September 7, 2020

5 most common mistakes people do while setting up a company

🕐5 minutes to read the article

A story of my client

I've been working in the field of company setup for more than 5 years in the UAE, assisted more than 5,000 people and incorporated about 500 companies. I've seen it all about company formation, business ideas, partners agreements and fights in front of me while signing the shareholding documents...

No matter which nationality you are, what is your budget for company setup, what is your background and business idea, there is always something common that makes people repeat again and again these mistakes.

  1. Running after cheap price. The market is full of promos, discounts, free visas, free services, free everything. But cheap is not always the best. Vice versa, there should be really something wrong with it: you are targeted with that low price for a specific reason, ALWAYS.
  2. Choosing wrong business activity. I had clients coming to me asking to do something with their business activity on the existing license as their bad competitor submitted a complaint to Dubai Municipality and the client was inspected, fined and threatened to get the license terminated. Don't be another "business consultancy" and "marketing services".
  3. Choosing wrong jurisdiction for family visa sponsorship. I've seen a lady who could not get dependent visa for her child because jurisdiction where she registered her company, was very conservative and simply did not allow women to sponsor their kids. And consultant did not warn her about it, just did his job - sold the cheap license.
  4. Investing all the money into company setup papers instead of into marketing. I've seen excited eyes of clients when they were signing shareholding documents and picking up the Trade License from the reception. That was so much promising! BUT next year I've seen them cancelling their Trade License. Why? They focused on formalities - invested all their money into expensive prestigious freezone, but then could not promote their product as the money finished and marketing budget exceeded their expectations. Reasonable jurisdiction for testing the water is a golden rule.
  5. Not checking properly residency visa requirements. So after a company is already formed, suddenly an attested degree is required, which the client was not warned about, and quite often he/she doesn't have. Means company structure must be re-arranged...

A bright case in my memory is when I received an enquiry from a solid British company, which two months earlier already setup company with another advisor. They were seduced by the lowest offer on the market for Mainland setup, Professional license.

As the result, they asked me:

  • to change company name, as the advisor could not negotiate with authority to give the right name the client wanted
  • to change the business activity, because the activity the advisor picked, did not allow the client to nominate their GM since his degree was not meeting the requirement for this specific registered business activity
  • to change the Local Service Agent as they were not able to reach him
  • and the cherry on the top - due to all this mess the client could not issue employment visas to his employees who were about to cross overstay period

We managed to fix it all within 3 weeks, being all over stressed and exhausted. As the summary - the client paid DOUBLE by fixing the things and putting everything in a right place...

My strong recommendation - if you wish to save your money and to setup your business for a reasonable price - get the right advice.

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