7 May 2025
By Vista CorpPlanning a new business set up in Dubai? Starting a business in Dubai in 2025 can be both challenging and exciting. Exciting because the world of opportunities opens for you. Challenging because many people commit mistakes that can cost them their time and money.
If you are wondering how to start a business in Dubai with ease, understand what common mistakes you can make during the process. There are local rules and different business cultures to thoroughly understand.
In this guide, we will mention all the major and minor mistakes you can make with your new business set up in Dubai in 2025 with solutions, so you can start your journey with confidence.
Key Takeaways
- Research your competitors, market, audience, and other factors related to your business niche.
- Do not pick from Mainland, Free Zone, or Offshore without understanding the advantages and disadvantages of each.
- Your business address matters the most. Make sure it’s strategic.
- Understand the UAE’s legal requirements like ESR, AML, and visa regulations.
- Plan your finances smartly and keep aside an unforeseen budget.
- Do not try to do everything on your own.
- Respect local culture.
Common Mistakes When Starting a Business in Dubai (2025 Edition)
Here are some of the top mistakes to avoid while setting up a business in the UAE:
1. Not Doing Enough Research and Planning
Many with a business idea often underestimate the research and planning part, which makes them struggle in the later phase. This is because the Dubai market is dynamic and very competitive. Before you enter, understand the ins and outs of your business niche, including the demand, local market, shifting trends, consumer preferences, technological interference, and the political aspect. Thorough research is a powerful tool to avoid unnecessary risks you might have to face.
Though Dubai offers the best tax policies, one must understand the laws governing it to access them in your favor. Missing these details means missing out on opportunities that can give you an edge over your counterparts.
Therefore, avoid legal troubles and enter as a well-informed and well-planned future entrepreneur in Dubai.
Solution: Take enough time to understand the demand for your product/service in Dubai, competition, competition gap, audience pain points, and everything related. That way, you will serve better.
2. Neglecting Legal Structure & Licensing Requirements
In the process of business setup in Dubai, the legal structure is the first thing to decide. An individual must choose the right legal structure, or it can have repercussions. Dubai offers different structures, like:
- Mainland Companies: Owned by locals or with a local sponsor.
- Free Zone Companies: 100% foreign ownership, best for businesses not wanting to trade directly in the local market.
- Offshore: This option is specifically for international operations without the need for physical presence in the UAE.
Remember, every structure has a list of pros and cons to keep in mind. Getting ahead with the wrong legal structure allows complications in terms of cost, ownership, flexibility, expansion, and others.
Example: If you are planning an expansion outside of a free zone, there could be challenges engaging with the mainland market.
Solution: Always consult an experienced consultant who’s a veteran in local business setup in Dubai. They will guide you with everything based on what goals you have for the business.
3. Choosing the Wrong Location
In business, the location matters the most. Especially in a city like Dubai, where competition is crazy, it plays an important role. With the location, affordability is another aspect to be keenly observed. There is more to consider, like:
Target Audience: Is your target audience the locals, tourists, or expats? You choose a location based on what will be easily accessible by your target audience. If it’s tourists, plan your business near tourist areas. If it’s locals, plan a central location.
Accessibility: Accessibility is another key aspect that can make or break your business. It doesn’t matter if you offer the best; if people can’t reach you, everything is in vain. Therefore, choose a location easily accessible by customers & entrepreneurs.
Competition: This one goes without saying. Whatever you plan, always study your competition in the local area and see what gaps you can fill to attract more customers.
For successful businesses in Dubai, locations have always played a major role.
Solution: Make the best location decision after consulting real estate consultants who understand the market in detail. Preserve the best spot and watch your business boom.
4. Not Choosing the Right Trade Name
In Dubai, the trade name extends beyond your brand’s identity. It has some legal requirements to comply with as set and approved by the UAE. As a new entrepreneur in Dubai, you might rush to this process without giving much heed to the trade name rules.
In that case, you can be penalized, rejected, or there could be unwanted, prolonged delays, creating unnecessary troubles. You can also be trapped in legal complications, which you must avoid at all costs.
Solution: Take your time and choose an appropriate and unique trade name following the Department of Economic Development’s (DED) naming rules. These include:
- Avoid offensive language
- No religious reference
- Cannot use others’ brand names unless legally permitted.
5. Ignoring Marketing and Branding
First image matters! In a vibrant ecosystem like Dubai, where businesses are in abundance, it’s easy to get lost in the crowd. Simply having an amazing product or a high-quality service won’t do any good. Good marketing and branding can lead your way to success.
Have a brand voice that your target audience understands. Give them the right message about your product in the right way. There are multiple branding channels and marketing ways, like digital marketing, influencer partnerships, events, and more. The right branding will attract customers and create strong brand recognition.
Solution: Have a good branding budget and research well how marketing and branding work in Dubai. There could be different channels and platforms where you can voice your message louder. Have a team and figure out things well in advance because branding in 2025 can’t be taken lightly, which also creates brand authenticity.
6. Wrong Choice of Business Activity
Another common mistake many make while setting up a company in Dubai is choosing the wrong business activity. Businessmen pick a business activity that does not entirely align with the actual plan. The result? The application can be rejected, or there will be restrictions on the business activities.
Example: If you plan to run a marketing agency with IT services, but you only mention “marketing services” in your trade license, you cannot legally provide IT services. That way, your expansion plans can suffer.
Solution: Visit the DED (Department of Economic Development) website online and check out all the business activity lists mentioned. Select every activity related to your business operations. To be on the safer side, select activities that you might provide in the future. That way, you won’t face any limitations later. For better understanding, consult a business setup company in Dubai to avoid any mistakes that can cost you precious money and time.
7. Overlooking Visa Requirements
When starting a business in Dubai, a visa is very important. Why? As an entrepreneur, you need an investor visa for yourself and employment visas for your team. But the problem is that many fail to understand that different jurisdictions in Dubai have different visa rules & quotas. Missing this detail can lead to legal issues and unnecessary complications.
Solution: Research enough about the visa needed based on what and where you are setting up your business, like the Mainland or a Free Zone. Always apply on time and plan in advance how many visas you will need. Also, knowing how to get an investor visa in Dubai will help you save time, cost, and money.
8. Inadequate Financial Planning
Along with a great idea, having a smart calculation of the money’s inflow and outflow is key to making your business operations in Dubai run smoothly. Setting up a business in Dubai costs can be unexpected sometimes which needs to be considered well in advance. There are office rent, visa costs, licensing fees, salaries, and more to manage, but many entrepreneurs mainly focus on the initial setup cost. All this can result in cash flow issues and hamper business operations.
Solution: Before the setup, have a financial chart ready. List every expected and unexpected cost to be ready with a buffer to play smart. Have a clever budgeting with experts on board to excel in Dubai’s competitive market, because one single mistake can take you many steps backward.
9. Ignoring Compliance and Legal Obligations
In the UAE, staying legally compliant is very important. The country has strict rules that every entrepreneur must follow, like Economic Substance Regulations (ESR) and Anti-Money Laundering (AML) laws. Not abiding by these laws can have serious legal consequences, like big fines, license suspension, or even damage to your business reputation.
Solution: Stay up-to-date with what is latest and file necessary reports like ESR notifications on time. Also, keep all your records ready for inspection, as that can happen suddenly. The right thing is to use a compliance checklist for UAE business or get in touch with an expert.
10. Not Understanding Local Sponsorship Agreements
When planning your business in the mainland jurisdiction, you will need a local sponsor/UAE national who will have 51% of the company shares. This is a legal requirement under UAE law for most business activities in the mainland. Where can people go wrong? The problem arises when people make agreements without understanding the role of a sponsor in the business operations. This misunderstanding later converts into disputes and even legal challenges.
Solution: To ensure there are no disputes, have a clearly defined sponsorship agreement about roles, profit-sharing, and exit terms. This will ensure smooth business operations between the owner and sponsor.
11. Delaying Trade License Renewal
Got your trade license? Are you carrying on with your business activities? It doesn’t end there. Yearly renewal of the trade license is equally important. It’s a legal requirement that can’t be escaped. Many either miss the deadline or delay it because of budget issues. This could mean fines, legal penalties, business suspension, and license cancellation. In the end, your visa credibility can suffer.
Solution: Mark your calendar for trade license renewal. Set aside your funds well in advance for this to avoid disruption in business operations.
12. Trying to do it All By Yourself
While looking for “how to open a company in Dubai,” it might all sound and look easy to you on the surface. But it’s more than what you know. There are legal steps, multiple approvals, local rules, document submission & more. One mistake you commit is to think that you can handle it all on your own. Result? Missed steps, delays, legal problems, and errors.
Solution: Take a smart approach by working with a known business setup consultant in Dubai. They are experts who understand everything from start to end, so you can handle your business smoothly in 2025.
13. Not Understanding Cultural Differences
Dubai is deeply rooted in its culture. When planning on how to set up a company in Dubai, not understanding cultural differences can lead to misinterpretation. Dubai is a land of different communities and cultures where the rule “one size fits all” doesn’t work. Example: How you dress up in a meeting and how you greet others can have a different impact on different people. You might be doing right, but it can make clients and partners uncomfortable.
Solution: Take your time to understand the Emirati culture. Dress right, understand traditions, and be professional.
14. Overlooking Taxation Obligations
Another major mistake many entrepreneurs make in Dubai while setting up their company here is that they ignore the tax requirements. Dubai now has VAT and corporate tax, both of which need to be taken seriously. Entrepreneurs many times do not register for VAT and don’t understand the new corporate tax laws. In both cases, businesses are made to pay heavy fines, or they have to face legal issues. Dubai does offer a very business-friendly environment, but tax compliance can’t be compromised in any case.
Solution: Always ensure you are aware of when to register for VAT or corporate tax. Have a proper record prepared and file reports on time. Again, the safest way is to hire a professional business setup service in the UAE. They can help you step by step.
15. Lack of Understanding of Real Estate Laws
As a business owner, if you want to operate in Dubai with a physical space, you must be aware of all the real estate laws. What can go wrong here? Rushing into the contract and signing it without being careful, like reading the fine print or understanding the local property laws. Other issues are:
- Signing long-term leases without knowing the renewal or exit terms.
- Choosing spaces that are not legally approved for your business type.
- Not aware of who is accountable for maintenance and other hidden costs.
Solution: Before entering any lease, get in touch with a professional who understands Dubai’s real estate rules & will take you smoothly through the process without any troubles. This way, you can avoid costly mistakes.
16. Neglecting Future Conflicts and Exit Plans
Many entrepreneurs jump right into starting their company without thinking about how they or their partners might leave later. This frequently causes issues like:
- There are no shareholder agreements outlining ownership, roles, or duties.
- Absence of defined dispute resolution mechanisms or succession planning
Solution: Create legal documents right away. Create thorough shareholder agreements that cover everything from conditions of exit to dispute resolution procedures to backup plans for unforeseen leadership or partnership changes. By being proactive, the company may be safeguarded, and future expensive legal disputes can be avoided.
Avoid Post-Set Up Business Mistakes in Dubai
You have successfully launched your business in Dubai, surpassing all the potential errors you could make. What’s next? It’s just the beginning, and you are vulnerable to making mistakes at any given point if you are not aware of post-setup business errors. Therefore, here are some regulatory, financial, legal, and administrative obligations you must fulfill.
1. Monthly Bookkeeping and Financial Planning
As per the UAE law, it’s mandatory for all businesses to keep a proper record for at least 5 years. Though not all businesses operating in the Free Zone have this obligation, but accurate bookkeeping is important for Corporate Tax for profits over AED 3,75,000. Failing to maintain this can lead you into trouble.
Tip: For better planning, many businesses in Dubai outsource this task to accounting firms for around AED 800-2000 a month, based on transaction volume.
