Limited Liability Company (LLC) in the UAE: Legal Overview, Formation, and Advantages

formation, advantages for L.L.C in UAE

The Limited Liability Company (LLC) is the most common form of business entity established in the United Arab Emirates (UAE). It provides investors with flexibility, protection, and the ability to conduct a wide range of commercial and industrial activities under the framework of Federal Decree-Law No. 32 of 2021 on

Commercial Companies.

From a legal perspective, the LLC structure is designed to balance limited liability for shareholders with efficient management and operational control.

Legal Definition

An LLC is a company formed by a minimum of two and a maximum of fifty partners, where each partner’s liability is limited to the extent of their share in the company’s capital.

Partners are not personally liable for the company’s debts or obligations beyond the value

of their contributions.

LLCs are not allowed to raise capital through public subscription or to issue tradable shares or bonds, distinguishing them from joint-stock companies.

Formation and Legal Requirements

1. Number of Partners

• Minimum: 2 partners

• Maximum: 50 partnersThe requirement of at least two partners must be maintained throughout the life of the company.

2. Share Capital

• There is no fixed minimum capital under the current law, but it must be “sufficient to achieve the company’s objectives.”

• Capital is divided into equal shares of nominal value, which are not freely tradable.

• Transfer of shares can occur only through a notarized agreement, and existing partners have a right of pre-emption to purchase those shares under the same conditions.

Memorandum of Association (MoA)

The MoA must be drafted and notarized before a UAE notary public.It outlines the company’s objectives, capital, management structure, distribution of profits and losses, and the rights and duties of each partner.

4. Management

• The company is managed by one or more managers, who may be partners or third parties.

• The manager’s authority and powers are defined in the MOA.

• Unless otherwise stated, the manager appointed in the founding contract cannot be dismissed without justifiable cause, providing continuity and stability.

5. Licensing and Registration

The company must obtain:

• A trade name reservation certificate

• Initial approval from the relevant economic department

• Notarized MoA and lease agreement for the registered office

• Final commercial license after registration with the Department of Economic Development (DED) or the relevant free-zone authority.

Legal Advantages of an LLC

1. Limited Liability Protection

Each partner’s liability is limited to their contribution to the company’s capital. This legal protection separates personal assets from company debts — a key reason for choosing this structure.

2. Flexibility in Management

Unlike public joint-stock companies, partners in an LLC can actively participate in the management and decision-making of the business.

3. Simple and Cost-Effective Setup

Establishing an LLC is relatively simple compared to other legal entities. The incorporation process does not involve public offerings or complex corporate structures.

4. Local and Foreign Ownership

Recent amendments allow 100% foreign ownership in most sectors, except for activities with strategic importance that require a UAE national partner. This change has increased investor confidence and simplified business entry.

5. Stability and Continuity

The company enjoys legal stability, as the removal of a manager named in the MoA requires legitimate cause. Moreover, the departure or death of a partner does not automatically dissolve the company.

6. Access to the UAE Market

An LLC can operate directly on the UAE mainland, allowing full access to local markets, government contracts, and expansion opportunities within the Emirates.

Legal Limitations

• LLCs cannot issue shares, bonds, or other securities to the public.

• Transfer of ownership is subject to the approval of other partners.

• Some activities may still require a local partner or additional approvals from competent authorities.

Conclusion

From a legal standpoint, the Limited Liability Company offers a balanced combination of protection, flexibility, and control — making it the preferred vehicle for entrepreneurs and investors in the UAE.It provides limited liability for shareholders, ensures smooth management continuity, and meets the regulatory requirements of the UAE Commercial Companies Law.

At Rashid Al Naqbi Advocates & Legal Consultants, our corporate law specialists assist clients with every step of company formation — from drafting and notarizing the Memorandum of Association to ensuring full compliance with UAE regulations.