Dubai, one of the most dynamic business hubs in the world, offers a range of opportunities for investors, entrepreneurs, and professionals looking to set up their businesses in the UAE. Whether you’re planning to trade physical goods or offer specialized services, the first step toward establishing a business in Dubai is obtaining the appropriate license. The two most common types of licenses issued are the Commercial License and the Professional License. While both are issued by the Department of Economic Development (DED), each serves a distinct purpose and comes with different ownership structures, capital requirements, liabilities, and fees.

In this article, we will explore the key differences between these two types of licenses, focusing on their legal structures, business activities, costs, and requirements for business setup in Dubai.

What Is a Commercial License in Dubai?

A Commercial License is issued to businesses involved in trading activities, including the buying and selling of goods. It is suitable for companies engaged in importing and exporting, retail, wholesale, and manufacturing activities. Additionally, this license covers a broad spectrum of business sectors such as real estate, construction, and even service-based businesses like advertising and cleaning.

The Commercial License is typically granted to businesses that operate with a Limited Liability Company (LLC) structure, although this structure can vary depending on whether the business is based in a Free Zone or the Mainland.

Key Features of a Commercial License:

1. Ownership:
   • A Commercial License is traditionally subject to a 51% ownership rule, where a UAE national or a local partner must hold at least 51% of the company shares. However, since June 2021, the UAE government has allowed 100% foreign ownership for certain activities in the mainland, offering more flexibility to foreign investors.
2. Minimum Capital Requirement:
   • Companies registered with a Commercial License typically need to show a minimum share capital of AED 300,000. This requirement can vary depending on the type of business activity.
3. Business Scope:
   • The license allows businesses to trade goods and products. It covers a variety of activities including retail, wholesale, and even import/export of products such as electronics, clothing, construction materials, and more.
4. Liabilities:
   • With a Commercial License, businesses are usually issued with limited liabilities, which means the liability of shareholders is limited to the value of their shares in the company.
5. Business Activities:
   • Businesses with a Commercial License can typically operate across multiple sectors such as real estate, general trading, retail, and construction. The license allows the company to conduct a wide range of activities under a single license.

Advantages of a Commercial License:

• Businesses can conduct up to ten activities under one Commercial License.
• Access to multiple company formation options in Dubai, including both Free Zones and Mainland.
• Local government business support for a variety of industries.
• Residence visas for employees and managers of the company.
• Simpler process for trade license renewal.

What Is a Professional License in Dubai?

A Professional License is tailored for businesses that provide services based on specialized skills, knowledge, or expertise. This license is typically issued to professionals such as consultants, freelancers, craftsmen, doctors, and lawyers, as well as companies offering educational services or beauty salons.

A Professional License is generally issued under a Sole Establishment (SO) or Civil Company (CC) structure, depending on whether the business is owned by one individual or multiple partners. Notably, this type of license allows 100% foreign ownership, provided a local service agent (LSA) is appointed to represent the business.

Key Features of a Professional License:

1. Ownership:
   • With a Professional License, foreign investors can own 100% of the company shares, which is a significant advantage for entrepreneurs who want to retain full control of their business. However, the business must appoint a local service agent to represent the company in official matters, though the agent does not have decision-making powers or liability in the company.
2. Minimum Capital Requirement:
   • A Professional License typically requires a minimum share capital of AED 150,000, which is lower than the capital requirements for a Commercial License.
3. Business Scope:
   • This license is designed for businesses offering professional services. These include consultancy, education, healthcare, beauty services, and other skill-based services. The business scope does not include general trading activities or selling tangible goods.
4. Liabilities:
   • A Professional License is associated with unlimited liability, which means the owner or owners of the company are personally responsible for any debts or liabilities incurred by the business. However, if the owner wishes to limit liability, they can change the legal structure to an LLC.
5. Business Activities:
   • The activities under a Professional License are mainly centered on service-oriented businesses. Examples include lawyers, architects, engineers, IT consultants, and marketing firms.

Advantages of a Professional License:

• Provides 100% foreign ownership of the company.
• Ideal for skilled professionals offering services in specific fields.
• Lower minimum capital requirements (AED 150,000).
• Clear transparency when dealing with clients.
• The ability to apply for residence visas for business owners and employees.

Commercial vs Professional License: Key Differences

Now that we’ve broken down the main features of both licenses, let’s compare them side by side to clarify the differences: