As an entrepreneur, I have successfully established my presence in Dubai through Kiltons Business Setup Services. When I started, I realized how important it was to understand the different free zones available in Dubai. Each free zone offers unique opportunities for businesses to thrive, encouraging growth and innovation, with benefits such as 100% foreign ownership and easy access to global markets.
Free Zone Establishment (FZE) and Free Zone Company (FZCO) are two of the most well-known Free Zone entities in Dubai. Kiltons Business Setup Services has received several inquiries from potential clients regarding the distinction between an FZE and an FZCO and which one was best for a company. I have been in Dubai for more than 40 years and have helped numerous companies start their businesses. Therefore, I’d like to help you better understand this issue. You’ll be better positioned to make an informed decision on which entity to use for your business in the vibrant market of Dubai by reading this blog.
Introduction to FZE and FZCO
In Dubai, one of the contributing factors to a thriving business scene is the plethora of free zones. It offers to equip entrepreneurs and investors with exceptional advantages, giving them an edge over their competitors. The two most common business structures in the Free Zone include the Free Zone Establishment (FZE) and the Free Zone Company (FZCO). You must understand the difference between the two to understand what might be ideal for your business.
Simply put, an FZE is an entity with one single shareholder, making it ideal for solo entrepreneurs or a single-member corporation. On the other hand, an FZCO requires at least two shareholders and can have many owners. They both offer various benefits but can cater to different business circumstances.
Our expert team at Kiltons helps entrepreneurs decide what free zone would be best for their company and also lets them know the drawbacks and advantages they stand to gain.
What is FZE?
A Free Zone Establishment (FZE) is a type of company structure that is allowed to operate in Dubai’s free zones. It is mainly set up to target foreign investors and promote business works for foreign people within the region. Usually, an FZE is formed by one individual or corporation, making it a perfect option for solo entrepreneurs or companies with a single owner seeking to operate in Dubai. An FZE enjoys all the benefits associated with establishing a company under a Free Zone. This includes operating a company as a foreigner, having no personal tax, no corporate tax, and fast processing of the business.
What is FZCO?
Free Zone Company (FZCO) is a business entity that can be registered in any one of the Free Zones located in Dubai. An FZCO is a limited liability company, which, unlike an FZE (a Free Zone Establishment), can be established by multiple shareholders, whether individual or corporate. This type of company is the best fit for businesses that require more than one owner or a few owners but share ownership among many partners or stakeholders. FZCOs take advantage of the benefits of operating in a free zone, which include 100% foreign ownership, and ease of business regulations.
Key Differences between FZE and FZCO?
In this section, we can discuss the key differences between FZE and FZCO.
Differences
FZE
FZCO
Ownership Structure Comparison
FZE is designed for single ownership. It can only have one shareholder, which can be either an individual or a corporate entity. Ideal for solo entrepreneurs.
FZCO is intended for businesses that require multiple owners.
Share capital requirements comparison
The minimum share capital required to set up an FZE varies depending on the specific Free Zone in which it is registered. Some free zones may have no minimum capital requirement, while others might set specific amounts that must be deposited in a corporate bank account.
FZCO can have multiple shareholders, and the capital requirement often reflects the need to accommodate more substantial business operations. Not all businesses have to meet the higher capital requirements. In some Free Zones, the minimum capital for both FZE and FZCO is the same. In these cases, the difference may not be very big.
Legal Implications and Limited Liability
A distinct legal entity separate from its shareholder, offering limited liability protection. This means that the shareholder’s liability is limited to the amount of capital invested in the company, protecting personal assets from any business-related debts or obligations.
An FZCO is also a separate legal entity from its shareholders. The limited liability structure ensures that each shareholder’s liability is restricted to their capital contribution, safeguarding personal assets from the company’s financial obligations.
Scalability and Business Growth Potential
Even though FZEs usually only have one shareholder, they can still get money from external sources like bank loans, venture capital, and seed investors. For further help with their growth and development, FZEs can also look into trade finance, grants, and government-backed funding programs. This can help scale business.
An FZCO offers greater scalability and flexibility for business growth. The ability to have multiple shareholders means that the company can raise capital more easily by bringing in new investors or partners.
Common Features and Benefits
Below are some of the benefits of operating in the Dubai Free Zone:
100% Foreign Ownership: Free Zone companies can be fully owned by foreign nationals and companies. This offers entrepreneurs full control over their business operations, decisions, and profits.
Full Repatriation of Profits and Capital: Free Zones in Dubai allow businesses to repatriate all their profits and capital without restrictions. This means that foreign investors can transfer their earnings back to their home country or any other location of their choice without paying any taxes or facing currency exchange restrictions.
No Import/Export Duties: Companies operating in Dubai's Free Zones are exempt from import and export duties. This benefit reduces the cost of trading goods internationally and makes Free Zones an ideal location for businesses.
State-of-the-art infrastructure: Free Zones in Dubai are equipped with world-class infrastructure and facilities designed to support various industries.
Consult Kiltons for Your Business Needs!
Kiltons Business Setup Services is an all-in-one platform for entrepreneurs to help them with business setup in Dubai. Our long history and experience allow us to navigate local regulations effectively, ensuring your choice of business setup is right for you, that it delivers everything you expect from a tax perspective, and that we ensure an efficient start through ease of operations.
Is your Dubai Free Zone business ready to be set up? Call Kiltons Business Setup Consultants for an appointment today (+971522407111). At every step of your business journey, right from selecting the best Free Zone to sorting out registration and licensing procedures, you get complete access to our expert team round-the-clock.
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