28 Jan 2026
By Vista Corp
Launching a sole proprietorship in Dubai requires more than choosing a business activity and applying for a license. While the structure is popular among individual professionals, the UAE applies specific rules around licensing authorities, permitted activities, ownership eligibility, and personal liability.
The choice between mainland and free zone jurisdictions, the nature of the professional activity, and qualification requirements can significantly impact how the business operates in practice. Many founders underestimate how these factors affect banking, visas, compliance obligations, and long-term scalability.
Understanding the regulatory environment before incorporation is critical to avoiding costly corrections later. This guide outlines the key considerations every individual must evaluate before launching a sole proprietorship in Dubai, so the business starts compliant, bankable, and aligned with future growth plans.
What is a Sole Proprietorship?
A sole proprietorship is a business owned and managed by one individual. There’s no legal separation between the owner and the business, meaning you and the business are the same legal entity.
In the UAE context, this structure is commonly used by:
- Freelancers
- Consultants
- Professionals offering services under their own name
You operate the business, earn the income, and take on the responsibility personally.
Key Characteristics (UAE-Specific)
- Single owner: Only one individual can own the business
- Full control: You make all decisions
- Unlimited liability: Personal assets can be used to settle business obligations
- Service-focused: Typically allowed for professional or service activities (not large-scale trading)
- Simple structure: Minimal governance, no partners, no shareholders
Foreign nationals can own a sole proprietorship in the UAE, subject to licensing rules and activity approvals.
Example
Let’s say Ananya, an Indian national living in the United Arab Emirates, is a digital marketing consultant.
- She registers a Digital Marketing Consultancy as a sole proprietorship
- The trade license is issued in her personal name
- All client contracts are signed by her
- All profits go directly to her
- If the business faces a legal claim, she is personally responsible
There’s no partner, no board, no complex structure, just Ananya and her business.
Who Can Open a Sole Proprietorship in the UAE?
A sole proprietorship is one of the simplest business structures in the UAE, but who can open one depends entirely on nationality and the nature of the activity. Below is a clear breakdown of eligibility and the important conditions (“catches”) for each group.
1. UAE & GCC Nationals
Maximum flexibility, but with personal risk.
UAE and GCC nationals enjoy the highest level of freedom when it comes to sole proprietorships.
- Eligible Activities:
They can register a sole proprietorship for any type of business activity, including:
- Commercial (trading)
- Industrial (manufacturing)
- Professional or consultancy services
- Ownership:
100% ownership with no local partner or agent required. - Important Catch:
A sole proprietorship comes with unlimited liability. This means there is no legal separation between the individual and the business. If the business incurs debts or legal claims, the owner’s personal assets can be at risk.
This structure is simple and flexible, but it is not asset-protective.
2. Foreign Nationals (Expats)
Allowed, but only for professional services.
Expats can absolutely open a sole proprietorship in the UAE, but with strict limitations.
- Eligible Activities:
Only Professional or Service-based activities, such as:
- Management consulting
- IT services
- Marketing, media, or design
- Educational or technical services
- Restricted Activities:
Expats cannot use a sole proprietorship for:
- Trading, importing, or exporting
- Manufacturing or industrial activities
- For these, an LLC structure is mandatory.
- Local Service Agent (LSA) Requirement:
On the UAE mainland, expats must appoint a UAE National as a Local Service Agent (LSA).
- The LSA holds 0% ownership
- Has no control or liability
- Is paid a fixed annual fee
- Acts only as a liaison with government authorities
This arrangement allows full operational control while meeting regulatory requirements.
3. Corporate Entities
Not permitted, by definition.
A company cannot open a sole proprietorship.
- A sole proprietorship must be owned by a natural person (a human individual).
- Corporate ownership is not allowed under this structure.
If a company wants full ownership of another entity in the UAE, the correct options are:
- A Subsidiary, or
- A Single-Shareholder LLC
A sole proprietorship is legally designed for individuals only, not corporate shareholders.
Benefits of a Sole Proprietorship in Dubai, UAE
Here are the five major benefits of a sole proprietorship in Dubai, UAE:
Full Control: You make all decisions yourself. No partners, no approvals, no delays.
