Now you’re ready to push forward and build your legacy in the entrepreneurial hub that is the UAE and the wider Middle East.
So, if you are based in the UAE, what are the key business considerations that entrepreneurs, startups and SMEs should focus on? Quite often, business owners get so immersed in the dream, the five-year plan or even the figures, that they forget some of the nitty-gritty that comes along with running a business. Protocols such as licenses, insurances or gratuities are necessities but can be put off for fear of complexity and uncertainty. In this blog we aim to simplify this path moving forward by sharing five key safeguards to consider.
If you want to have full ownership of your company, you need a license and location in one of the 45 free zones in the UAE. In addition to the corporate and personal tax benefits, a free zone allows 100% foreign ownership with more seamless labor and immigration procedures. Ensure you choose the free zone that is most suited to your business from your startup stage, and also provide premises that can aid your ongoing growth. Several business owners GWM Corporate Solutions have helped have made fast starts, leading to a change of office location in 24 months or less.
Don’t underestimate how time consuming this process can be, never mind the associated costs.
Ensure accounts are prepared from the outset– employ an accountant, or look at a cost effective outsourced accounting solution.
When it comes to cash flow forecasting, failure to plan equals planning to fail. Carry out stringent due diligence on funding. Banks, private investors and peer-to-peer lenders will all consider a great idea, but appraise all the options, as the devil is often in the detail. Ensure your business is capitalised adequately to cover overheads for six months. Many great ideas fall by the wayside due to corners being cut from day one.
Be aware of all UAE legislative requirements and keep abreast of developments such as the impending VAT introduction and compulsory accounting and auditing for LLCs from June 30, 2017.
The incoming requirement to calculate your end-of-service gratuity liability and hold these funds in escrow is of paramount importance. Best practice is to put a solution in place from the outset, rather than hold your gratuity as a liability on the company balance sheet.
As your company grows, your gratuity liability grows with it; so don’t be left with a sizeable outlay if several employees leave the company around the same time.
It is important to consider the “what-ifs” in relation to a shareholder or key person becoming severely ill, or in worst-case-scenarios, passing away. What would happen to the deceased shares on death? Is this written into the Articles of Association (AoA)? How will the deceased family and beneficiaries be remunerated?
Unfortunately, it’s common place upon the death of an owner that the remaining shareholders don’t have the funds to purchase the deceased shares. They may have first refusal at a fair market price but, if they can’t fulfill the purchase, the family of the deceased may have to sell to the highest bidder.
This could be a rival who wants to move the company forward in a different direction. The consequences can be catastrophic. Sadly, during my time in the UK and UAE, I’ve seen too many businesses falter due to insufficient safeguarding. Public liability insurance, or any relevant insurances required by the business sector to protect the business from claims, is not to be ignored. Create a plan to review all elements of the business on an annual basis. The “company will” or AoA shouldn’t simply be drafted on day one and then ignored. As the company grows, the AoA needs to be adapted accordingly.
As the saying goes, a happy workforce is a productive workforce. Ensure your employees have a level of medical coverage and benefits in kind that bestow their position in the company. Put in place a gratuity scheme that is tangible, secure and will be managed by top-tier investment houses to ensure risk-managed growth. It’s a sorry state of affairs when an employee moves on, but the end of service gratuity (EOSG) lump sum they’ve built up isn’t liquid, leading to a messy fallout and a drawn-out struggle to be paid what is rightfully owed. From personal experience, when my wife stopped working to raise our family, as well as numerous client scenarios, I’ve found that a structured gratuity proposition goes a long way to making people feel valued, whilst turning the heads of potential high caliber additions to the team. In addition to EOSG, an additional Corporate Pension Scheme should be considered. This would work in a similar fashion to the UK and implementation further mirrors the evolution of the UAE from a frontier or developing market, into a mature, developed market.
Article originally published by Entrepeneur ME Tuesday 23, May 2017