Dubai Business Setup: Mainland or Free Zone? Your Path to Success
May 9, 2025
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Dubai's vibrant economy continues to beckon entrepreneurs from across the globe 
[11]
[15]. If you're considering launching a venture here, one of the very first, and most critical, decisions you'll face is choosing between a Mainland or a Free Zone setup [11][15]. This choice fundamentally shapes how you can operate. With recent significant changes, like the expansion of 100% foreign ownership, understanding the nuances is more important than ever 
[4]
[6]
[30]
[18]
[24]
[25]
[32]. This article breaks down the key factors comparing Mainland and Free Zone options to help you make the best decision for your Dubai business journey.
Understanding Your Options: Defining Mainland and Free Zone
What is a Dubai Mainland Company?
Think of the Mainland as the core onshore economic area of Dubai, operating directly under UAE federal laws and the watchful eye of the Dubai Department of Economy and Tourism (DET) [11]
[17]. If you set up here, DET is your primary licensing authority [4][11]. Your business will be governed mainly by federal legislation, such as the UAE Commercial Companies Law, alongside specific DET regulations [11][17]. This structure traditionally offers the widest market access within the UAE [4]
[7][11]
[29][15].
What is a Dubai Free Zone Company?
Dubai Free Zones are specially designated geographical areas created to boost foreign investment, often catering to specific industries like tech, media, or commodities [15]
[12]. Think of places like JAFZA, DMCC, or DAFZ 
[16]. Each zone operates as its own jurisdiction with a dedicated Free Zone Authority handling licensing and registration 
[1][6]&size=28)
[8]
[9]. While within the UAE, they function under their own set of rules, offering certain advantages distinct from the mainland framework [1][6][8].
Key Differences Explored: Mainland vs. Free Zone Head-to-Head
Market Access & Scope of Business
This is often the deciding factor for many businesses. A Mainland company generally enjoys unrestricted freedom to trade anywhere within the UAE, across all emirates, and can also engage in international trade [4][7][11][29][15]. Crucially, Mainland businesses can also bid for lucrative government contracts [11][15]. Free Zone companies, on the other hand, are typically limited to operating within the boundaries of their specific zone or conducting business internationally [7][15][16]. If a Free Zone entity wants to sell directly into the UAE mainland market, it usually needs to partner with a local distributor or agent, or go through the process of setting up a dedicated mainland branch [6][7][29]. However, some zones are blurring these lines; for instance, DAFZ offers dual licenses that can permit mainland operations under certain conditions, subject to DET approval 
[5]
[10].
Foreign Ownership Rules: The 100% Ownership Shift
Historically, this was a stark contrast. Free Zones were the go-to for 100% foreign ownership, a major draw for international investors wanting full control [6][7][8][15]
[31]. Mainland setups, for most commercial activities, traditionally mandated that a UAE national sponsor hold at least 51% of the company shares [6][15]. But here’s the game-changer: recent amendments to the UAE Commercial Companies Law and the FDI Law mean 100% foreign ownership is now permitted for the vast majority of business activities on the Mainland as well [4][6][30][18][24][25][32]. Authorities have published extensive lists covering over 1,000 activities eligible for full foreign ownership, spanning sectors from retail and manufacturing to professional services and tech [4][30][24][25][32]. While this opens up huge possibilities, be aware that a small 'negative list' of activities deemed strategically important might still require local partnership arrangements [4][30]
[28].
Licensing Authority & Setup Process
Your licensing journey differs significantly. For a Mainland company, your primary point of contact is the Dubai Department of Economy and Tourism (DET) [11][17]. Depending on your specific business activity, you might also need approvals from other government ministries or regulatory bodies 
[2][6][18]. Setting up in a Free Zone means you'll primarily deal with that specific zone's Authority [1][6][8]. This is often perceived as a more streamlined process as you're interacting mainly with one entity, though specific industry approvals might still be necessary depending on your field [1][6][15].
Office Space Requirements
Physical presence requirements also vary. Mainland companies generally need a physical office space, and you'll need a registered tenancy contract (known as Ejari) to get your license 
[14][18]
[20]. There might even be minimum size requirements, sometimes cited around 200 sq ft [6][7]. Free Zones tend to offer more flexibility here, with options ranging from 'flexi-desks' and shared workspaces to virtual office packages, which can be more cost-effective initially [1][6][7]. However, even in a free zone, a physical presence might become necessary for operational substance or specific activities [1][6][7].
Employee Visas
Need to bring staff onboard? On the Mainland, there's generally no strict upper limit on the number of employee visas you can obtain, but the allocation is often linked to the size of your physical office space [6][11][15]. In Free Zones, visa quotas are frequently tied to the type of package or office space you choose, often starting with an allocation of 1 to 6 visas, which can usually be expanded later [6][7]. Visas for Free Zone employees are sponsored by the respective Free Zone Authority [15].
Costs, Capital & Auditing
Let's talk money. Setup costs can fluctuate wildly depending on your choices – license type, activity, legal structure, office solution, visa needs, and whether you choose Mainland or a specific Free Zone [7]
[13]. As very rough estimates, Mainland setup might fall between AED 20,000 to AED 40,000, while Free Zones could range anywhere from AED 10,000 to over AED 50,000 [7][13]. Minimum share capital requirements also vary; some Free Zones have set minimums (like AED 50,000 in DMCC or just AED 1,000 for a DAFZA FZ Co.), while others might have none [1]. Mainland capital needs depend on the legal form chosen [1]. Finally, auditing rules differ. Mainland Limited Liability Companies (LLCs) generally need an annual financial audit [6]. For Free Zones, it varies – some require audits, some don't, but having audited financials is often essential if you want to potentially benefit from Corporate Tax advantages, like qualifying for 0% tax as a Qualifying Free Zone Person [6][7].
Choosing Your Legal Structure: Options in Each Jurisdiction
Mainland Legal Structures
On the Mainland, popular choices include the Limited Liability Company (LLC), which is favoured for its liability protection for shareholders and can now often be 100% foreign-owned [4][13][17][18]. An LLC requires a foundational document called a Memorandum of Association (MOA) [2]
[3][14]. Another option is a Sole Establishment, owned by one person; if a foreign national runs professional services (like consultancy) this way, they usually need a Local Service Agent (LSA) [2][3][13][18]. An LSA is a UAE national or local company that acts as your administrative liaison with government departments for a fee, but holds no shares or liability [13]
[22]. This requires an LSA agreement, not an MOA [2][3][14][22]. Civil Companies are common for professional partnerships (doctors, lawyers) and may also need an LSA if partners are foreign [2][4][14][17][22]. You can also set up Branches of foreign or Free Zone companies [2][17]
[19]; notably, the LSA requirement for foreign branches was removed in 2021 
[21][32]. The MOA, by the way, is essentially your company's constitution, detailing its structure, rules, ownership, and activities [21]
[26].
Free Zone Legal Structures
Within Free Zones, the common structures are the Free Zone Establishment (FZE), designed for a single shareholder (either an individual or a company) [1][9][16][31][12]
[23], and the Free Zone Company (FZCO or FZC), which accommodates multiple shareholders (typically two or more) [1][9][16][31][12][23]. You can also establish a Branch of an existing parent company in most Free Zones [1][9][16][31][12][23]. Keep in mind that the exact structures available can vary from one Free Zone to another [1][8].
The Setup Roadmap: A General Overview
Ultimately, the decision between Mainland and Free Zone hinges on where you plan to do business – locally across the UAE or internationally from a dedicated hub [7][11][29][15]. Consider your specific activity, operational style, and budget [7][13]. The fantastic news is that 100% foreign ownership is now a widespread reality in both jurisdictions for most activities, significantly altering the decision-making landscape compared to just a few years ago [4][6][18][30][32]. Given the nuances and the importance of getting it right from the start, navigating the setup process can be complex. Seriously consider seeking guidance from experienced business setup consultants or law firms based in Dubai; their expertise can be invaluable in ensuring a smooth launch for your venture [6].
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