As a sole proprietor or entrepreneur looking to start or expand their business in the UAE, a free zone might be the perfect option for you. Moreover, by 2025, the UAE aims to host over 300,000 companies, with free zones, particularly in Dubai, driving much of this growth.
Starting a business in a free zone offers numerous benefits, including tax and customs duty exemptions, 100% foreign ownership, 100% repatriation of capital and profits, and a streamlined setup process.
However, depending on your free zone setup, you may need a local distributor to trade in the local market. Moreover, the free zone license pre-approval process can involve strict compliance checks. Factors like your nationality and additional requirements can complicate licensing, as each zone has sector-specific regulations.
Without a clear understanding of the setup process and careful preparation, you risk costly mistakes or delays.
Thus, this blog aims to provide a clear, step-by-step roadmap that guides you in smoothly navigating the free zone company formation process while making informed decisions. It helps you select the right free zone for your industry, understand legal structures, prepare documentation, estimate costs, and overcome challenges like opening a bank account.
Steps to Start a Business in Free Zones
To successfully establish your business in a free zone, below are the essential steps you may generally follow:
- Define Your Business Activities
- Select Your Free Zone
- Determine Your Company’s Legal Structure
- Register the Trade Name
- Secure Office Space
- Obtain Initial Approval & Apply for Trade License
- Apply for Visa
- Open your Corporate Bank Account
1. Define Your Business Activities
Based on market demand and your expertise, start by identifying your primary and secondary activities, and ranking them by revenue potential.
Dubai’s free zones cover more than 20 sectors, including e-commerce, technology, healthcare, and aviation. Since each free zone specializes in specific areas, it’s essential to verify that your planned activities are permitted before choosing a zone.
Depending on the free zone package you select, your license can include anywhere from two to ten activities.
Unlike Dubai Mainland, free zones allow you to mix and match activities from different groups under a single license. For example, a consultancy firm might combine marketing services, management consulting, and event management. This flexibility lets you pivot or scale your operations smoothly.
After identifying your business activities, determine the appropriate license corresponding to your activities. Popular license types in free zones include:
- Trading License: For businesses that buy and sell goods, such as import/export or retail.
- Service License: For companies offering professional services like consulting or accounting.
- Industrial License: Best suited for manufacturing, processing, and industrial production.
- Freelance License: For independently working professionals such as data analysts or content writers offering specialized services to local/global clients.
- Innovation License: Ideal for companies in research and development, AI, tech, or blockchain.
- Dual License: In partnership with Dubai Economic Development (DED), this license allows select free zone setups to operate within Dubai Mainland without additional office space or a local shareholder.
Pro-Tip: List only the activities you plan to conduct. Including extra activities can unnecessarily increase your license cost. Avoid vague terms like “general trading” unless you intend to cover multiple product categories. Instead, specify activities such as “food and beverages trading” to align your license with your business goals.
2. Select Your Free Zone
Selecting the right free zone in the UAE depends on your business domain, target market, and operational needs. Each zone caters to specific industries and offers unique benefits. Below is a curated list of some of the most prominent UAE free zones, including their industry focus and benefits.
Jebel Ali Free Zone (JAFZA)
- Established In: 1985 | Location: Dubai
- Key sectors: Trade, Logistics, Manufacturing
- Benefits: Proximity to Jebel Ali Port (world’s largest man-made harbor) and Al Maktoum International Airport, making it ideal for import/export businesses needing seamless logistics. Also ranks no.1 in the fDi Global Free Zones of the Year 2024 awards and boasts 100+ Fortune Global 500 firms.
Hamriyah Free Zone (HFZ)
- Established In: 1995 | Location: Sharjah
- Key Sectors: Industrial Manufacturing, Maritime, Logistics, Oil & Gas
- Benefits: Offers industrial lands with modern facilities and direct access to a water port and harbor, which are perfect for shipbuilding and maritime services. It is the UAE’s second-largest industrial free zone.
Dubai Multi Commodities Centre (DMCC)
- Established In: 2002 | Location: Dubai
- Key sectors: Commodities, Trade (precious metals)
- Benefits: A nine-time global free zone awardee, DMCC contributes 15% of Dubai’s FDI and is globally recognized for commodities trading. It also offers a Dual License and a Single Family Office License, allowing 100% ownership by family members.
