Free Zone Company vs Mainland Company

March 22, 2023

A free zone company and a mainland company are two different types of business entities with different operating structures and legal requirements. If you are an investor or entrepreneur planning for your business setup in Dubai, UAE, read our article that covers the following topics:

  1. What is a mainland company?
  2. What is a free zone company?
  3. Mainland vs free zone: what are the differences?
  4. Mainland company or free zone company – comparison of advantages
  5. Why establish your business with SPC Free Zone?

What is a mainland company?

A mainland company is an onshore company that is registered with the Ministry of Economy and can conduct business within and outside the UAE.

Trade licenses of mainland companies are issued by the Department of Economic Development (DED), with little to no limitations on their business activities, which is considered a primary feature of mainland entities. However, some business activities require a local sponsor or a UAE national to be a partner in the company.

What is a free zone company?

A Free Zone company is an entity registered in a free zone; an autonomous jurisdiction area located within each emirate. The Free Zone Authority (FZA) is the regulatory body that operates free zones and regulates their functions. Currently, there are over 45 free zones across the country that offer 100% ownership and many other unique features.

Mainland vs free zone: What are the differences?

Free zone and mainland companies provide business owners with a myriad of benefits and features. For example, free zone companies offer foreign investors the advantage of 100% ownership, tax exemptions, and greater operational freedom within the free zone. On the other hand, mainland companies provide greater access to the UAE and the global market, and the ability to do business across the country without restrictions.

Here are the main differences between the two companies:

  • Ownership: Free zones provide entrepreneurs with 100% ownership of their companies with no need for a local sponsor. As for mainland companies, foreign investors are required to have an Emirati partner that holds at least 51% of the company’s shares for conducting most business activities. However, the UAE government has recently allowed 100% foreign ownership for selective business activities registered on the mainland.
  • Location: Free zone companies are located within the designated free zone across the UAE, while mainland companies can be located anywhere in the country.
  • Workspace: Mainland companies must have a physical office of at least 200 square feet size to be licensed. However, it is not necessary for free zone enterprises to provide a physical site, and many free zones permit businesses to conduct business from virtual workplaces.
  • Business scope: Free zone companies have restrictions on doing business within the UAE market as they are not allowed to trade directly with the UAE market but through locally appointed distributors. Mainland companies, on the other hand, are exempted from this restriction and allowed to conduct business anywhere in the UAE.
  • Approvals: Mainland companies require government approvals from several government entities that include the Department of Economic Development, Municipalities, the Ministry of Labor, and others. Free zones have their own jurisdiction and business setup regulations, and you do not need approval from non-free zone government authorities to set up your company.
  • Visas: There are no visa restrictions when it comes to mainland companies. However, the number of visas issued is dependent on the workspace area of the company; the number of visas that can be acquired increases with the workspace area.

Free zone companies do have restrictions on the number of visas that can be applied for, but rather depends on the free zone regulations and other conditions.

  • Capital prerequisite: The legal structure of a mainland company determines its capital prerequisite, while a free zone’s prerequisite is determined by the emirate in which the company is established.

Mainland company or Free zone company – Comparison of advantages

As a business owner aiming to establish your company in the UAE, you need to be fully aware of the advantages of each to make the right decision. Below are the advantages of both companies.

Advantages of mainland companies:

  • No restrictions on conducting business anywhere in the UAE.
  • 100% repatriation of profits and capital on most business activities.
  • No restrictions on the number of visas.
  • Unrestricted access to local and global markets.
  • More business activities compared to free zone companies.
  • Ease of obtaining a corporate bank account.

Advantages of a free zone company

  • 100% foreign ownership without the need for a local sponsor.
  • Easy and fast company formation.
  • 100% repatriation of capital and profits
  • Easier recruitment policies.
  • Advanced infrastructure and work facilities.

Discover our state-of-the-art facilities at SPC Free Zone

Why establish your business with SPC Free Zone?

SPC Free Zone can assist businesses in streamlining their operations by providing the fastest and most cost-effective business setup services.

We offer different setup packages depending on your business requirements. These include obtaining a memorandum of association (MOA), Lease Agreement, Business Activity Certificate, and Trade License.

Moreover, SPC Free Zone provides the option of a dual license that allows you to work from the zone and the mainland. With SPC Free Zone, businesses can maximize their profits with zero paid-up share capital, and 100% foreign ownership.

SPC Free Zone also provides an e-commerce license and general trading license for all commercial activities. We aim to give business owners the tools and knowledge they need to navigate their way.

Contact our team today to help with your business setup in Sharjah today!

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