FZE Company vs. FZCO Company in Dubai: What's The Main Difference
Dubai is one of the best places to start a business in the UAE. It offers many advantages to new business owners, especially through its free zones. These free zones offer complete foreign ownership, tax benefits, and easy rules for running a company. When you decide to start a business in a free zone, you will see two main options: Free Zone Establishment (FZE) and Free Zone Company (FZCO). Both are good options, but they do the best work for a variety of business plans.
If you are a solo entrepreneur starting a business, the FZE is just made for you. It allows you to own and operate your business alone. But if you are starting a company with a partner or group, the FZCO is a better choice. It allows for 2 to 50 owners. Both setups give you complete control, but the number of owners is the main difference. In addition, each type of documentation and setup has different rules, so it is important to choose those who match your goals.
Choosing between an FZE and an FZCO can seem confusing at first. But once you understand the basic difference β sole proprietorship versus multiple owners it becomes easy. You donβt have to figure everything out on your own. Business setup experts like DBS can guide you step by step. They simplify the process, help you fill out forms, and ensure that your business starts smoothly in Dubaiβs free zones.
Maybe get yourself a glass of coffee and get started.
What Is an FZE?
A Free Zone Establishment (FZE) is a business that operates in one of Dubaiβs free zones. It is designed for people who want to start a business on their own. With an FZE, one person or one company owns the entire business. This setup is great for sole proprietors looking to operate in Dubai. An FZE allows you to keep 100% of your profits, avoid personal income tax, and waive corporate tax. It is also quick and easy to set up.
What Is an FZCO?
A Free Zone Company (FZCO) is another way to start a business in Dubaiβs free zones. This type of business is suitable for people who want to start a company with friends or partners. An FZCO can have two or more owners, either individuals or companies. Like an FZE, it also allows 100% foreign ownership and does not charge personal or corporate taxes. If you want to work with other people, an FZCO gives you more flexibility.
Types of Business Organizations in Dubai, UAE
Here are the most important types of business organizations in Dubai, United Arab Emirates:
1 - Limited Liability Company (LLC)
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Ownership: You need a minimum of two and a maximum of fifty shareholders. Usually, ownership of the UAE citizens should be 51%, but new regulations allow 100% foreign ownership in some areas.
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Liability: The shareholders are only liable for the amount they invest.
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Suitable for: Many types of businesses that want to work in the UAE mainland.
2 - Freezone Establishment (FZE)
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Ownership: Owned by a single shareholder, either a person or a company.
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Liability: The owner has limited liability.
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Suitable for: Sole proprietors or companies operating in free zones.
3 - Free Zone Company (FZC) or Free Zone Limited Liability Company (FZ-LLC)
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Ownership: Has several shareholders, usually between two and fifty.
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Liability: Each shareholderβs liability is limited to their shares.
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Suitable for: Suitable for partnerships or companies operating in free zones.
4 - Sole Proprietorship
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Ownership: Owned and managed by one person.
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Liability: The owner has full liability, so personal assets can cover business debts.
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Suitable for: Suitable for small businesses, freelancers, and individual consultants.
Recommended to Read: Mainland vs. Freezone Business Setup: What's The Main Difference
5 - Offshore Companies
- An offshore company is established in the UAE but does not conduct business within the country. It is mainly used as a base for international operations.
- You get 100% foreign ownership and you pay no corporate tax.
- You cannot do business in the UAE mainland.
Best For: Holding companies, global trade, and asset protection.
6 - Joint Venture (JV)
- A joint venture is a partnership between a foreign investor and a UAE national.
- It is not a separate legal entity; profits and losses are shared according to an agreement.
- The local partner must own at least 51% of the company. If the agreement is not disclosed, the local partner is liable for all liabilities.
Best For: Project-based businesses and foreign investors entering the UAE market.
7 - Civil Company
- A civil company is a partnership where professionals come together to provide services such as legal, medical, or consultancy work.
- Foreign professionals can own 100% of the business for professional activities.
- A Local Service Agent (LSA) must be appointed for administrative functions.
- Partners share profits and liabilities as per their agreement.
Best Choice: Lawyers, doctors, engineers and other professional service providers.
Benefits of Free Zone Companies in Dubai
0% Corporate Tax (for Eligible Businesses)
Free zone companies pay 0% corporate tax if they follow with the regulations. They also do not pay customs duties on the goods they import or export.
No Need For Office Space
You can use a virtual office or shared spaces in a free zone. But if you choose a mainland setup, you will have to rent or buy actual office space.
100% Foreign Ownership
You can have full ownership of your free zone company without the need for a local Emirati partner, which is not allowed for mainland companies.
Privacy And Confidentiality
Free zone businesses keep owner details private, unlike mainland companies where the information is public.
This gives your business additional privacy and helps keep your details safe.
