In the United Arab Emirates (UAE), the most common form of business is the sole proprietorship because it provides full control of the business. This is because of business friendly policies on the market, tax holidays, and sundry incentives which have rated the UAE among the most favored business locations across the globe among budding business people.
This guide aims to explain what it means to have a sole proprietor business in the UAE, advantages and disadvantages of such business, and how to set up a sole proprietor business in the UAE.
What is a Sole Proprietorship?
Sole trader is that type of business which is carried by an individual who is personally liable for the business. In contrast to corporations or partnerships, the sole trader is not legally distinguished from the owner, thus the owner himself is fully responsible for all the legal liabilities of the enterprise.
Key Features of Sole Proprietorship in the UAE
- Complete Ownership and Control
In the UAE, sole trader businesses are owned 100% by the individual who is conducting the business. That is why this structure is best suited for those who tend to like autonomy and direct authority over the business processes. - Personal Liability
The business owner is legally liable for all the debts, which may be a problem in the event that the business is contracted to provide services that it cannot deliver. - Simplified Setup Process
The setup of a sole trader business entity in the UAE is relatively easy, and in most cases, the legal formalities might be less compared with other legal entities.
Benefits of Sole Proprietorship in the UAE
- Ease of Management
If there is only one owner of the business, the strategic actions are fast to make, therefore the time taken to execute strategies and respond to change is minimal. - No Corporate Tax
At the moment, the UAE does not have the corporate tax policy for business entities, therefore it’s favorable for sole traders. - Access to Local Market
A sole trader gives full access to the UAE local market, especially if the owner is a UAE national. For the expatriates, this structure is restricted to some business activities, unless they are set up in free zones. - Lower Costs and Administrative Requirements
Sole trader business entity is relatively easy to establish and has fewer regulations, hence incurring less establishment and operating costs.
Steps to Establish a Sole Proprietorship in the UAE
- Choose a Business Activity
Establish business activity to be carried out, since it defines the licenses and permissions to be obtained. The Department of Economic Development (DED) controls business operations and offers a list of approved operations. - Select a Trade Name
It is important that your trade name should be in harmony with the type of business you are carrying out. To make certain it conforms to the UAE laws, there are no obscene words or any reference to religion. - Obtain Initial Approval
Once you have selected a trade name and business activity, you will require the initial approval of the DED. This approval shows the first stamp of approval from the government on your business. - Submit Required Documents
Required documents include a clear copy of the passport, Emirates ID, an NOC, if you have a sponsor currently, and proof of residence. - Secure a Business Location
A business location and tenancy contract are compulsory for mainland businesses. In the case of free zone sole proprietorship, some of the amenities could be offered within the free zone. - Obtain a Business License
After reading the above steps, seek a professional or commercial license, depending on your business. After approval, one is legally allowed to commence business in the UAE.
Costs of Establishing a Sole Proprietorship in the UAE
Costs may vary based on location (mainland vs. free zone) and business activity. Major costs to consider include:
- Trade Name Reservation: AED 600 – AED 800
- Initial Approval: AED 1,000 – AED 2,000
- LSA Fees (For Foreigners): AED 5,000 – AED 15,000 annually
- Trade License Fee: AED 3,000 – AED 7,000
- Office Space Rental: AED 10,000+ annually (depends on location and size)
- Municipality Fees: 5% of the office rent
- Administrative Costs: AED 1,000 – AED 2,000 for document attestation, legal translations, etc.
Free Zone vs. Mainland Sole Proprietorship
- Free Zone
Free zones allow 100% foreign ownership as well as; they are subject to few taxes. But they restrict your business operations to the free zone unless you get special permits. - Mainland
Mainland sole proprietorship provide a gateway to the rest of the UAE market, but expatriates may require a UAE national local service agent.

Limitations of Sole Proprietorship in the UAE
- Personal Liability
The owner has unlimited liability of the business, implying the fact that personal property of the owner may be responsible for paying of some debts in instances where businesses are in deep. - Limited Capital Options
One of the disadvantages of a sole trader is that it may be difficult for such a trader to mobilize large capital, as compared to a corporation. - Restricted for Some Nationalities
Some of the challenges that expatriates encounter when starting some forms of businesses on the mainland include lack of permission to start some forms of businesses without a local sponsor or service agent.
Important Legal Considerations for Sole Proprietors
- Comply with Regulatory Requirements
The key idea is that business owners and managers ought to follow the requirements of DED, in order not to receive penalties or face shutting down the business. - Renew Business License Annually
A business license requires annual renewal. Renewals should be made in good time to continue with the operations legally. - Consider Liability Insurance
To reduce personal exposure, the sole trader should consider taking liability insurance.
How AB Capital Supports Entrepreneurs in Setting Up a Sole Proprietorship in the UAE
AB Capital Services offers a full range of services to clients who want to start a business as a sole trader in the UAE. During company setup consultation and advising in choosing the most appropriate business entity and country, and guiding on acquisition of required permissions, AB Capital Service, Dubai facilitates a seamless setup process. Their team helps you select a business activity, obtain initial clearances, and acquire the licenses you need to start your business with confidence. Let AB Capital manage it for you – we’ll do that while you work on expanding your business in the UAE market.

Conclusion
A sole proprietorship in the UAE has the advantage of being easy to set up, the owner has full authority over the business, and it is cheap to establish. However, long-term disconnection with the domestic market exposes the company to personal liability, restricted capitalized access to some markets. Knowing the requirements and limitations will help you decide whether to start your business as a sole proprietor in the UAE.
FAQs
- Can a sole proprietor in the UAE operate outside free zones?
Yes, but expatriate sole proprietors may need a local service agent for mainland operations. - Are there taxes for sole proprietors in the UAE?
Currently, the UAE does not impose personal or corporate taxes on sole proprietorship, although VAT may apply. - What is the difference between a free zone and mainland sole proprietorship?
Free zones offer 100% foreign ownership but limit business activities to the zone area, while mainland businesses can operate across the UAE but may need a local agent. - Can expatriates own a sole proprietorship in the UAE?
Yes, expatriates can establish a sole proprietorship in specific sectors and free zones. In the mainland, a local service agent may be required. - How long does it take to establish a sole proprietorship in the UAE?
The process can take 1–2 weeks, depending on document readiness, chosen jurisdiction, and government approvals.