Why cheap company setup can be an expensive mistake

The cheapest route to a destination isn’t always the best.

If you’re setting up a company in the UAE, it’s tempting to do it as quickly and cheaply as possible in order to get started straight away. With economic growth suggested to hit 3.5% in 2019, and Expo 2020 on the horizon, it makes sense to take advantage of the booming business climate.

But be careful.

Because the cheap route to setting up a business is full of pitfalls that will cost you time, money and energy – and could ruin your chances of success before you even start.

  1. A cheap setup can lead to hours of wasted time later on

Although starting your company in the UAE with minimal expense sounds attractive, it can be too good to be true. For example, some companies offer temptingly cheap services for setting up a company in a free zone. But if you don’t live in the emirate where that free zone is situated, you will still have to visit it whenever you need to get your paperwork done.

Although starting your company in the UAE with minimal expense sounds attractive, it can be too good to be true.

When you take into account the administrative requirements of any business – especially the paperwork and employee visas that can accompany growth – this could get serious. Most startups can’t afford to keep spending time and money travelling to another emirate.

How using a reputable company formation specialist can help

Using a professional company formation specialist will make sure your business setup is as cost efficient as possible, whatever the location. This will protect you for the future, too, saving you hours of time and a lot of money in the long term.

It also takes the administrative pressure off, because the paperwork will be completed by the specialist on your behalf. This leaves you to get on with other important business issues. 

  1. Setting up a corporate bank account can be a headache

You need to have a corporate bank account in order to operate a business in the UAE. Even though the region entered the top 20 in the ‘Ease of Doing Business’ list of the World Bank this year, opening a business bank account can be complicated.

This goes for all foreign nationals, whether you’re from the wider region or further afield in Europe or the US.

Information you may be asked for includes the legal existence of the business ‘entity’, as well as your business areas, target audience, suppliers, and forecasted revenues. You will also need to provide evidence of corporate owners, identifying beneficiaries and management – with the documents often needing to be certified in both the UAE and their country of origin.

This strict due diligence in the industry is entirely understandable, but makes it even more crucial for business startups in the UAE to get help when setting up.

How using a reputed company formation specialist can help

An expert in this area can take control of the whole process, compiling all relevant documentation and ensuring you stay compliant with the legal requirements. This will make it a much smoother process and allow you to start work in the region far faster than if you attempted to apply for an account yourself.

  1. Not understanding free zone restrictions can be costly

While the free zones in the UAE certainly have their financial benefits, business startups need to know about their limitations. Indeed, your company type can determine where you can set up. Certain businesses are restricted to particular free zones and you’ll need to make sure you apply for the right type of business licence for the right free zone.

Setting up in a free zone makes sense if you intend to operate there for the foreseeable future. The restrictions aren’t only in place initially – when you need to renew your licence, you will still be restricted to that particular location.

This is an important point to bear in mind. For example, should you wish to adjust the company’s direction in the future, it may potentially mean setting up again from scratch.

How using a reputed company formation specialist can help

Making these decisions by yourself might save you some money initially. But unless you are knowledgeable about the different restrictions, it could cost you even more in the long run – and hamper your future decision making and business growth.

Working with a reputable company formation team means getting valuable information to inform your choice of location at the start.

  1. Cutting corners can give you brand image problems

Avoid doing anything that may give the impression that your company is ‘cheap’. Yes, it’s crucial to keep your overheads as low as possible, but you cannot risk damaging your brand image by looking as though you are willing to compromise on quality to get ahead. 

Avoid doing anything that may give the impression that your company is ‘cheap’.

As author Thiruman Archunan stated in his work Ideas and Disclosures: “A business fails when motive becomes more important than the trust.” Trust is key to any successful business. If you appear to be cutting corners in the setting up of your business, people will assume that you do the same in every aspect of your work.

How using a reputed company formation specialist can help

“It takes 20 years to build a reputation and five minutes to ruin it,” said Warren Buffet, one of the world’s best business minds.

This is especially important to remember when you’re starting out. For the sake of your brand image, you need to ensure people see you taking your business seriously. This means:

  • Making smart decisions based on what’s best for all aspects of your business
  • Avoiding the temptation to cut corners just to save a few dollars
  • Hiring the right people to help and advise you

Think long-term – invest in your company setup

There is a lot to think about when starting a business, and of course it makes sense to find savings in some areas.

But your setup should not be one of these areas.

Start as you mean to go on by hiring an expert to lay a strong foundation for your business. This will give you the best possible chance of long-term success.

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