Dubai International Financial Centre (DIFC)
- Established In: 2004 | Location: Dubai
- Key Sectors: Financial Services – Banking, Fintech, Asset Management
- Benefits: Features a robust regulatory framework aligned with international standards, providing access to the global financial market. It also offers a Dual License and an Innovation License for fintech startups.
Abu Dhabi Global Market (ADGM)
- Established In: 2015 | Location: Abu Dhabi
- Key Sectors: Financial services, fintech
- Benefits: Located in Abu Dhabi’s financial district, ADGM boasts a robust legal and regulatory framework and serves as a prime hub for financial services and fintech innovation.
Sharjah Publishing City Free Zone (SPCFZ)
- Established In: 2017 | Location: Sharjah
- Key sectors: Printing, Publishing
- Benefits: Known as the world’s first free zone dedicated to the printing and publishing industry. SPCFZ offers low setup costs and streamlined procedures. It also supports trading, consulting, IT, and e-commerce ventures
Ras Al Khaimah Economic Zone (RAKEZ)
- Established In: 2017 | Location: Ras Al Khaimah
- Key Sectors: Startups or SMEs in diverse industries (Manufacturing, Trading)
- Benefits: RAKEZ provides highly affordable licenses, industrial land, and flexible office space options. It allows up to 10 mixed activities under one license.
Dubai South (formerly Dubai World Central)
- Established In: 2006 | Location: Dubai
- Key Sectors: Aviation, logistics, real estate
- Benefits: With proximity to Al Maktoum International Airport, Dubai South offers excellent connectivity for logistics and state-of-the-art facilities for aerospace companies.
Twofour54 (Abu Dhabi Media Free Zone)
- Established In: 2008 | Location: Abu Dhabi
- Key Sectors: Media, Film Production, Gaming
- Benefits: Provides tax rebates for film productions and comprises state-of-the-art studios. Has partnerships with Netflix and CNN and is ideal for content creators or filmmakers.
Dubai Media City
- Established In: 2001 | Location: Dubai
- Key Sectors: Media & Communications, Advertising, Broadcasting
- Benefits: Offers the Media License covering publishing, PR, and digital content. It is home to major international media houses like BBC and Zee. It provides an ideal ecosystem for agencies and freelancers.
Dubai Internet City
- Established In: 1999 | Location: Dubai
- Key sectors: Technology (Tech startups & SMEs)
- Benefits: Fosters a supportive ecosystem for innovation, with access to research centers and incubators. Also home to global tech brands such as – Google, 3M, Microsoft, and Careem. It generates 65% of Dubai’s technology sector GDP.
Fujairah Creative City
- Established In: 2006 | Location: Fujairah
- Key sectors: Media, Entertainment, Consulting
- Benefits: Offering the lowest VAT-free setup costs in the UAE, Fujairah Creative City is ideal for creative professionals and freelancers. It also permits up to 20 visas under one license, facilitating workforce expansion.
Ajman Free Zone (AFZ)
- Established In: 1988 | Location: Ajman
- Key sectors: Trading, SMEs, E-commerce
- Benefits: Known for its affordable setup costs and quick license processing. Its proximity to Ajman Port provides easy access to both local and international markets.
RAK Digital Assets Oasis (RAK DAO)
- Established In: 2023 | Location: Ras Al Khaimah
- Key sectors: Digital Assets – Web3 Startups, Blockchain, AI, Metaverse
- Benefits: It is the UAE’s first free zone exclusively for digital and virtual asset companies. Offers tailored licenses for decentralized autonomous organizations (DAOs), blockchain startups and AI-driven ventures.
3. Determine Your Company’s Legal Structure
The following are some primary legal forms available in UAE free zones, each with its pros and cons:
- Free zone limited liability company (FZ LLC): A popular legal entity option in free zones, the FZ LLC strikes a balance between flexibility, limited liability, and ease of setup. It provides legal protection by limiting shareholders’ financial liability to their capital contribution.
- Free zone company (FZCO): Ideal for businesses seeking investors or partners, the FZCO allows for a larger number of shareholders (two or more). However, this structure requires more complex governance structures and documentation to manage the diverse interests of shareholders.
- Free zone establishment (FZE): FZE offers a simple, single-owner setup for an individual or a corporate entity. However, it comes with unlimited liability, meaning the sole shareholder bears full responsibility for all the company’s financial obligations.
