Many entrepreneurs arriving in the UAE (especially those coming from the UK) instinctively assume that company formation is little more than a procedural task. In Britain, a business becomes official the moment it appears on Companies House, and the decision about where it is registered has no bearing on credibility, banking, governance or tax. Everything is standardised.
The UAE works very differently. Instead of a centralised corporate registry, it is a mosaic of jurisdictions: the mainland authorities of each emirate, more than forty free zones, and several specialised regulators. Each operates with its own rules, governance standards, permitted activities and commercial realities. Choosing between them is not merely administrative tick boxing - it defines how your business will function, scale and be perceived.
For founders unfamiliar with the region, this guide offers a clear overview of how UAE jurisdictions differ and why choosing “the cheapest free zone” often becomes the most expensive decision a business can make.
Why the jurisdiction matters
The UAE’s national government describes each free zone as serving a specific economic purpose e.g. logistics, media, technology, commodities, financial services, and more. This alone signals that the jurisdictions are not interchangeable. Some offer world-class infrastructureand transparent regulatory frameworks; others provide the bare minimum needed for a licence.
The assumption that “a licence is a licence” is where many foreign founders go wrong. The jurisdiction you select influences your:
• Banking experience
• Corporate tax obligations
• Visa capacity
• Ability to hire
• Standing with investors and corporate partners
• Operational flexibility
• Governance and reporting requirements
A company can be legally formed within days, but the consequences of choosing the wrong jurisdiction appear months later: bank account delays, inconsistent licencing, restructuring costs, and credibility issues when speaking to serious clients or investors.
Mainland: the default choice for businesses serving the local market
A mainland company operates under the emirate’s Department ofEconomic Development (Dubai DET, Abu Dhabi DED, etc.) and can trade anywhere in the UAE. For businesses with a real presence in the domestic market, mainland remains the most straightforward long-term option.
It suits sectors such as retail, hospitality, healthcare, fitness, consumer services and any business employing a local workforce or bidding for government-related work. Following reforms in 2021, foreign founders in many sectors can own 100% of mainland companies, removing the old local-sponsor requirement.
Mainland is far from the cheapest option, but for businesses genuinely serving UAE customers, it is usually the cleanest, most durable structure.
DMCC: a specialist zone for commodities, web3 and digital assets
DMCC began as a commodities trading zone and its structure still reflects that purpose. It is most functional for businesses dealing with precious metals, diamonds, energy products, agricultural goods or firms needing trade-related permissions such as customs codes and import–export arrangements.It also supports regulated crypto and Web3 activity under defined permissions.
DMCC works well for companies operating in these sectors because it provides the relevant ecosystem, activity categories and support infrastructure.
Where it is less suitable is for general service businesses, consultants, digital-first companies, small agencies or remote businesses. For these founders, the additional compliance steps and higher operating costs offer little practical value and can create unnecessary friction.
DMCC makes sense when your business directly benefits from its trading or regulated-activity framework and usually not otherwise.
ADGM: the international hub for holding companies
ADGM (Abu Dhabi Global Market) is unique in the region because it operates entirely under English common law. This gives the jurisdiction a level of legal predictability and investor familiarity that foreign founders often expect but rarely find elsewhere in the Gulf.
ADGM has grown far beyond its financial-services reputation. Its non-regulated commercial zone now includes holding companies, IP entities, multi-entity groups, SPVs, venture-backed startups and founders preparing for external investment.
Its strengths lie in governance clarity, reliable dispute resolution and a corporate framework aligned with what investors and legal counsel expect in the UK, Europe and Singapore. For holding companies, cap-table structuring, SPVs, JVs and anything involving external shareholders, ADGM is often the most future-proof choice.
This is a jurisdiction selected for its legal architecture, not its pricing.
Most generalised Dubai free zones
Dubai offers several modern free zones aimed at consultants, small teams and digital businesses. The two most commonly selected by foreign founders are IFZA and Meydan.
IFZA is known for flexibility and broad activity categories.It suits solo founders, consultants, agencies, online service providers and businesses with international client bases. Its visa structure is intentionally lean - up to four visas at a reasonable cost - making it well matched to small teams.
Meydan also targets early-stage and digital businesses but provides two practical advantages: it allows the use of dedicated mainland office space and up to six visas. This gives slightly more operational room for founders planning to hire or maintain a physical presence.
Both offer good value, broad licensing and straightforward compliance. They are not designed for regulated industries, commodities trading, investment structuring or capital-intensive operations but they are ideal for lean companies needing a Dubai presence without the complexity of larger, specialised zones.
"Cheap" free zones in other emirates
Free zones such as RAKEZ and Shams offer lower-cost company formation and serve a legitimate purpose for micro-businesses, freelancers and location-independent founders. However, these jurisdictions were not designed to support businesses requiring strong banking relationships, hiring capacity, investor engagement or governance-driven infrastructure.
Founders choosing solely on price often face issues later: limited bank acceptance, mismatched activity categories, visa constraints, and the need to migrate the company once it begins to grow. The short-term saving can lead to long-term restructuring costs.
These zones work for small, simple operations or simply to have a presence but not for companies with plans to scale.
Choosing the business set up is fundamental
Your legal jurisdiction influences everything from how easily you open a bank account to how you raise capital, hire staff, manage tax and eventually exit the business. No single free zone is “best.” The right choice depends on your revenue model, client base, growth plan and risk appetite.
• If you serve UAE clients, mainland or a Dubai free zone that allows onshore activity may be necessary.
• If your clients are international, IFZA or Meydan may provide the right balance of flexibility and cost.
• If you need investor credibility or intend to build a holding structure, ADGM is usually the preferred option.
• If you select a jurisdiction purely because it is cheap, it is almost guaranteed to create friction later.
Founders planning beyond the first year typically end up in one of five places: Mainland, ADGM, DMCC, IFZA or Meydan. Everything else serves narrow, specific purposes.
Speak to a corporate services provider, not a setup agency.
Most restructuring cases begin with founders who chose a jurisdiction recommended by a “company setup consultant.” These firms are transactional by nature: they issue a licence quickly, ask minimal questions and provide no ongoing support. They do not handle governance, tax, banking preparation, compliance or long-term planning — yet these are the factors that determine whether a UAE company thrives.
A corporate services provider (CSP) works differently. We look at the full lifecycle of the business: structure, banking substance, shareholder arrangements, visas, compliance, reporting, tax, growth plans and operational realities. And unlike setup firms, we remain responsible long after the licence is issued.
If you want a structure that supports your ambitions rather than limiting them, speak to a CSP. The right jurisdictional decision will shape your company’s trajectory for years to come.
