Choosing Between a Mainland LLC, Free Zone LLC, or Hybrid Setup in Dubai

Free Zone vs Mainland LLCs in Dubai: Quick Overview

Key Factors to Consider Before Choosing a Dubai LLC Structure

Market Access 

Mainland LLCs offer full UAE market access and retail presence. Free Zone LLCs target international trade but need a local distributor or mainland branch to sell directly in the UAE.

Foreign Ownership

Mainland LLCs and Free Zone LLCs both allow 100% foreign ownership in 2025. Mainland ownership applies to most sectors except a few strategic industries. Free Zone LLCs have always offered full ownership with no equity taken by local authorities, appealing to global entrepreneurs and digital businesses.

Licensing Scope and Business Activities

Mainland LLCs allow over 2,000 business activities under one license, enabling diversification and quick pivots. Free Zone LLCs specialize in sector-specific activities but face limits outside their permitted categories, often requiring new licenses or relocation to expand operations.

Taxation and Compliance

Mainland LLCs pay 0% corporate tax up to AED 375,000 and 9% above, with VAT registration and Emiratisation rules for larger firms. Free Zone LLCs can remain tax-free if qualifying as a “Free Zone Person,” with lighter compliance and fewer audit requirements, unless in regulated industries.

Cost of Setup and Renewal

Mainland LLCs cost AED 15,000–35,000 to set up plus higher renewals, while Free Zone LLCs start from AED 10,000 with lower renewal fees and bundled packages for startups and solo founders.

Office Space Requirements

Mainland LLCs require physical office space with Ejari for licensing and visa sponsorship. Free Zone LLCs allow virtual offices, flexi-desks, and shared spaces, offering lower costs and scalability for remote or digital operations.

Eligibility for Government Contracts

Mainland LLCs can bid on government tenders, accessing high-value contracts across the UAE. Free Zone LLCs cannot participate without a mainland branch, limiting access to lucrative public sector opportunities.

Visa Quotas and Employment Rules

Mainland LLCs provide scalable visa quotas linked to office size but require Emiratisation for firms with 50+ employees. Free Zone LLCs include flexible visa quotas in packages and have no Emiratisation requirements.

Business Flexibility and Pivot Options

Mainland LLCs can quickly add new activities or services without restructuring. Free Zone LLCs must follow zone-specific activity lists, often requiring new licenses or entities to expand.

Expansion and Branching Capability

Mainland LLCs can expand across the UAE without extra authority approvals. Free Zone LLCs must appoint a distributor or set up a mainland entity to serve domestic markets.

What Is a Dubai Mainland LLC?

How Mainland LLCs Work

A Dubai Mainland LLC is a business entity licensed by the Department of Economy and Tourism (DET) that allows full operational access across all seven emirates in the UAE. Unlike Free Zone companies, a Mainland LLC is not restricted to a specific geographic area or industry cluster. It can serve both private and public sector clients, open retail locations, bid on government contracts, and expand freely within the country.

Mainland LLCs operate under the UAE’s federal and emirate-level commercial laws and are structured to offer liability protection to shareholders. As of 2025, most commercial and professional activities allow 100% foreign ownership, making this structure attractive for global investors focused on long-term local presence and growth.

Mainland LLC Activities and Licensing Scope

Mainland LLCs are allowed to conduct over 2,000 approved business activities, ranging from traditional sectors like general trading, construction, and manufacturing to modern industries such as fintech, consulting, e-commerce, education, and healthcare. Multiple activities can be grouped under a single trade license, enabling broad operational flexibility and cost savings.

This licensing freedom is particularly advantageous for businesses that need to evolve across sectors without restructuring their legal identity.

Mainland LLC Ownership Rules in 2025

As of 2025, most business activities no longer require a UAE national shareholder. One hundred percent foreign ownership is permitted under Federal Law No. 26 of 2020, with the exception of a few strategic industries such as:

• Banking and financial services
• Insurance
• Oil and gas exploration
• Telecom and defense-related activities

Mainland LLCs must have a minimum of two and a maximum of fifty shareholders, offering flexibility for partnerships, joint ventures, and investor entry.

Mainland companies are governed by UAE’s corporate tax and VAT laws:

• Corporate Tax:
  
  • 0% on profits up to AED 375,000
  • 9% on profits above AED 375,000
• VAT: 5% VAT applies to businesses with taxable revenue exceeding AED 375,000 annually
• Audit Requirements: Mandatory for regulated sectors and larger firms
• Emiratisation: Companies with 50 or more employees must hire UAE nationals based on defined quotas

Mainland LLC Pros

• Full access to all UAE markets
• Ability to trade B2B and B2C across all emirates
• Eligible for UAE government tenders
• Multi-activity licensing and expansion without re-registration
• No restriction on local hiring or distribution
• Strategic physical presence in premium commercial districts

Mainland LLC Cons

• Higher setup and renewal costs
• Mandatory office space leasing
• More complex regulatory compliance
• Emiratisation obligations for larger firms

Our Verdict: When to Choose a Mainland LLC

A Dubai Mainland LLC is ideal for businesses that require full access to local UAE markets, plan to open retail or service locations, or intend to compete for government contracts. It is the preferred structure for companies with long-term local strategies, extensive visa needs, or ambitions to scale operations across multiple emirates.

If your business demands flexibility, physical presence, and market reach within the UAE, a Mainland LLC is the optimal path forward in 2025.

Also check out: types of approved business activities in UAE that you should know before acquiring a license.

What Is a Dubai Free Zone LLC?

How Free Zone LLCs Work

A Free Zone LLC in Dubai is a business entity incorporated within one of the city’s designated Free Zones. These zones operate as independent jurisdictions governed by their own Free Zone Authorities, offering simplified setup processes, tax incentives, and full foreign ownership.

Free Zone LLCs are designed primarily for companies focused on international trade, digital services, and export-oriented operations. While they provide significant advantages in cost, setup speed, and ownership, Free Zone companies are generally restricted from conducting direct business within the UAE mainland without a local distributor or branch.

Free Zone LLC Activities and Limitations

Each Free Zone specializes in a particular sector, and licenses are granted only for approved business activities within that zone’s focus.

Examples of specialized Free Zones:

• DMCC: Trading, commodities, gold, logistics
• DIFC: Finance, fintech, investment
• Dubai Internet City: Tech, e-commerce, software
• Dubai Media City: Creative industries, marketing, production

Limitations include:

• Cannot sell goods or services directly to the UAE mainland without a local agent
• Not eligible for UAE government tenders or public contracts
• Must obtain additional licenses if expanding beyond the zone’s permitted activities

Free Zone Ownership Benefits

Free Zone LLCs offer 100% foreign ownership across all sectors and company types. No UAE national is required as a shareholder or service agent. This gives founders total control over:

• Profit distribution
• Management decisions
• Exit strategies
• Business pivots

The Free Zone Authority acts as a nominal sponsor but holds no equity or decision-making power.

Free Zone Tax Benefits (Corporate and VAT)

Free Zone companies can access powerful tax incentives, especially if they qualify as a “Qualifying Free Zone Person”:

• Corporate Tax:
  
  • 0% on qualifying income
  • 9% applies if the business operates outside permitted Free Zone activity or into mainland
• VAT:
  
  • VAT exemptions available for some inter-zone transactions and export activities
  • 5% VAT applicable on eligible local sales
• Customs:
  
  • Duty-free imports and re-exports
  • Exempt from export duties

Many Free Zones offer 15 to 50-year corporate tax holidays, depending on their agreements with UAE federal authorities.

Free Zone LLC Pros

• Full foreign ownership
• Simple and fast incorporation
• No requirement for local sponsors or agents
• Significant corporate tax benefits
• Access to world-class infrastructure and facilities
• Lower setup and operational costs
• No Emiratisation requirements
• Flexibility in office arrangements
• Streamlined compliance and licensing

Free Zone LLC Cons

• Cannot trade directly with the UAE mainland
• Not eligible for government tenders or local public contracts
• Activities limited to the scope of each zone
• Must create a mainland branch for local market entry
• Fewer visa quotas compared to mainland setups

Our Verdict: When to Choose a Free Zone LLC

Choose a Dubai Free Zone LLC to serve global clients, operate in specialized sectors, and reduce setup costs. Benefit from full foreign ownership, zero corporate tax for qualifying activities, and simplified compliance. Use flexible workspace options to scale efficiently while maintaining full operational control.

