Free zone company formation in the UAE: FZE, FZCO and FZ-LLC

What a free zone company actually is

A free zone company is a limited-liability company licensed by a free zone authority rather than by the Dubai mainland — the rest of Dubai outside the free zones, licensed by the emirate's own economy department. It is a separate legal entity from its owners — the company holds the contracts and the liability, and your personal assets sit behind it. It gives 100% foreign ownership as standard, with no local partner.

Free zone company vs mainland LLC

A free zone company suits most businesses. The reasons to look at a mainland company instead are specific — set out below.

A free zone company works for most businesses serving the UAE and abroad; a mainland company comes in for specific reasons, set out further down. See how both sit next to branch, sole establishment and holding on the types of company in the UAE page.

The free zone company, in full

FZE, FZCO or FZ-LLC — what the difference is

The two are the same structure with a different number of owners. A Free Zone Establishment (FZE) has a single owner; a Free Zone Company (FZCO, sometimes FZC) has two or more. Both are limited-liability companies that are legally separate from their owners, and both give 100% foreign ownership.

The choice follows your shareholding, not the other way round — if you are setting up alone you will usually be an FZE, and you can bring in shareholders later. Adding a shareholder converts the FZE into an FZCO — the same company amended at the free zone, not a new one set up from scratch.

Free zones do not agree on how many shareholders they will register, and there is no single UAE figure. Jafza puts the range for a Free Zone Company at two to fifty shareholders, so fifty is the ceiling there.

DMCC sets no upper limit at all — its Company Regulations of 10 October 2024 say only, at Article 25.2, that a company “shall at all times have one or more Shareholders” — and IFZA says the same, one or more. Check the free zone’s own regulations before you plan a wider share register.

Some free zones label the same entity a free zone LLC (FZ-LLC); it is the same family of limited-liability company, with the exact naming and detail set by each free zone authority.

Is a free zone company the same as an LLC?

It is a limited-liability company, but not a mainland LLC. Both protect your personal assets; the difference is who licenses them and where they can trade. A mainland LLC is licensed on the mainland and sells directly into the UAE market; a free zone company is licensed by a free zone and is built to trade internationally and within its free zone. People often call both “an LLC” loosely — the distinction that matters is the trading reach, not the label.

What a free zone company can and cannot do

A free zone company can work with clients in the UAE and abroad, trade with other free zones (moving goods between them usually carries no customs duty), and trade internationally. Your visa — and visas for your staff and family — come through the company’s establishment card, the document that lets it sponsor people for UAE residence; the number you can issue is set by the free zone and your package, and once you are putting several people on visas the package and desk size start to matter.

Selling physical goods into the UAE mainland is the exception: those goods count as imports, so customs duty (5% on most goods, higher on a few — 50% on alcohol, 100% on tobacco) and VAT apply, and they go through a mainland route.

Since March 2025 a Dubai free zone company can also apply to Dubai’s Department of Economy and Tourism — the government department that licenses mainland businesses — for a mainland branch licence or a permit — the branch licence runs a year and renews, the permit is temporary and capped at six months — rather than only selling through a distributor (Dubai Executive Council Resolution 11 of 2025). The department decides which activities qualify, and the route does not cover financial firms in the Dubai International Financial Centre (a separate free zone for financial businesses).

When a free zone company is fine — and when you’d look at mainland

The client can sit anywhere in the UAE; what counts is where the work is done.

Clearly fine for a free zone company

IT consultancy

• You have an IT consultancy in a free zone.
• You visit a mainland client’s office to discuss a network upgrade.
• You return to your free zone office.
• You prepare the proposal, do the work remotely, hold Teams meetings and invoice the client.

That is exactly how many IT consultancies operate.

Marketing agency

• You have a free zone marketing company.
• You meet a mainland client in Business Bay to discuss their advertising campaign.
• All creative work, reporting and account management is done from your free zone office.
• The client pays your free zone company.

Again, normal consultancy activity.

