Sole establishment or LLC for a small trading business
Should I open a sole establishment or an LLC for a small trading shop?
The situation
A sole establishment is owned by one person and has no separate liability shield. An LLC is a separate legal person, so the owners usually risk only their capital.
The law
- Federal Decree-Law 32 of 2021 on Commercial Companies: Defines the LLC and its limited liability
- Art 11, Federal Decree-Law 47 of 2022: A natural person doing business in the UAE is a resident person for Corporate Tax
What it means for you
If you run the shop as a sole establishment, the business income is your income for Corporate Tax once turnover from business passes AED 1 million in a year. An LLC registers in its own name from day one. Example: a shop with AED 800,000 turnover run as a sole establishment would not need Corporate Tax registration that year, but an LLC with the same turnover must register. Pick the LLC if you carry stock, staff or supplier credit risk.
What to do
- Estimate year-one turnover and risks such as stock and leases.
- Compare licence cost for both forms on the portal.
- Choose LLC if liability protection matters.
- Diarise Corporate Tax registration for the chosen form.
We can do this for youMainland company setup in Dubai or Abu Dhabi: activity, legal form, trade licence, office and first registrations: AED 4,500