Hybrid Strategy: Combining Free Zone and Mainland Advantages

In 2025, a hybrid setup that combines both Free Zone and Mainland structures offers businesses the ability to optimize tax efficiency while accessing the full UAE market. This dual-entity approach is especially effective for companies that serve both international clients and local UAE customers or plan to scale operations across multiple jurisdictions.

Who Should Use a Hybrid Approach?

A hybrid model is ideal for businesses that:

• Want to benefit from 0% corporate tax on qualifying Free Zone income while maintaining a legal presence in the mainland.
• Sell to both international and local UAE customers.
• Need to bid on government contracts or operate physical retail locations within the UAE.
• Require flexible visa allocations and wider operational capabilities across different emirates.
• Have investment or expansion plans that involve multiple legal entities or shareholders.

Structure Examples

Example 1: E-commerce Platform

• Free Zone LLC handles the platform’s tech development and international transactions.
• Mainland branch manages product warehousing, delivery, and local payments in the UAE.

Example 2: Marketing Agency

• Free Zone LLC is registered in Dubai Media City for international clients.
• Mainland LLC services local brands and participates in government tenders.

Example 3: Trading Company

• Free Zone LLC in JAFZA or DMCC manages import/export logistics.
• Mainland branch oversees B2B distribution and local wholesale across the UAE.

Cost and Complexity Considerations

While hybrid setups offer flexibility and strategic advantages, they also introduce added complexity:

• Dual Licensing Costs: You must maintain trade licenses for both entities (Mainland and Free Zone).
• Compliance Duplication: Accounting, renewals, and reporting must be done separately for each company.
• Banking & HR Complexity: Separate bank accounts and employee visa processes are required.

Higher Initial Investment: Combined setup costs may exceed AED 30,000 to AED 50,000+ depending on license types, office space, and business activity.

Final Thoughts: Which Dubai Business Structure Is Right for You?

The optimal Dubai business structure—Mainland LLC, Free Zone LLC, or Hybrid—depends on your market access needs, compliance preferences, and expansion goals.

• Mainland LLC – Best for companies needing direct UAE market access, eligibility for government tenders, or physical operations such as retail, warehousing, or manufacturing. This structure offers unrestricted geographic reach across all emirates.

• Free Zone LLC – Ideal for digital-first companies, consulting firms, and international trading operations. Benefits include faster setup, lower operating costs, and tax advantages that improve profitability. It suits startups, SMEs, and global service providers that do not require direct mainland market access.

• Hybrid Setup – Combines Free Zone efficiency with Mainland reach. Businesses can launch lean in a Free Zone and later establish a Mainland branch to serve growing UAE-based demand.

Frequently Asked Questions

Can a Free Zone LLC sell directly in the UAE?

No, a Free Zone LLC cannot sell directly to UAE mainland customers. To trade within the mainland, you must either appoint a local distributor, use a commercial agent, or set up a Mainland branch of your Free Zone entity.

Which structure has better tax benefits?

Free Zone LLCs offer better tax benefits if they qualify as “Qualifying Free Zone Persons.” These companies can benefit from 0% corporate tax on eligible income, while Mainland LLCs are subject to 9% corporate tax on annual profits exceeding AED 375,000.

Is a local sponsor still required in 2025?

No. As of 2025, most business activities in the UAE no longer require a local sponsor. Mainland LLCs can now be 100% foreign-owned under Federal Law No. 26 of 2020, except in specific strategic sectors such as finance or defense.

Can I convert from Free Zone to Mainland later?

Yes, you can either convert your Free Zone entity to a Mainland company through restructuring, or you can open a new Mainland branch under your Free Zone parent company. Both processes are legally recognized but may require new licensing and regulatory approvals.

Do Free Zones require office space?

Yes, but the requirements are flexible. Many Free Zones allow for virtual offices, shared workspaces (flexi-desks), or co-working spaces to meet legal licensing obligations. Physical office space is not mandatory unless your activity or visa quota demands it.

Ready to Launch Your UAE Business?

Start your journey with confidence by working with setup specialists who understand the latest 2025 regulations, tax rules, and market dynamics.

• Consult with Juriszone, which can recommend the best jurisdiction and structure for your goals
• Book a free consultation to explore Mainland, Free Zone, or hybrid models
• Get our UAE Business Setup Checklist to get step-by-step guidance for launching