With Covid making people nervous about their job security in some sectors, increasingly Abu Dhabi residents are looking for a second income source. One such source is starting a side business.
Others have entrepreneurial dreams related to their passions and hobbies. And, let’s face it, being an entrepreneur is quite trendy nowadays and when we hear mega stories about startups getting bought out by big brands, who wouldn’t want to give it a go themselves!
What exactly is a side business? A side business is a way of making extra money whilst keeping your day job. Often referred to as a side hustle, the people who embark on starting a side business are called hustlers. They generally work in their spare time to build up their business, promote their business and manage any fulfilments needed.
The nature of the business varies from person to person. Recently, in Abu Dhabi, some of the popular inquiries which we have received for people wanting to start side businesses include, e-commerce of various products, handmade or natural beauty products/foods, and consultancy services. As you can see, the activities are diverse, but e-commerce is by far the most popular inquiry. This is because of advances in technology, distribution channels, payment gateways, cheaper licenses and social media.
Are side businesses legal in Abu Dhabi? YES, as long as you have the appropriate business license (trade license). All types of businesses in Abu Dhabi must have a trade license. Even tiny businesses, which don’t consider themselves to even be a business, need to have a trade license. In essence, if you are transacting, you need a license. If someone is paying you for a product or a service you are supplying to them, you need a license. You could be providing personal training sessions, doing hair and make up or some book keeping for your friends and neighbours – no matter what it is, who it is for, or how frequently you do it, YOU NEED A LICENSE.
At the moment, there are many people across Abu Dhabi providing all kinds of services to make money because they have either lost their jobs or because they have had to take a salary cut; however, they are all operating at risk and face fines far more expensive than setting up a trade license.
What type of license do I need for a side business in Abu Dhabi?
The Tajer Abu Dhabi license is purely for UAE citizens and residents, and it is especially for entrepreneurs. You need to have an Emirates ID card in order to apply for the license. The Tajer license enables you to establish a license without the need for a premise for the first two years. This means that you save money on leasing a shop or office that you might not actually use and therefore gives you more cashflow for your operations/inventory. In the past, the need to have a premise was the major barrier for entrepreneurs getting licensed.
This is a great license for Abu Dhabi entrepreneurs at the moment because the Abu Dhabi Department of Economic Development (ADDED) fees for the activities are waived for new licenses. This doesn’t mean the license is free as there are other costs which need to be covered, but every little saving helps. Also, the first license is issued for two years, making it significantly cheaper than a free zone option. This gives you plenty of time to test the market and get your business up and running.
What are the benefits of the license?
· Lots of activities to choose from, so there should be something for most startups.
· It is a mainland license, so you can engage with clients and customers throughout Abu Dhabi rather than being restricted to the geographical boundaries of one of the free zones.
· Save costs on commercial premises by working from home for the first two years.
· Quick setup, usually within 48 hours, so you can get started straight away.
· First license valid for two years.
· Easy bank account opening.
· Multiple shareholders are allowed, meaning friends can collaborate on a new business venture together.
· Legally sell via social media platforms and websites.
· Employ up to three staff.
How much does a Tajer Abu Dhabi license cost? Approximately AED6,000.
Do you need a local sponsor? Yes, a local sponsor is required. The legal structure for the Tajer license is a Limited Liability Company (LLC). This means, a local sponsor (Emirati) is required to hold a minimum 51% share in the business and an expatriate can hold up to a maximum 49% of the shares. If engaging with a local sponsor is scary, there are ways to protect your business and your profits, so don’t immediately dismiss this as an option.
What are the ongoing obligations with a Tajer license?
- The license fees are payable at the time the Tajer license is issued – remember this is for a two year period. Then you can operate your business for two years before having to pay any further government fees. At the two year anniversary of the license issue it will be necessary to renew the license at which point the validity will be for 12 months and thereafter renewable annually.
- All companies need to keep accounts to international accounting standards. If/when the company’s turnover reaches the VAT threshold (AED187,500 is the voluntary threshold and AED365,000 is the mandatory threshold), it would be necessary to register with the Federal Tax Authority.
How can you accept payments? Setting up a corporate bank account for a Tajer license is surprisingly quick and easy. Thereafter it is possible to receive payments by cash, cheque or electronic transfer. If your business is selling goods online it is also possible to setup payment gateways to receive payments via your website and the options available in the UAE are increasing all the time. If you will be selling at events or face-to-face with your customer, you can arrange a POS terminal to accept credit and debit card payments. Fees are applicable for each of these options, so do spend some time researching what is right for you and your business.
What else should you be aware of in relation to the Tajer license?
If you are selling via a website, the suffix needs to be .ae
For many, being their own boss will always be a dream, but for others who have the determination and persistence to follow their passion, starting a small business in Abu Dhabi is now an achievable and affordable reality. What is holding you back?
Written by Jenny Hunt, Founding Partner & CEO of Gateway Group Of Companies. Gateway helps companies get licensed to do business in Abu Dhabi. To establish your business in Abu Dhabi: