The paper 'Starting a Restaurant in UAE" is a great example of a business case study. The project scope includes exploring the pertinent legal issues required to create a company. Focus is on opening up a large restaurant, which is set to have a fleet of 10 delivery vehicles. The company founders are looking for investors and have already obtained 200,000 AED seed money, which will be used to set up the business and hire consultants. This paper explores the best legal form of company that should be created and the legal and government procedures that will need to be undertaken with the Department of Economic Development (DED) and other government agencies. The appropriate legal form of business The most appropriate form of business is a limited liability company (LLC) as an entity with multiple shareholders.
As defined by Article 218 of the UAE Commercial Companies Law, an LLC is a type of company requiring that the liabilities of partners be restricted to their shares in the company’ s capital. An LLC can further be described as an association that is limited to a maximum of 50 persons and a minimum of two persons.
Each member’ s liability is restricted to the amount of his or her share in the company’ s capital. The LLC has no capital limitation, as they are no longer needed to fulfil the lowest amount of capital requirements of AED 150000 in Abu Dhabi and the other Emirates, apart from Dubai, which requires a minimum of AED300000. The LLC refers to a business arrangement between two or up to 50 individuals or partners, in which each one of them is not liable to the amount of all their assets or contributions for the liabilities of the company (PWC, 2015).
It is advantageous to the restaurant, as, in this type of business, the law considers all partners not to be each partner’ s agent, and, therefore, partner’ s bankruptcy would not amount to the bankruptcy of all other partners (AHK, n.d. ). Additionally, the company shares are not restricted from being represented in certificates that can be negotiated. It, therefore, provides a greater opportunity to raise more finances for the company. A fundamental appeal of a limited liability company is that the shareholders are protected against company liabilities or failures, as their liability is restricted to their share capital.
On the other hand, when trading in partnership, and in case of failure of the business, all of the partners’ personal assets would be paid to the creditors. Therefore, the underlying rationale for incorporating the business as a limited liability company is to protect the shareholders and the investors behind the formation of the restaurant from liabilities in case of business failure. Another motivating reason for choosing to incorporate the company as an LLC is that it allows for outside investors, including seed capital investments.
Therefore, LLC would protect the investors who have provided the 200,000AED as seed money to set up the business from exposure to personal risk, including losses and possible litigations as the company would be considered a legal entity. This type of company also provides great flexibility in terms of allocating shares, as well as protecting shareholders that lack any managerial skills to get involved in running the restaurants (PWC, 2015).
AHK. (n.d.). Framework about establishing a business in the UAE. Retrieved from http://vae.ahk.de/fileadmin/ahk_vae/FAQ/Business_Support/AHK_Merkblatt_Firmengruendung_Englishx_01.pdf
Company Formation Dubai. (2016). Open a restaurant in Dubai. Retrieved from http://www.companyincorporationdubai.com/open-a-restaurant-in-dubai
Latham & Watkins. (2011). Doing business in the United Arab Emirates. Retrieved from https://www.lw.com/upload/pubcontent/_pdf/pub2783_1.pdf
PWC. (2015). New UAE commercial companies law: Legal reforms to strengthen the legal and regulatory landscape of doing business in the UAE. Retrieved from https://www.pwc.com/m1/en/tax/documents/new-commercial-company-law-in-uae.pdf
UAE Trade-USA. (2016). Doing business in the UAE. Retrieved from http://www.uaetrade-usa.org/index.php?page=uae-economy&cmsid=105
World Bank. (2016). Starting a business in. Retrieved from http://www.doingbusiness.org/data/exploreeconomies/united-arab-emirates/starting-a-business