LLC vs Sole Proprietor vs LSA in UAE: Which Business License Is Right for You?
The UAE offers a variety of business license options, each catering to different entrepreneurial needs. With recent legal updates, foreign investors now have more flexibility in setting up businesses without the previous restrictions.
This guide compares the Limited Liability Company (LLC), Sole Proprietorship (LLC SP), and Local Services Agent (LSA) licenses to help you choose the best structure for your business.
1. Limited Liability Company (LLC)
Key Features:
- Ownership: Previously required a 51% local partner, but now 100% foreign ownership is allowed in most sectors (except for a few reserved activities).
- Liability: Shareholders’ liability is limited to their capital contribution.
- Minimum Capital: No mandatory minimum capital requirement in most free zones and mainland.
- Number of Owners: Can be formed by one or more shareholders (single-person LLC is now possible).
- Local Sponsor/Agent: No longer required in most cases due to recent reforms.
Best For:
- Medium to large businesses.
- Companies looking for scalability and credibility.
- Investors who want liability protection.
2. Sole Proprietorship (LLC SP – Single Owner LLC)
Key Features:
- Ownership: 100% owned by a single individual (no need for a local partner or additional shareholders).
- Liability: The owner has unlimited personal liability (unlike a standard LLC).
- Business Activities: Suitable for most commercial and professional activities.
- Local Sponsor/Agent: Not required for foreign investors in most cases.
Best For:
- Freelancers, consultants, and small business owners.
- Entrepreneurs who want full control without partners.
- Low-risk businesses where liability is not a major concern.
3. Local Services Agent (LSA) License
Key Features:
- Ownership: Can be 100% foreign-owned or with partners, but requires appointing a UAE national as a local agent (with 0% ownership).
- Liability: The foreign owner retains full control and profits.
- Business Scope: Primarily for service-based activities (not trading or industrial).
- Agent’s Role: The local agent has no financial stake but assists with government procedures.
Best For:
- Service providers (consulting, maintenance, IT, etc.).
- Businesses that need a local presence but want full profit retention.
- Entrepreneurs comfortable with a local agent arrangement.
Comparison Table: LLC vs Sole Proprietorship vs LSA
| Feature | LLC | Sole Proprietorship (LLC SP) | LSA |
|---|---|---|---|
| Ownership | 100% foreign possible | 100% single owner | 100% foreign + local agent (0% share) |
| Liability | Limited | Unlimited | Depends on structure |
| Local Sponsor | Not required (mostly) | Not required | Required (agent with 0% stake) |
| Minimum Shareholders | 1 (single-person LLC) | 1 (sole owner) | 1 (foreign owner) |
| Best For | Scalable businesses | Small businesses | Service-based businesses |
Which License Should You Choose?
- Choose an LLC if you want liability protection and growth potential.
- Choose a Sole Proprietorship (LLC SP) if you’re a solo entrepreneur with a low-risk business.
- Choose an LSA if you’re in services and need a local agent without profit-sharing.
Recent Changes to Note:
✅ No Emirati partner required for LLCs in most sectors.
✅ Single-person LLCs (LLC SP) are now possible.
✅ LSA allows 100% foreign ownership with a local agent (no equity loss).
Final Thoughts
The UAE’s business-friendly reforms make it easier than ever for foreign entrepreneurs to set up companies. Your choice depends on liability concerns, business size, and activity type.torship, or LSA-based company depends on your business type, ownership preferences, and budget. With the right support, you can launch your venture confidently and legally.
If you’re unsure about the right structure, our experts at Protypings.com can guide you through a free consultation and handle the entire registration process.