Simple Setup: Easy registration process with fewer documents and quicker approvals.
Lower Compliance: Minimal ongoing formalities compared to company structures.
Best for Professionals: Ideal for consultants, freelancers, and service-based businesses.
Easy to Upgrade Later: You can start small and move to an LLC as the business grows.
Step-by-Step Process to Open a Sole Proprietorship in the UAE
Opening a sole proprietorship in the UAE is one of the most straightforward ways to start a business, provided your activity and eligibility are clear. Registration for mainland businesses is handled by the government licensing authority, primarily the Department of Economy and Tourism (DET).
Step 1: Confirm Your Eligibility & Business Activity
Before anything else, confirm:
- You are eligible to open a sole proprietorship (UAE/GCC national or expat for professional activities)
- Your activity is permitted under a sole establishment license
This step is critical because not all activities are allowed, especially for expats.
Step 2: Apply for Initial Approval
Initial approval is obtained from the DET.
This approval simply means: “The UAE government has no objection to you starting this business activity.”
At this stage:
- No office lease is required
- No license is issued yet
- It’s only a regulatory green light
Step 3: Reserve and Approve the Trade Name
You must submit at least three trade name options to the DED.
- Not violate public morals
- Do not include restricted or religious terms
- Match your licensed activity
Once approved, one name is officially reserved for your business.
Step 4: Prepare the Local Service Agent (LSA) Agreement (If Required)
This step applies only to foreign nationals opening a mainland sole proprietorship.
- A UAE National is appointed as a Local Service Agent (LSA)
- The LSA has 0% ownership
- No involvement in business operations
- Paid a fixed annual fee
Both parties must be present to sign the LSA agreement.
Step 5: Secure Physical Office Space
For a mainland sole proprietorship, a physical office is mandatory.
You must:
- Lease an office space
- Obtain a tenancy contract
- Register the lease under Ejari
Ejari is regulated by the Real Estate Regulatory Agency (RERA) and ensures legal recognition of the office address.
Step 6: Submit the Ejari & Office Documents
Once the office is finalised:
- Ejari certificate
- Tenancy contract
- Office details
These documents are submitted to the DET to confirm your business location.
Step 7: Obtain External Approvals (If Applicable)
Some activities require special approvals from additional authorities (for example: consultancy, education, healthcare, or regulated professions).
The DET will:
- Inform you if external approvals are required
- Specify which authority must approve the activity
You cannot proceed without completing this step if it applies.
Step 8: Review & Final Submission
All documents are reviewed together:
- Initial approval
- Trade name approval
- LSA agreement (if applicable)
- Office & Ejari documents
- External approvals (if required)
Once verified, your application moves to the final stage.
Step 9: Make the License Payment
You will receive a payment voucher from the DET.
After payment:
- The trade license is generated
- Your sole proprietorship is officially registered
Step 10: Collect Your Trade License
Once payment is completed:
- The Sole Establishment Trade License is issued
- You are legally allowed to operate
- You can proceed with:
- Bank account opening
- Visa applications (if applicable)
- Corporate registrations
Difference Between Sole Proprietorship and LLC
This is not just a structural choice. It decides whether your personal bank account survives if your business doesn’t.
