The advantages and disadvantages of a trade license vs a freelancer permit

The advantages and disadvantages of a trade license vs a freelancer permit:

Do you wish to establish a business of your own? With its entrepreneurial culture and expanding economy, the UAE is an excellent place to do so. However, you will want a valid driver’s license, which you may obtain in one of two ways. If you wish to start a company, you may apply for a trade license, or if you only want to operate as a solo practitioner, you can apply for a freelancer permit.

We’ll look at five particular topics in this post to help you determine which choice is best for you.

1. Recruiting skilled workers 

Any company’s life cycle eventually reaches a moment where it’s time to employ. This is a simple procedure if you have a trade license. There are a few more procedures that freelancers must do.

Trade license: If you have a trade license, you can hire as many people as your license allows. This number will vary depending on the size of your firm or the free zone where you operate. If your license permits for six visas, you have the option to recruit six people.

Freelancer: If you want to hire a freelancer, you’ll have to go through an extra stage. Only you (the identified individual) are allowed to operate in the business with the freelancer’s permission. Many people, on the other hand, use the freelancer permit as a starting point and subsequently upgrade to a complete trade license when they are ready.

This is a straightforward procedure, and once completed, you are free to hire as many staff as you have visas available.

2. Starting your business and operating it

When it comes to getting started, both choices are simple: apply for a license or permission from the Department of Economic Development (DED) if you want to trade from the mainland, or apply directly to your preferred free zone.

However, there are a few distinctions between the setups that you should consider when it comes to doing business.

Trade license: Obtaining a trade license is the easiest method to do business in the UAE. Trade licenses are issued by both the DED and all free zones, so getting started is simple. Similarly, the great majority of UAE and overseas companies are content doing business with companies operating under a trade license, so you should have no problem doing so in the long run.

Freelancer: Freelancer permits are not as common as trade licenses, however many UAE free zones, including RAKEZ, Dubai Media City, Dubai Internet City, Dubai Design District, and Dubai Knowledge Park, now offer them.

The sole limitation to doing business is that some larger firms may require a tax registration number (TRN), which freelancers do not have. Furthermore, it is not feasible to create a corporate bank account in the UAE as a freelancer.

3. Maintaining minimal expenses

When it comes to running a business, the cost is always a consideration. When it comes to comparing trade license and visa alternatives, the most cost-effective option will be determined by the size and nature of your company. It is feasible to keep expenses low in both situations by not hiring personnel or renting office space.

Trade license: A free zone business can be established for about AED 25,000 to AED 28,000 in terms of set-up fees. This is slightly more expensive than the freelancing option, however, you will be able to:

• Obtain a TRN number and engage in business with major corporations
• As your company expands, you’ll need to hire people rapidly
• Create a business bank account.

Freelancer: If you want to start a small business on a tight budget, the freelancing option may be preferable for you. Starting at AED 7,500, there are several extremely appealing freelancing permit packages available. However, this is not the whole amount you must pay because it excludes the cost of a residence visa, an immigration card, insurance, and other expenses.

A freelancing permit costs on average between AED 10,000 and AED 20,000, depending on factors like:

• Whether you need a one-year permit or want to go for three years.
• Whether you require a residency visa or are a stay-at-home mother who only requires an operating permit to operate your business lawfully in the UAE.

4. Sponsoring dependents is another option.

You can seek to sponsor your dependents for a visa if you run a business. You must, however, have a valid UAE resident visa.

Trade license: If you run a business, you can sponsor dependents as long as you fulfill the wage requirements. If you want to sponsor a spouse, kid, maid, driver, or other dependents for a visa, there are four simple steps to follow: get an entrance permit, alter your status, take a medical fitness exam, register for an Emirates ID, and have your visa stamped.

Freelancer: The method is the same if you want to sponsor dependents as a freelancer. It’s worth mentioning, though, that proving your profits as a freelancer might be difficult. However, if you have formal documentation proving that you fulfill the wage criteria, applying for dependents’ visas should be simple.

5. Trade with the mainland

Businesses in UAE free zones are not authorized to deal directly with the mainland market. There are several methods to do it indirectly, whether you have a trade license or are a freelancer.

Trade license: The most convenient approach for a free zone firm to trade with the mainland is through a local distributor who will charge a fee for their services. Alternatively, you can apply to the Department of Economic Development (DED) to create a branch office outside of your free zone and trade with the rest of the world from there.

Freelancer: There is no explicit law prohibiting a freelancer from working for mainland businesses. Some free zones, though, may limit your capacity to do so. Working with a business formation professional who can advise on the appropriate setup for your trade needs is the finest counsel.

Disclaimer

UAE rules and regulations, as well as company formation prices, are subject to change at any time. While we do our best to provide accurate information based on careful research, laws, and regulations may have changed after this article was written. Furthermore, the operator of the third-party website is entirely responsible for any information contained in external links.

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