You need to meet all the legal requirements when setting up a Dubai company, failing which you can incur heavy penalties. Foreign entrepreneurs, who take advice from the internet or rely heavily on DIY documents, are at high risk of making costly errors while setting up their companies. Here are the top 10 penalties you may incur if your business is not set up correctly.
1. Penalty for Not Getting the Right License
Obtaining a license is the first step in setting up a business. A legal permit issued by the relevant authority is required for all commercial activities. The Dubai Government provides international entrepreneurs with many integration choices to choose from. It can draw all sorts of penalties of all kinds to choose the wrong company structure or have the wrong business license for your operation or not have a license at all. It can also disclose personal liability to shareholders. Therefore, if you plan to incorporate a Dubai company, get the right permit first.
2. Penalty for Starting a Business While Legally Employed
Suppose a person starts a business of his own with a legitimate job visa and is lawfully employed as an employee to work in a company. In that case, it is in violation of employment agreements and laws and contracts in Dubai. It is done with the employer’s written permission.
3. Penalty for Lack of Written Agreements & Contracts
Although several business agreements are conducted based on confidence and verbal agreement, the written agreement remains the most trusted and successful form of agreement. Only in the case of any dispute can a written and signed document recording the precise terms agreed by the parties be enforceable.
4. Penalty for Not Registering Intellectual Property
One of the essential intangible assets that a corporation can possess is intellectual property. Intellectual property will offer the owner a potential economic advantage and help to remove rivals from the market. Forgetting to file and leaving your intellectual property unclaimed will lead to tremendous financial losses.
5. Penalty for Not Assessing Worst-case Scenarios
An organization can minimize risks by either insurance or a contract. Suppose the pain points and potential worst-case scenarios are established, analyzed and handled in advance. In that case, appropriate protection steps are taken to mitigate such circumstances, either through insurance or through contracts.
6. Penalties for Violations Related to VAT Registration and Financial Records
Businesses need to guarantee that they are compliant with VAT. There are penalties for not reporting your company for VAT or failing to maintain the tax law prescribed financial records required.
7. Penalty for Activity at Unregistered Location
There are penalties for practicing a business activity at an unregistered location.
8. Penalty for Work Hour License Incompliance
Companies can incur penalties for not complying with DED permission to work for additional hours.
9. Penalty for Changing or Adding Activity without Permission
Companies must incur fines without receiving approval from the DED or the government authority concerned for modifying or incorporating a business operation.
10. Penalty for Practicing Business Activity in a DED-Closed Establishment
A severe penalty would have to be levied on businesses that conduct business or economic processes in an institution closed by DED.
Conclusion
Foreign investors must have full knowledge and understanding of the legal criteria for a successful business set-up in Dubai. They could otherwise end up making pointless errors that could incur heavy penalties. That’s why it’s best to have a company set up a specialist like Commitbiz to direct you through the procedures and laws to ensure the correct way to set up your company.
As the editor of the blog, She curate insightful content that sparks curiosity and fosters learning. With a passion for storytelling and a keen eye for detail, she strive to bring diverse perspectives and engaging narratives to readers, ensuring every piece informs, inspires, and enriches.