Easy Business Setup And Remote Registration
Many free zones allow you to start your business online without coming to the UAE. You can upload all the paperwork digitally. Some free zones even offer quick setup in one day.
However, some things, such as getting your Emirates ID, getting your visa stamped, or opening a bank account, may require an in-person visit.
Key Difference Between FZE Company Vs. FZCO Company
|
Aspect |
Free Zone Establishment (FZE) |
Free Zone Company (FZCO) |
|
Number of Shareholders |
A FZE has only one owner. This can be an individual or a company. It is good for those who want complete control. |
An FZCO has more than one owner. It usually has two to five owners, who can be individuals or companies. It works well for partners. |
|
Summary |
If you want to run a business alone, choose an FZE. |
If you have partners, an FZCO is a good option. |
|
Legal Structure |
A FZE is a single-owner company. It works like a limited liability company (LLC) but does not require a board of directors. |
An FZCO has multiple owners and requires a board of directors and clear roles for each owner. It also works like an LLC. |
|
Liability Protection |
The owners of both an FZE and an FZCO lose only what they invest in the business. |
Both protect the owners by limiting their investment. |
|
Capital Requirements |
The amount of money required to start an FZE depends on the rules of the free zone. |
Starting an FZCO usually requires more money because it has more owners. |
|
Note |
Check the rules of the free zone before starting to find out if capital is required. |
Donβt forget to check the rules of the free zone for capital before starting an FZCO. |
|
Ownership Flexibility |
A FZE is owned by a single person or company, so control is simple and clear. |
An FZCO allows multiple owners. Each person is only liable for the money they put in. |
|
Management and Governance |
An FZE is easy to manage because one person makes all the decisions. No formal board is required. |
An FZCO requires a board and meetings because decisions are made collectively by the owners. |
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Speak With an Expert!Top Free Zones in UAE to Set Up an FZE Company
Some of the most popular free zones in the UAE to set up an FZE company are:
| Free Zone | Best For |
|---|---|
| DMCC (Dubai Multi Commodities Centre) | Trade, gold, diamonds, and fintech |
| JAFZA (Jebel Ali Free Zone) | Shipping, storage, and factories |
| Dubai Silicon Oasis (DSO) | Tech firms and startups |
| Sharjah Media City (Shams) | Low-cost option for media, ads, and creatives |
| RAKEZ (Ras Al Khaimah Economic Zone) | Affordable for small and mid-size businesses |
| Fujairah Creative City | Great for freelancers and online work |
Choosing Between an FZE and an FZC: Consider Your Options
Choosing between a free zone establishment (FZE) and a free zone company (FZC) is an important step in starting and increasing your business in the vibrant market in Dubai. Whether you want the control that comes with an FZE or team collaboration of FZC, both options are designed to make your business successful. They offer good location advantages, money-saving incentives and easily follow regulations. Your choice should match your business plan, how you want to work and your budget.
When you understand the rules, how each task and costs, you can create a smart choice in the Dubai business world. Taking advantage of the special benefits of each free zone can help your business legitimate and thrive in the global market.
For personalized help and advice, call us on +971 54 332 2846 or send us a WhatsApp message on +971 54 332 2846. You can also email us at sales@aedbs.com for quick assistance.
How DBS Consultancy Can Help You?
Choosing between an FZE and an FZCO can be confusing, but DBS Consultancy makes it easy. Our team has many years of experience with all types of businesses in the UAE. We will help you choose the right type based on your business goals and handle everything from start to finish.
Call DBS Consultancy today on +971 54 332 2846 and find out how we can help you grow your business.
Frequently Asked Questions
Q1. What Is The Difference Between an FZE and an LLC?
Both FZE and LLC offer limited liability to owners and are recognized by the free zone authorities. The main difference is that an LLC operates on the mainland, while an FZE operates only in their free zone and outside the UAE.
Q2. What Does FZCO Mean In The UAE?
FZCO stands for Free Zone Company and can have up to fifty owners. It works best for larger businesses with larger budgets because it is easier to grow and usually requires more capital.
Q3. What Does FZE Mean In The UAE?
FZE stands for Free Zone Establishment. It is owned and operated by a single person or company. Unlike civil companies, a local agent is not required to set up an FZE.
Q4. Do Free Zone Companies Pay VAT?
Most Free Zone Companies do not pay VAT. But if their revenue exceeds AED 375,000 in the last year, they must register for VAT.
Q5. What Types of Companies Are Allowed in Free Zones?
In free zones, you can set up different types of companies depending on your needs. You can open a branch of your foreign or local company. You can also register as an FZCO (Free Zone Company), FZE (Free Zone Establishment), PJSC (Private Joint Stock Company), or a Private Limited Liability Company.
Recommended to Read: DED Payment Voucher: Benefits and Process To Get It In UAE