Additionally, SHAMS (Sharjah Media City Free Zone) is the only free zone offering the LLC legal form instead of the typical FZC LLC structure. This LLC suffix not only provides similar benefits but also enhances credibility with potential international partners or banks. These entities prefer the familiarity and proven professionalism of an LLC.
4. Register the Trade Name
Once you identify your business activities, choose the ideal free zone and legal structure, and receive initial approval, it’s time to register your trade name.
Start by brainstorming three potential name candidates that reflect your brand identity while adhering to the free zone’s naming guidelines.
Some free zones follow DED guidelines, which you can explore in our blog, while others have their own rules. For instance DMCC guidelines prohibit using terms “ME” or “CO” in an individually owned company’s name unless they come as part of a word (e.g., “LCME Trading DMCC” or “ATCO Services DMCC”).
Next, conduct a thorough search to avoid name conflicts with existing businesses. You can utilize UAE’s National Economic Registry – Growth platform for the same.
Finally, reserve your trade name with the free zone authority. Our Best Solution team can help you with this process. They handle all the necessary paperwork, ensuring your trade name complies with regulations and is timely registered on the free zone’s portal.
5. Secure Office Space
A registered office space is mandatory for correspondence with free zone regulatory authorities or government entities.
Free zones offer a range of office space options tailored to your business needs, whether you choose to purchase or rent. The office space will depend on your workforce size and nature of business activities.
You can rent shell and core or non-serviced offices that give you full control over decor, maintenance, utilities, and bills. Manufacturing businesses can purchase ready-to-use land or an office building in free zones like the National Industries Park (NIP) to build a facility from scratch.
Freelancers and small businesses can choose cost-effective options such as fitted offices, co-working spaces, or flexi-desks in free zones’ business centers. For instance, Dubai South business centers comprise modern office spaces tailored for startups, providing an environment conducive to growth and collaboration.
Unlike Dubai Mainland—which requires Ejari registration—the free zone authority prepares your lease contract and provides proof of address along with your license, simplifying the process of securing office space.
Moreover, if you rent an office space from the free zone’s business center, the authority supplies essential public utilities and telecommunications services, such as:
- 24-hour technical support
- Telephone devices and connections
- Wireless and high-speed internet access
- Data network connections and internet phone calls
6. Obtain Initial Approval & Apply for Trade License
Initial approval is a crucial step in the licensing process. This seal of approval signifies that the government has no objections to your proposed business.
Many activities require third-party approvals in Mainland, that most free zones do not mandate. This makes free zones an ideal choice for businesses that primarily serve international clients and do not engage heavily in the local market.
However, certain sectors still require additional clearance from government authorities. Tourism and travel businesses must obtain approval from the Executive Council. Similarly, health-related activities require approval from local health departments like the Dubai Health Authority (DHA).
To apply for an initial approval, submit the following documents to the relevant free zone authority:-
- Completed application form
- Business plan
- CV (for freelancers)
- Passport and residence/tourist visa copies for all shareholders and the appointed manager
- Registry Identification Code (RIC) form for the appointed manager
- Signatures of shareholders and the appointed manager
- Proof of funds (bank reference letter)
- Proof of home address for shareholders
Most applications receive approval within one business day. However, free zones conduct strict due diligence, including background checks for any legal or criminal history. Failing these checks can lead to immediate rejection, delaying your license issuance. Additionally, applicants from high-risk nationalities, such as Syria or Nigeria, face a higher likelihood of rejection.
After obtaining your initial approval, pay the registration fee to secure your trade license.
The timeline of license issuance may vary across free zones. Some, like Ajman Free Zone, offer a one-click license. With all documents and compliance in place, this initiative allows you to obtain a business license in just 15 minutes to an hour.
Beyond the initial approval documents, you may need to submit:
- Ultimate Beneficial Owner (UBO Notification) – Includes share capital details and organizational structure
- Corporate Power of Attorney (if applicable)
- Attested and notarised Memorandum and Articles of Association
- Passport-sized photos
Bear in mind that documentation requirements also vary across free zones. For example, SHAMS may register your business without attested documents or a business plan. It’s advisable to check the requirements in advance with the free zone authority or consult our experts for guidance.