| Feature | Sole Proprietorship (Sole Establishment) | Limited Liability Company (LLC) |
| Legal Personality | Not a separate legal entity. The business and the owner are legally the same person. | Separate legal entity. The company exists independently of its owners. |
| Personal Liability | Unlimited liability. If the business incurs debts or legal claims, creditors can go after the owner’s personal assets (bank accounts, car, property, savings). | Limited liability. The owner’s risk is limited to the capital invested. Personal assets are protected from business creditors. |
| Ownership Structure | Owned by one natural person only. A company cannot own a sole proprietorship. | Can have 1 to 50 shareholders. Ownership can be by individuals or corporate entities. |
| Permitted Activities | For expats: Professional / service-based activities only (consulting, IT, marketing, design). No trading or manufacturing allowed. | Can conduct all activities: Commercial (trading), Industrial (manufacturing), Professional, and Tourism. |
| Foreign Ownership Rules | Expats can own 100%, but for mainland professional licenses, a Local Service Agent (LSA) is mandatory. | Expats can own 100% of most commercial and industrial mainland activities (post-ownership reforms). No LSA required. |
| Corporate Tax | Subject to corporate tax if revenue exceeds the exemption threshold. Small Business Relief (SBR) applies up to AED 3 million in revenue. | Subject to 9% corporate tax on taxable profits above AED 375,000. SBR also applies if revenue is under AED 3 million. |
| Business Continuity | No perpetual succession. The license usually terminates upon the death of the owner. Difficult to transfer or sell. | Perpetual succession. The company continues even if a shareholder exits or passes away. Shares can be transferred easily. |
| Banking & Financing | Considered high risk by banks due to unlimited liability. Harder to secure loans, overdrafts, or trade finance. | Bank-friendly structure. Easier access to corporate accounts, credit facilities, and trade finance. |
| Audit Requirements | Usually not mandatory, unless required by the licensing authority or for tax purposes. | Often mandatory, especially for Free Zone companies and larger mainland businesses. |
| Scalability & Growth | Limited. Best suited for solo professionals with low risk and minimal operations. | Highly scalable. Ideal for hiring staff, leasing offices/warehouses, importing goods, and raising capital. |
In short:
A Sole Establishment is easy, but fragile.
An LLC costs more, but protects everything you’ve built.
Requirements to Register a Sole Proprietorship in the UAE
These documents will be requested during the trade license application process, in line with UAE regulations for sole establishments.
You will generally need to provide:
- A passport copy of the business owner
- UAE residence visa or visit visa copy, as applicable
- Three proposed trade names for the establishment
- Clear description of the business activity to be licensed
- Details of the office space required for the business
- Emirates ID copy of the Local Service Agent (LSA), if applicable
Having these documents prepared in advance helps ensure a smoother and faster licensing process.
How Much Does It Cost to Open a Sole Proprietorship in Dubai?
The total expense of opening a sole proprietorship in Dubai depends on your activity, location, and individual requirements. Instead of a fixed amount, it’s more accurate to understand where payments are made during the setup process. Below are the key areas where fees typically apply.
1. Government Licensing & Registration
Payments are made to the relevant licensing authority for:
- Initial approval
- Trade name reservation
- Issuance of the trade license
These are mandatory charges required to legally register the business.
2. Local Service Agent (LSA) Arrangement (If Applicable)
For foreign nationals setting up a mainland sole proprietorship:
- A UAE National must be appointed as a Local Service Agent
- The LSA is paid an agreed annual professional fee
This fee is contractual and separate from government charges.
3. Office Space & Ejari Registration
A physical office is required for mainland licenses.
Expenses include:
- Office rent
- Ejari registration (official rental registration)
- Tenancy contract documentation
The size and location of the office directly influence this portion.
4. External Approvals (Activity-Based)
Certain professional activities require approval from:
- Industry regulators
- Professional bodies
- Specialised government departments
These approvals may involve additional application and processing fees.
5. Documentation & Attestation (If Required)
Depending on nationality and activity:
- Legal translations
- Document attestation
- Notarisation of agreements
These are situational and depend on individual circumstances.
6. Immigration & Visa-Related Expenses (Optional)
If the business owner or employees require visas, additional payments may apply for:
- Establishment card
- Entry permits
- Medical tests and Emirates ID
These are separate from the business license itself.
Get It Right From the First Time With Vista
If there’s one thing we’ve seen again and again, it’s this: Most founders don’t get stuck because their idea was bad; they get stuck because the setup was wrong.
- We’ve spoken to entrepreneurs who already have a license, but can’t open a bank account.
- Who hired a team, only to realise their structure doesn’t allow it.
- Who are now paying to undo decisions they never knew they were making.
At Vista Corporate Global Business Setup, we don’t treat your sole proprietorship in Dubai like a file number. We listen first to what you’re building, how you plan to earn, and where you want this to go. Then we guide you toward a setup that actually fits you, not just what’s fastest on paper.
Because your first setup decision shapes everything that comes after it. And we believe you deserve to start on the right footing, not fix mistakes later.
FAQs
1. Can an expat own 100% of a Sole Proprietorship in Dubai?
Yes, but with a condition. Expats can own 100% of a sole proprietorship, but only for Professional activities (e.g., consulting, software development, or accounting). If you want to trade goods or manufacture products, you must form an LLC.
2. Do I still need a “Local Sponsor”?
The term “Sponsor” is outdated. For an expat-owned Sole Establishment on the mainland, you need a Local Service Agent (LSA). They do not own any part of your business; they are paid a fixed annual fee to help with government paperwork.
3. What is the biggest risk of a Sole Proprietorship?
Unlimited Liability. There is no legal “wall” between you and your business. If the business fails or is sued, your personal assets (car, home, personal bank accounts) can be seized to pay off the business debts.
4. Is there a minimum capital requirement?
Technically, no. For most professional licenses, you do not need to show a specific bank balance to start. However, you must prove you have the funds to cover your license fees and office rent.
5. Do I have to register for Corporate Tax in 2026?
Yes, if your revenue exceeds AED 1 million. Even as an individual (Natural Person), if your turnover hits this mark, you must register with the Federal Tax Authority (FTA). Missing the registration deadline can result in an AED 10,000 fine.
6. Can I open a Sole Proprietorship while on a Visit Visa?
You can start the application process on a visit visa to get your Initial Approval and Trade Name. However, to finalise the license and open a bank account, you must switch to a residency visa.
7. Can I sponsor my family on this license?
Absolutely. As the owner of a Sole Establishment, you are entitled to an “Investor Visa” (usually valid for 2 years). This allows you to sponsor your spouse, children, and even parents, provided you meet the minimum income requirements.
8. Can I have employees?
Yes. Despite the name “Sole” proprietorship, you can hire staff. However, your visa quota (the number of employees you can hire) will depend on the size of your physical office space.
9. Do I need a physical office, or can I work from home?
In 2026, most licensing authorities require a physical address. While “Virtual Offices” or “Flexi-desks” are common in Free Zones, Mainland licenses usually require a registered Ejari (tenancy contract).
10. Can I change my Sole Proprietorship into an LLC later?
Yes. This is a common move as businesses grow. It involves a “Change of Legal Status.” You get to keep your trade name and history, but you essentially “upgrade” to limited liability.
11. What happens to the business if I (the owner) pass away?
This is a major downside: a Sole Proprietorship legally terminates upon the death of the owner. Unlike an LLC, which has “perpetual succession,” a sole proprietorship is tied directly to the person.
12. Is a “Freelance Permit” the same as a Sole Proprietorship?
Not quite. A Freelance Permit is usually cheaper and restricted to a very narrow list of creative/tech activities in Free Zones. A Sole Proprietorship is a more “formal” business structure that allows for a wider range of professional activities and more employees.
13. Can a company own a Sole Proprietorship?
No. A Sole Proprietorship must be owned by a Natural Person. If a company wants to own 100% of another entity, that entity must be a “Single-Shareholder LLC” or a “Subsidiary.”
14. Do I need to get my accounts audited?
Generally, no. Unlike LLCs, sole proprietorships are usually exempt from mandatory annual audits. However, you must keep clean books for 7 years to comply with UAE Corporate Tax and VAT laws.
15. Why do banks find it hard to open accounts for Sole Proprietorships?
Banks see them as “High Risk” because there is no separation of funds. They often worry that business owners will use the corporate account for personal shopping, making it hard to track the business’s actual health.Disclaimer: This content is for general informational purposes only and does not constitute legal or professional advice. Regulations may change. Always seek professional guidance before making business, licensing, or tax-related decisions in the UAE.
Disclaimer: This content is for general informational purposes only and does not constitute legal or professional advice. Regulations may change. Always seek professional guidance before making business, licensing, or tax-related decisions in the UAE.
