Why Cheap Business Setup Packages May Cost You More in the Long Run

When considering business setup within the United Arab Emirates (UAE), many entrepreneurs are often enticed by advertisements promoting affordable business setups due to their low initial costs, quick approval, and easy setup. For first time entrepreneurs or those on a tight budget, this option appears to be the best choice available.

While the initial price may be appealing, the truth is that business set-ups are much morethan just acquiring a company license. Setting up a company requires setting up an infrastructure to effectively run the business, to comply with said laws and regulations, as well as to allow room for future expansion. Many times in the UAE, company formation is quite simple with company licenses able to be issued within a couple of days and the Government process is very organised. Affordable packages tend to exploit the limited timeframes and ease of establishment of companies in the UAE and, thus, solely focus on costs and speed of service. This customer-oriented approach is very comforting to someone who has no idea how to create a new business within UAE. To this person, the message is clear: Get started now for less. Most people tend to forget that this is only the beginning of the story.

What Exclusions Are Present in the Low-Cost Package Offering

A Low-cost package will often be created around the lowest cost possible for the initial licence fee. The low-cost package will typically exclude many of the essential aspects of establishing a company; choosing the correct business activity, planning via potential visa's and the understanding of the regulatory requirements and ensuring an adequate level of flexibility in terms of operations.

Selecting the correct business activity is one of the most common problems with Business activity selection. Many types of activities sound very similar, however they may have varying legal implications for your business. Many new businesses will initially select the incorrect activity, which subsequently minimizes their activity options and can create issues with banks, potential clients or authorities. Planning for future visas is another area that is often missed. Some business licenses are limited in the number of visas an individual can apply for or will require the business to upgrade its license to accommodate the addition of new employees. Many entrepreneurs will only find out about a limitation or necessary upgrade when they are ready to hire a new employee, which typically results in increased costs at that time. Compliance is an additional area that is rarely detailed in the cheap or low-cost packages. Compliance obligations are generally not included in low-cost packages; for example, filing the renewal of your business license or continued compliance obligations related to regulatory filing; these are typically treated as 'afterthoughts', which results in penalties, delays and additional stress when you fail to comply or misunderstand your obligations.

Growth Limitations due to Limited License

Essentially, the way that many companies choose to provide low-cost services to their customers is by providing very limited, or in some cases virtually no, product licensing. These limited or restrictive licenses may be acceptable, however, they are generally not suited for businesses looking to expand or grow their service offerings. The first area of potential issues generally arise when a vendor attempts to open up a vendor account with UAE banks. Most banks will thoroughly review each vendor's documents and licensing before approving the vendor to open an account and will require a direct correlation between what the vendor has presented (in terms of licensing, activity and operating procedures). If a license contains a narrow scope or lack of detail(s) regarding the vendor's scope or type of operation, banks will likely delay or even deny the vendor's application.

Once a company has been established and a business model created, growth may present further issues. More expansion of service offerings is likely to involve further licensing modifications or requiring a change in the structure of the company. At this point, the lower start-up cost associated with the company's establishment can become an impediment to growth rather than providing an opportunity to expand.

The "cost-saving" decision made at the company's inception generally evolves into a continuous cycle of unnecessary delays, excessive paperwork, and unforeseen costs. This is when most entrepreneurs understand that their decision to utilise the lowest cost option may not have been the best decision for their business growth.

No Guidance or Hidden Costs

One of the many disadvantages to low-cost packages is a lack of professional support and guidance. A business registration is just one step in the business setup process; as such many entrepreneurs make decisions based on price alone without consideration for the long-term perspective of their company. Although the effects of these poor decisions are not immediately visible,, it's usually several months into the company's operations that the problems become apparent. The remedy to these issues usually comes with a cost, and the time it takes to fix the problems is going to cost more than if you had spent the money on a better package from the beginning.

Low-cost packages do not provide transparency in terms of further costs that will arise after the establishment is made. Although the initial cost to establish a business is low, once established, there will be many additional fees associated with Ali-firming, Compliance, updates, and renewing your business license, plus anything else you may need after establishment. This information is not provided to the customer before establishment, so it feels like they were forced to commit to the establishment of the business. In essence, the sum of the incremental costs will be much greater than if you had properly planned the establishment of your business initially.

Compliance and Restructure: the Final Point of Interest

One of the least recognized aspects of business establishments within the UAE is thatcompliance is ongoing and requires your continued attention. Compliance includes renewals of your business license, visa of the employees, tax obligations, and any actual regulatory changes that occur within your industry. When looking at low-cost packages, generally, they will stop all support after you have been assigned a business license. Without proper support on a continuous basis, it is easy to miss deadlines or fail to comply with the proper standards, resulting in huge fines for the business owner.

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