2. Quarterly VAT Filing
According to UAE Federal Tax Authority (FTA) regulations, VAT registration is required if your taxable turnover exceeds AED 375,000. You must:
- Submit VAT returns every quarter
- Maintain detailed tax invoices and audit trails
- Pay 5% VAT on taxable supplies/services
Non-compliance on this means a fine of AED 1,000.
3. Annual License Renewal
Annual license renewal is a mandatory requirement for all businesses in Dubai, whether mainland or free zone. Without an annual license renewal, you cannot continue your business operations, or else there will be bank account freezing, legal blocks, and visa suspension. The cost includes:
- AED 12,000–15,000/year (free zones)
- AED 10,000–25,000/year (mainland, varies by activity)
4. Economic Substance Reporting (ESR)
Companies in relevant activities like consulting, holding companies, shipping, and IP business must:
- File ESR Notification annually
- Submit a full ESR Report (if required)
As per the UAE ESR law aligned with OECD standards, not meeting this filing requirement can result in fines up to AED 50,000.
5. AML & UBO Compliance
Under the UAE’s Anti-Money Laundering (AML) regime & Ultimate Beneficial Ownership (UBO) law, companies must:
- Declare UBO details to the authorities
- Maintain internal records
- Report suspicious transactions (for applicable sectors)
This is enforced by the ministry of economy, and can lead to a fine of AED 50,000 to AED 1 million.
6. Insurance and Medical Coverage
Basic health insurance is required for all individuals with resident visas, including employees and dependents, particularly in Dubai and Abu Dhabi. Employers need to:
- Renew health insurance annually.
- Pay premiums ranging from AED 650 to AED 2,000 per person/year.
In addition, commercial liability insurance is recommended for risk management.
7. HR & Workforce Onboarding
If you have employees working under you:
- Register with the Ministry of Human Resources & Emiratisation (MOHRE) (mainland only).
- Issue labor contracts and work permits.
- Subscribe to the Wage Protection System (WPS) for timely salary disbursement.
Failing to comply with MOHRE standards can result in labor bans or fines.
New Business Regulations and Updates in the UAE in 2025
Here are some new business regulations and updates in the UAE you should know in 2025 before business setup in Dubai to make fewer errors and earn more:
1. 15% Minimum Tax for Big Companies
MNCs in Dubai with a global revenue of over €750 million will face a 15% DMTT. DMTT stands for Domestic Minimum Top-Up Tax. This is due to the UAE’s commitment to the OECD’s global tax reforms.
2. Increase in Corporate Tax for Large Entities
Most businesses still have to pay 9% corporate taxes. But please note that businesses now under the category of multinational will have to pay up upto 15% tax. This move is to ensure that corporations contribute fairly to the economy, whether big or small.
3. Tax Benefits for Research and Development Company
To boost innovation, businesses that perform R&D in the UAE can now benefit from 30% to 50% tax credits. It is to make innovation cost-effective so that more and more investment can be made in the field of technology.
4. Higher Utility Charges in Dubai
Sewerage costs will be increased by the Dubai Municipality from the beginning of 2025. Businesses like manufacturing & hospitality that use water in heavy amounts may see an increase in operating costs as a result of the new tariff, which will start at 1.5 fils per gallon.
5. Strict Rules on AML (Anti-Money Laundering)
All businesses must now follow tighter AML and Counter-Terrorism Financing (CTF) laws. This includes tracking transactions, identifying clients properly (KYC), and reporting suspicious activities.
6. Economic Substance Reporting
Sectors like finance, leasing, IP, and shipping are made mandatory to show real economic presences in the country through staff, office space, and their main business activities. Filing ESR is now important. ESR stands for Economic Substance Reports.
7. Mandatory Data Protection Rules
The UAE is now becoming serious about its data protection rules. Businesses must adhere to data privacy and protection policies to avoid cyberattacks & handle all the data securely. This is especially required for sectors like fintech, e-commerce, and service companies.
8. Emiratisation Penalties
All the companies operating in the UAE with 50 or more employees must meet their Emiratisation quotas. If they fail to do so, they will get a fine of AED 108,000 per missing UAE national in skilled roles.
9. Health Insurance is Now Mandatory
Starting this year, at the beginning of 2025, health insurance will not be a mandatory thing for all private-sector employees. Companies will have to include the provision in their human resource and payroll plans; otherwise, they will have to pay a fine or face other legal issues.
10. Heavy Fines For Violating Labor Laws
If companies fail to meet standard labor laws in the UAE, like employee protection, contract terms, or visa processes, they can be fined around AED 5,000 to AED 50,000. Proper documentation for businesses in the UAE is now taken more seriously than ever before.
Final Thoughts: Plan Smart, Avoid Mistakes, and Build Strong
When you plan your business setup in Dubai, avoiding mistakes is equally important as being prepared. Asking the right questions, like how to set up a business in the Dubai Free Zone or mainland, what all the requirements are, and where I can go wrong, is crucial to ensure everything falls into place, and you are ready to thrive in the land of opportunities. Partner with Vista Corporate Group for expert guidance on starting a business in Dubai.
FAQs
1. What if I select the wrong jurisdiction for my company in Dubai?
Choosing the wrong jurisdiction from the Freezone, Mainland, or Offshore can impact the tradeability of your business, profitability, and performance. This is because each has its own pros and cons that entrepreneurs must know well in advance for better business planning. Therefore, always be mindful of choosing the right jurisdiction as per your business goals. It will help you in the future as well.
2. How can improper documentation hamper my business in Dubai?
If you are not already aware, improper documentation is one of the main reasons why most business license delays and rejections happen in Dubai. Improper documentation can lead to setup delays, rejections, and legal complications that can hamper your business’s credibility. Even a small error is enough to make you start the process all over again.
3. What is the best business to start in Dubai in 2025?
Dubai has a stronghold in businesses in multiple sectors. There are many sectors that are expected to boom in the coming years. E-commerce, blockchain, web3, healthcare, trading, and real estate are among the top business ventures you can start in Dubai in 2025. These businesses have great potential for sustainable growth in the future. So, plan wisely and make the most of opportunities where the growth graph is higher.
4. What are the potential problems Dubai might face in the future for business?
Below are some of the potential problems Dubai might face in the future:
- Global Recession: If the pace of the global economy will come down, investments in Dubai will suffer.
- Trade Conflicts: With increasing conflicts between big trading countries, global trade might come down. It will impact Dubai’s global trade hub role.
- Lower Tourism: Economic problems worldwide can impact Dubai’s tourism, which will impact its hotels, airlines, and malls.
- Water Shortage: Dubai has a limited water supply, and meeting the needs of a growing population can be a challenge in the future.
- Real Estate Slowdown: Real estate is a key part of Dubai’s economy. But it is now becoming so crowded, leading to lower investment confidence.
5. Which business is most profitable in Dubai?
E-commerce, as of 2025, is the most booming and profitable business in Dubai. With nearly 99% of the population with internet access and due to the shift in digital trends, online businesses have now become very popular. Moreover, the UAE government is making heavy investments in digital transformations. This transformation makes opening and running an e-commerce business a smooth process. From fashion to everything, the demand for online services is going high. Therefore, in 2025, the profit graphs are going to be higher with an e-commerce business.
6. What are the weaknesses of Dubai?
Extreme heat, high cost of living, and strict rules are some of the weaknesses in Dubai. These are some reasons why many people don’t find themselves at home in Dubai. Expats in Dubai cannot get citizenship, which makes them dependent on their employer, leading to uncertainty.
7. Common mistakes to avoid when starting a startup in Dubai?
With a business setup in Dubai, some common mistakes to avoid are:
- Lack of market research
- Poor financial planning
- No contracts
- Fail to delegate
- Being unrealistic
- Wrong hiring
- Underestimating customer feedback
8. What’s the biggest mistake you can make while setting up a business in Dubai?
Setting the wrong pricing is the worst mistake an entrepreneur can make in the beginning. Wrong pricing doesn’t necessarily have to be higher prices, but undercharging too is a common mistake that even smart business owners make.