Starting to look like you need a mainland licence

Permanent on-site IT team

• You have a free zone IT company.
• Four engineers work every day from the client’s Dubai office, with their own desks.
• They rarely attend your free zone office.
• The client’s site has effectively become your operating base.

At this point you look less like a consultancy and more like a mainland operation.

Recruitment company with a sales office

• You have a free zone recruitment company.
• You rent a small office in mainland Dubai, branded in your company name.
• Staff work there every day, meeting candidates and employers.
• It functions as your Dubai sales office.

That is hard to argue is merely “servicing mainland clients” — you are running a mainland establishment.

If that sounds like your setup, the licence needs to match where the work actually happens. Running lean from home or a desk is fine; it is a fixed, staffed base on the mainland that changes the picture. Sometimes that is a mainland company; sometimes it is a free zone company with a mainland branch or permit alongside it. We’ll make sure everything is in the right place during the first meeting before we start work.

What it means at the bank

A free zone licence does not open a bank account on its own. The bank looks at what the company actually does, who owns it and where the money comes from, and each free zone sits differently with each bank. At Start Business Services we speak to the bank's compliance team about the activity before the free zone is chosen, so the licence supports the account rather than working against it.

Where the paperwork is complete and correct, the account is usually open around seven to ten days after the Emirates identity card is issued; a more complex profile takes longer. How to open a UAE business bank account sets out the documents and the sequence in full.

Tax and VAT on a free zone company

A free zone company is inside the UAE tax system. VAT (currently 5%) applies as it would elsewhere once your UAE turnover passes the level where VAT registration becomes compulsory (currently AED 375,000 (UAE dirhams) a year, as published by the Federal Tax Authority).

Separately, a free zone company can qualify for a 0% corporate-tax rate on its qualifying income (the “qualifying free zone person” rules) — but only if it meets strict conditions, and never automatically just because you are in a free zone. A company that does not qualify falls under the standard UAE corporate tax rules instead. Not every free zone company qualifies, so rather than leave it as a maybe, at Start Business Services we tell you whether the 0% is realistic for your activity. The detail sits on the UAE corporate tax page.

Choosing a free zone is a separate decision

There are more than forty free zones in the UAE, and the right one depends on your activity, your customers and how the company will bank — not the headline licence price. We keep that as a separate decision so it gets proper attention: see the full list, compared, on the free zones in Dubai page. Cost moves with the free zone, the activity and the number of visas, so we set the exact figure in the first conversation. The government's own list of free zone authorities, on u.ae, names 37 — 22 of them in Dubai.

Is a free zone company right for your business?

A free zone company is at its simplest when your clients are mostly outside the UAE, and it still works well when you serve both — in practice many owners start with clients abroad and pick up UAE clients as they settle in, and one free zone company covers that. For most owners it is the simplest, quickest base: 100% foreign ownership and a structure banks understand.

You would move to a mainland company for the reasons set out above. Most real situations are settled in one conversation that starts from what the business does. We set the company up, handle the licence, residency and the bank, and you deal with the same person from the first call onwards.

Written by Gareth Jones, Founder of Start Business Services — he advises UK, Irish and Australian owners on UAE company structures, free zones, banking and setup.

Who can own a free zone company

A free zone company can be owned by an individual or by another company — worth knowing the difference before you set it up.

You, or your overseas company

Most owners hold the shares personally, which keeps setup and banking simple. But your existing overseas company can own the free zone company instead — useful if you want the UAE entity to sit inside your group for consolidated accounts or a future sale — and a holding company can sit above it.

Corporate ownership means the bank looks through to the full ownership chain behind the parent, with those documents officially certified for UAE use (attested), so it takes longer. For a new free zone company, holding the shares yourself is the simpler route; the overseas company holds them when the entity needs to sit inside your existing group, at the cost of a longer banking process.

The same trade-off, in full — including the holding-company option — is on the LLC ownership section. Some free zones also set their own rules on corporate shareholders, which we check for the free zone you choose.