two in ownership terms is that, in contrast, the free zone allows you 100% ownership, which is attractive to many freelancers in Dubai. Mainland, on the other hand, requires one to have a local sponsor who should own at least 51% of the business. Another equally important factor is that a company that registered under a free zone is required to operate within the confines or jurisdiction of the zone. In contrast, mainland companies are free to trade without borders, both locally and internationally. It is therefore advisable to consider all the factors before deciding on where to set up, bearing in mind that both zones operate within their pros and cons.
3. Choose a trading name and register it
A trade name refers to the name of the business. Before embarking on registering a business name, make sure that the domain name is reserved because, without it, your business has no online presence. There are several ways to choose a company name. However, the right business name should be unique, related, or associated with the brand or product, easy to pronounce and spell by the consumer. Remember to apply for registration of the business name through the relevant registering authorities of both zones.
4. Apply for a trade license
Apply for an e-commerce license at the Department of Economic Development (DED) for a mainland business. To obtain an e-commerce permit for a free zone company, one has to make the application through the relevant free zone authority. The type of license depends on the nature of your e-business.
5. Apply for initial approval certificate (NOC certificate)
It accounts for all utilities and is valid for six months on a non-renewable term. It can be sought together with the trade name approval application.
6. Prepare a draft of an MOA and Local Service Agent Agreement (LSA)
This step applies to companies seeking to operate on the mainland. The MOA between you and the sponsor should stipulate the arrangement and the percentage ownership of all partners. An LSA is a citizen of the UAE who guides a foreign national during the licensing requirements and government-related matters at a fee which is payable annually.
7. Register a physical office
It is mandatory to have a registered physical office in Dubai for your business to be considered a legal entity. For a free zone company, the office must be within the zone, unlike for the mainland, where the office could be at any location within Dubai. It is advisable to conduct a spot check when seeking to register an office in a free zone since there are cost-effective free zones that offer some sought of relief to businesses.
8. Final license approval
Upon successful completion of the process, you will get your e-commerce permit within a period not exceeding seven days, depending on the issuing authority. However, note that if your business dwells on imports and exports, it is mandatory to register with a ports and customs authority who will issue you with an importer’s code to ease your operations. The United Arab Emirates imposes a customs duty of 5%. Companies licensed by free zone authorities are not eligible for the import duty fee since they operate within the free zones.
For the first time freelancers in UAE, it is good to engage the services of a resident business consultant to avoid the common mistakes made when setting up and applying for an e-commerce license. The process of e-commerce licensing is simple and straightforward if you adhere to the requirements.
To conclude, consider to research on the limitations and benefits presented under each zone when applying for an e-commerce license in Dubai. Also, look for the pros and cons of the type of company you wish to be licensed. It is essential to be aware of the requirements and the steps involved to obtain a license, primarily legal terms.