Limited liability company: what it means for UAE businesses.

What limited liability company means

Also called: LLC.

A limited liability company (LLC) is a company whose partners are liable for its debts only up to their share of the capital. Under Article 71 of the Commercial Companies Law (Federal Decree-Law No. 32 of 2021), an LLC has between two and fifty partners, and a single natural or legal person may also form and own one, in which case the name carries "Limited Liability (Sole Proprietorship)". The form is used on the mainland and, under their own regulations, in many free zones.

An LLC has its own legal personality. It holds assets, signs contracts, registers for VAT and Corporate Tax in its own name and pays its own tax. Owning shares does not in itself make a partner a Taxable Person, and dividends paid to partners are not deductible for the company.

The companies law also sets duties that shape the accounts: at least one auditor every year, annual financial statements under international accounting standards, a statutory reserve of 5% of net profits until it reaches half the capital, and an annual return of the partners register each January. Since the 2025 amendments, an LLC may also create different classes of shares if its Memorandum of Association provides for them.

How it works

• Capital must be sufficient for the company's object, paid in full at incorporation, and cash contributions deposited with a bank operating in the UAE (Article 76).
• The Memorandum of Association must be in Arabic, authenticated by the competent authority and entered in the Commercial Register, and so must every amendment (Articles 14 and 15).
• Every LLC needs at least one auditor each year (Article 27). Separately, Corporate Tax requires audited statements where revenue exceeds AED 50,000,000 (Ministerial Decision No. 82 of 2023).
• Each year 5% of net profits goes to the statutory reserve; the partners may stop once it equals half the capital (Article 103).
• Limited liability depends on following the rules: managers who issue documents without the LLC suffix can become personally and jointly liable (Article 72).

Worked example

A two partner Dubai LLC with revenue above the Small Business Relief limit has a profit of AED 975,000, which is also its taxable income.

Profit before tax	AED 975,000
Corporate Tax: 600,000 above the 375,000 band at 9%	AED 54,000
Net profit after tax	AED 921,000
Transfer to statutory reserve at 5%	AED 46,050
Profit available for distribution	AED 874,950

The statutory reserve is set aside before profits are shared, and the dividends then paid to the partners are not deductible for Corporate Tax.

Common mistakes

• Believing limited liability protects the partners in every case. Personal guarantees given to banks or landlords, and manager liability under the companies law, still apply.
• Skipping the annual audit because Corporate Tax only requires audited statements above AED 50,000,000 of revenue. The companies law requires an auditor for every LLC.
• Paying out all the profit without first setting aside the 5% statutory reserve.

The law

• Federal Decree-Law No. 32 of 2021 on Commercial Companies, Articles 27, 71, 72, 74, 76 and 103
• Federal Decree-Law No. 20 of 2025, Article 1 (Article 76 replaced, adding Clause 4 on classes of shares), Arabic text
• Federal Decree-Law No. 47 of 2022, as amended, Article 11, Clause 3 (Resident Person) and Article 33, Clause 4 (dividends not deductible)
• Ministerial Decision No. 82 of 2023, Article 2 (audited financial statements for revenue above AED 50,000,000)

Frequently asked questions

Can one person own a UAE LLC?

Yes. Article 71 allows one natural or legal person to incorporate and own an LLC, liable only up to the capital in its Memorandum of Association. The name must then end with Limited Liability (Sole Proprietorship).

Does the LLC or the partner pay Corporate Tax?

The LLC. It is a juridical person incorporated in the UAE and so a Resident Person. The Federal Tax Authority's guidance confirms that owning shares in a company does not by itself make a natural person a Taxable Person.

Related terms

Memorandum of Association · Mainland company · Share capital · Audited financial statements · Retained earnings. See every term in the UAE tax glossary.

For the full picture, read our guide: Audit Requirements for UAE Companies Under Corporate Tax.

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