Introduction
Advisory services provided by a company encompass a broad range of services that business consultants offer. Such services include advice on the formation of capital, the management of financial assets or cash flow, the integration of successful business strategies, and so on. An advisory company may assist its clients in establishing both long- and short-term business goals and suggest various investment options based on the established goals. As a rule, businesses and high net worth individuals seek the services of an advisory company. Responsibilities that employees in an advisory firm must implement include the following:
- Conducting meetings with clients to understand their financial capacities and goals;
- Educating customers about different forms of investment and how they can affect their business;
- Recommending suitable investment options and helping to develop a financial plan;
- Monitoring clients’ progress and recommend improvement steps.
It is important to mention that the majority of advisory firms spend the largest bulk of their assets on advertisements of their services to attract new and prospective clients. This means that an advisory company does not require a large office nor does it have to employ a lot of staff. To minimize their spending and maximize profits, an advisory company can consist of several individuals who perform key functions in a company.
Best Legal Form of Company to Create in UAE
When it comes to creating an advisory company in the UAE, it is first important to select the least expensive and the simplest legal form of company. It has been suggested to create an advisory company with a friend who may be considered a business partner. In this case, a general partnership (GPC) is the easiest and the cheapest legal form of company that only UAE nationals can create. Such a company is usually created by at least two partners who are responsible for the overall performance of a company while also being liable for its debts. Under the UAE law, interests of partners in a general partnership are conveyed either through the approval of another partner or the written expression of partnership in a legal agreement. Due to the reputation of the UAE as a tax-free jurisdiction that discourages all forms of money laundering, the government supports the establishment of general partnership companies by UAE citizens, which means that the process of creating an advisory company in this manner will be the least complex and the most cost-effective in the UAE context (“GPC – general partnership company – partnership in UAE,” 2017).
Advantages of General Partnerships
When creating a general partnership company to advise clients on business optimization, it is essential to note several advantages that place the choice of such a legal structure above other options. First, easy formation is essentially the largest advantage that a general partnership company offers. Its creation requires a minimum amount of paperwork; as a rule, partners sign a contract of general partnership commencement, which describes the distribution of profits and losses. Second, the general partnership gives equal rights to each partner with regards to participation in the control and management of the business. This means that the responsibilities of each partner in a GPC are clear to one another, which minimizes the number of misunderstandings and other conflicts that may arise based on owners’ responsibilities. Third, it is important to mention that unlike other countries, the UAE does not impose federal income taxes on general partnership companies as they only consist of UAE nationals. As a rule, the government predominantly enforces taxes on foreign companies that actively engage in oil and petroleum activities as well as foreign banks (PWC, 2015). Fourth, the overall general partnership system allows for an easy resolution of disputes and does not require the involvement of too many stakeholders, which may often facilitate bureaucracy that often occurs in such a legal structure of companies as corporations.
Comparison of General Partnerships with Other Legal Forms
Compared to other legal types of companies, a general partnership has been concluded to be the most reasonable because other structures bear a large list of disadvantages that may hinder the effectiveness and the profitability of business advising company. For instance, if to compare a general partnership with a joint venture, there is one major disadvantage that makes joint ventures less effective – issues of equal involvement, which is usually practiced in general ownerships (“12 advantages and disadvantages of a joint venture,” 2017). Another example is a limited liability company (LLC) structure, which suggests that the responsibilities of owners are only limited to the value of shares that they hold, which means less equality between partners.
While an LLC structure may be a solution for the advisory business in the future because of possible growth and expansion, it is not appropriate to be used at the first stages of a company’s creation and early development (“LLC – limited liability company in UAE,” 2017). Lastly, it is also important to mention that neither a public shareholding company nor a private shareholder company structures can be applied to the scenario of creating a small advisory company with a minimum amount of employees and partners. The mentioned legal structures of businesses are characterized by such complex rules of having no less than ten founders (public shareholding) or ensuring a minimum capital of AED 2 million (private shareholding), as well as many more regulations. At the moment, the advisory company is planning to operate on several human resources and spend as little as possible on unnecessary amenities to invest in advertising and attracting potential clients. Therefore, large starting capitals are out of the question in this case, which means that a general ownership structure will potentially bring the most advantages to the company.
Procedures to Open a Business
To open a business, several legal and governmental procedures should be undertaken. In the beginning, it is important to ensure that partners in a general partnership company are all UAE nationals. Also, the name of the company should include the names of partners to show that they have equal responsibilities in businesses (Dubai Chamber of Commerce and Industry, 2012).
It usually takes approximately fifteen days to start a company in the UAE; however, the maximum period is sixty-two days. First, the company should determine its nature of the activity (consulting) to obtain an occupational license from the Abu Dhabi Department of Economic Development (“Starting a business,” 2017). Second, it is important to come up with a legal form of the company. For instance, because the company is planning to become a financial consultancy firm, it is more likely to be a stand-alone business, which means that a sole proprietor is not allowed to take up such an activity (“Starting a business,” 2017). Therefore, the company should establish itself as a general partnership company.
Third, the company should register a trading name, which should follow a large list of legal conditions. For instance, the name of the company to be registered should not have been registered previously; it should align with the activities of the company and its legal status, it should not mention any religions, authorities, international bodies, and so on. Other requirements for a trading name include adhering to public law, being honest with potential clients, and being different from other registered names. It is essential to note that in case of non-compliance with the mentioned rules on trade names, the DED has the authority to cancel or change the company’s name.
After obtaining a trading name and deciding on the occupational license to issue, the company should apply for approval from DED for enabling the completion of all other procedures promptly. Even though the majority of economic activities in the UAE usually need only a preliminary approval of business, some companies that apply for registration may be asked to contact other authorities to obtain approval. After getting all approvals necessary for the registration, applicants can contact the DED for paying the required fees, submitting documents, and collecting a business license (“Starting a business,” 2017). Depending on the legal and economic status of a company, the required documents may vary.
Other steps involved in the registration of the advising company include the establishment of a directors’ board. Since the company is not planning to hire many employees, the board of directors can include only the two partners involved in a general partnership. Regarding local support for the company, it can be advised to have a local agent (sponsor, partner, etc.) for helping to get business forward, expand, and develop. However, this is not a mandatory requirement for UAE nationals; foreign business owners are more likely to benefit from having a local agent.
Additional Steps for the Type of Business
In conclusion, it should be mentioned that setting up a company in the United Arab Emirates is not as complex compared to other countries. Since the company does not impose corporate income taxes on its nationals, a general partnership between two friends is a venture that can be undertaken with minimum efforts and financial support. Additional steps (or advice) that a general partnership can use to its advantage include sharing the same values between partners, choosing a partner that has complementary skills, defining roles and responsibilities from the first days, drawing up legal documents for increased clarity, and facilitating the culture of honesty. Even though the mentioned advice does not necessarily cover steps to create a business, they cater to the needs of a general partnership, which implies honesty and equal distribution of responsibilities between partners.
Overall, an advisory firm created as a general partnership has some great business opportunities in the United Arab Emirates. After obtaining an occupational license and registering a trading name, the company will be legally eligible to offer its consulting services to its clients. Since the advising services will be provided to clients on-site, the company has great potential to meet new clients and maximize its advertisement efforts to achieve success.
References
Dubai Chamber of Commerce and Industry. (2012). Starting a business in Dubai. Web.
GPC – general partnership company – partnership in UAE. (2017). Web.
LLC – limited liability company in UAE. (2017). Web.
PWC. (2015). Doing business in the UAE. A tax and legal guide. Web.
Starting a business. (2017). Web.
12 advantages and disadvantages of a joint venture. (2017). Web.