Choosing to be an entrepreneur and starting up your own business can take you on the seventh cloud. But more than the excitement, responsibilities take the charge of surrounding you. Starting up your own business in UAE can be very fruitful but needs you to make wise decisions initially. As an owner, it is your responsibility to make properly researched and practical decisions at the beginning to get profiting results at the end.
Every business start-up needs investment, proper staff, funds for operational expenses, land for the office set-ups, and much more from the owners. So you should decide to start the business on the basis of available funds, land, and manpower. In UAE, sole proprietorship VS LLC are the two main business structures for lucrative benefits. Depending upon the owner’s interests, capital funds, liability protection needs, and financial goals- an owner can choose the appropriate business structure.
What is the sole establishment or sole proprietorship?
The sole establishment business structure allows a complete 100% ownership to one person only. That single owner would be responsible for all the profits and losses in the business. This business structure is a bit easy to set up and involves flexible investment funds. The owner doesn’t need to go through complex paperwork in the sole proprietorship form and can get a trade license in his own name only.
Pros and cons of sole establishment- The main benefits of opting for a sole establishment business are-
- No partners to have conflicts with.
- Very little paperwork is required.
- Possible tax deductions.
- Visa allocation benefits from the UAE government.
- Permission to use a virtual address, so no physical storefront is required.
- Lesser operational expenses.
- Easy to wind up.
The possible cons of choosing sole establishment business form are-
- No liability protection.
- Difficult to raise business funds.
- Problems in getting finance loans.
- Lower Market credibility.
What does the LLC business form mean?
LLC stands for Limited Liability Company. It is a state-level business structure that is operated typically at a legal level. It has more than one owner, which is called its members. Unlike sole proprietorships, the owners of LLC are not liable for commercial debts in the business. Their physical assets like home, property, and personal bank balance are fully protected against company debts.
Pros and cons of LLC-
The main benefits of opting for Llc company are-Protection against commercial debts, Secured physical assets and properties, greater fundraising, helpers available in case of emergency.
The main cons involved in a limited liability company are- Legal paperwork required, mutually agreed decision-making, no tax deductions, tax return completion costs.
Sole establishment versus LLC in UAE?
The major difference between a sole proprietorship and limited liability company is the protection against commercial debts or bankruptcy. The members of LLC have their physical assets protected in the case of company failure. Whereas the single owner in the sole establishment has to bear the losses and debts on his own. Moreover, sole establishment involves very light paperwork unlike the proper legal paperwork required in LLC structure.
What is the right business option for you- Both the sole establishment and Llc company have their own benefits and risks. The study below to choose the right one for you-
- Efforts to set up the business- The sole proprietorship structure offers a very easy and convenient setup for its owner. A few trade licenses from the local government and start-up funds are required to initiate your dream business. Whereas setting up an LLC can be a bit complex as it involves some typical legal paperwork. So depending upon the type of your business and efforts that you can make, choose the one that suits you the most.
- Investment- The single owner in the sole establishment is responsible for arranging the entire investment of the business. Being the only decision-maker, he can invest as much as he can but cannot take any other financing party’s help. Whereas in limited liability company, many owners are there to invest and arrange for the business needs. They can even get financial loans from third parties as they have legally registered their company’s name.
- Business funds- Every business growth needs timely funds. In the Llc company business structure, the funds required are generally raised by all of the owners and investors involved. Moreover, they can raise funds from third-party finances also as they have greater market credibility.
- Debt liabilities- In case of any financial failures, a sole proprietor would be legally liable for all his debts. But in LLC, the owners have complete protection against commercial debts. No one can even touch their physical assets like home and property in case if their company faces bankruptcy.
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Operational expenses-
In a limited liability company, the finances are managed by all of the owners and their investors. But in a sole establishment, the whole and sole owner is responsible for the capital investment as well as the operational expenses for running the business. So if you can manage to bear the investment on your own, choose the sole proprietorship and enjoy the fruitful benefits alone.
- Goals to achieve- If you are a sole proprietor, the future goals of your business would match up with your own dreams only. Whereas in an LLC, all of the owners have the right to mend and bend the future plans. So if you have some financial dreams to fulfill or you have future goals already set in your mind- a sole proprietorship would be the right choice for you.
- Paperwork requirements- As the sole establishment form involves only one owner and no physical storefront, the paperwork required is very less. But the LLC form includes many owners and has debt protection clauses. Thus this business structure involves typical legal paperwork involving the registered company’s name and trade licenses.
Conclusion- Depending upon the available investment, physical storefront, eligibility requirements, and the type of business- both the sole establishment and LLC structures have their own benefits. If you wish to enjoy the profits alone and be your own boss- a sole proprietorship form would suit you the most. The owner can limit the investment to reduce the debt risks and maintain the security of his hard-earned money.