7. Apply for Visa
After obtaining your business license in a UAE Free Zone, the next essential step is to apply for visas for yourself and your employees.
Free zone authorities sponsor and issue the residence visas for you and your employees. However, as an employer, you must bear the costs of visas for your dependents and those of your employees.
The residence visa permits you and your employees to legally reside and work in Dubai while managing your business operations.
- Obtaining an entry permit.
- Completing medical fitness tests (Chest X-ray & Blood Tests)
- Registering for an Emirates ID and visa stamping.
Unlike the Mainland, free zones offer business packages with a limited visa quota—typically 1 to 6 visas, depending on the free zone’s policy. The number of visas allocated also depends on your office space.
For instance:
- Meydan Free Zone: Allocates 1 visa per 5 sq. meters of physical office space.
- DMCC: Allocates 1 visa per 9 sq. meters of office space
If you need to increase your visa quota without acquiring additional office space, your company must demonstrate strong financial standing. However, only businesses with physical offices qualify for increased visa allocations. Companies operating from flexi-desk arrangements are not eligible for exceptional visa quotas.
8. Open your Corporate Bank Account
Opening a corporate bank account has historically been a challenge for free zone businesses. However, free zone authorities are actively working to streamline the process.
For instance, SPCFZ has signed an MoU with Emirates NDB. This strategic partnership provides SPCFZ customers with exclusive banking benefits, including a dedicated channel at Emirates NBD to facilitate credit facilities and account openings.
To apply for a corporate bank account, banks in the UAE may require:
- Your business licence.
- Share certificates.
- Memorandum and articles of association.
- Passport copies of shareholders.
- Office lease agreement
- Home address (tenancy contract)
However, digital banking solutions like WIO and Mashreq Neo further simplify corporate banking. Offering 24/7 services, these digital platforms have more lenient documentation requirements than traditional banks like ADCB.
Freelancers and small businesses using flexi-desk offices can open corporate bank accounts within 48 hours through these digital banks, even without a physical office address. Similarly, entrepreneurs setting up their business remotely—without a UAE residence visa—can bypass the home address (tenancy contract) requirement by opting for online banking platforms.
Cost of Free zone Business Setup in the UAE
The cost of setting up a free zone company can range from AED 6,000 to AED 50,000 or more, depending on various factors such as:
- Free zone chosen: Different free zones offer packages at varying price points. Generally, licenses from Dubai free zones cost about 30% more than those from emirates like Sharjah or Ajman. The price difference may be due to Dubai free zone’s enhanced brand value, ease of service, and superior customer support.
- Type of business activity: Licensing fees vary by activity, and the number of activities you choose can also affect the cost. For example, adding “general trading” to your list increases the license fee compared to opting for a service such as “IT consultancy”.
- Office space: The cost of your annual license fee rises when you rent serviced offices or warehouses compared to a flexi-desk. Hence, startups and freelancers typically choose flexi-desk arrangements to minimize expenses.
- Visa requirements: Free zones like SPC, RAKEZ, and SHAMS offer startup packages starting as low as ~AED 6000, which include no visas. As your visa needs increase, so does the cost. Additionally, the type of visa—whether investor or partner—can further raise your license fee.
- Additional services: If you require additional services—such as accounting or legal advice for VAT and corporate tax compliance—provided by free zone authorities, expect to pay an extra AED 5,000 to AED 20,000.
For a detailed estimate, use Best Solution’s cost calculator and consult our experts for affordable license packages tailored to your specifications.
Conclusion
Starting a business in UAE’s Free Zones offers entrepreneurs remarkable opportunities. However, the jurisdiction also presents challenges such as limited mainland market access, higher costs for certain business activities, and compliance requirements.
Follow our structured guidelines to navigate these hurdles effectively and take advantage of the dynamic business environment that free zones offer.
Plan carefully and execute each step methodically. Begin by choosing a business activity that aligns with your goals. Next, evaluate your options and select the Free Zone that best suits your industry. Then, secure your trade name and office space, obtain an initial approval, and apply for your license.
After receiving your business license, complete your setup by applying for visas and opening a corporate bank account.
For further assistance or detailed guidance, consider consulting with the Best Solution experts who can help kickstart your journey to success. As official channel partners of various free zones across UAE, we help you navigate the free zone licensing process and expedite your license issuance.
