Before Krish Kumar launches his business selling car parts this year, he has a long list of things to tick off.
Factbox: Here is what small business owners should not miss.
Type of contract: What not to miss Contracts can be fixed, where a specific start and end date must be noted but cannot exceed four years. The good news is these can be renewed. An unlimited term contract is the other option. It has a start date, but no termination date..
Contents of contract: What not to miss Legally, the only provisions that are required to be written in the contract include how much the employee will be paid, where they will be working and the dates they both signed the contract. It must also specify whether the contract is fixed or runs for an unlimited period of time. Be sure to make at least two copies, for the employer and employee. Any changes made to the contract must be submitted to the Ministry of Labour when the worker's labour card is renewed.
Probation period: What not to miss Although it is not legally required, many businesses specify an initial probationary period where a new worker can be dismissed – for any reason – without receiving any notice or gratuity from the employer. A probation can only last up to six months, and workers cannot be put on multiple probations
Compiled from “Setting Up in Dubai” and “Setting Up in Abu Dhabi” by Essam Al Tamimi
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The first is waiting until August, when Mr Kumar turns 21, so he can be legally named as a partner on AutoScrap's business licence.
He will also have to obtain legal documents, secure office space and find an outlet to distribute various vehicle parts. He anticipates that process will take at least one month.
"I'm aware of what to do," says Mr Kumar, who is a business development manager at Kiran Jewellers in Sharjah.
Small to medium enterprises (SMEs) account for about 80 per cent of the UAE's non-oil economy. If Mr Kumar's venture goes ahead this year, it will be just one of about 20,000 SMEs expected to join a pool of 175,000 already operating in the country, according to Khalid Maniar, the founder and managing partner of Horwath Mak, a business advisory in Dubai.
But not all of these new businesses will survive. While experts do not have an exact failure rate, they warn that the global economic environment is still volatile and that local SMEs are expected to face difficulties this year in areas such as financing.
In the US, the failure rate in the first five years is 50 per cent, according to the country's small business association.
"SMEs will have to work prudently to survive," says Jitendra Gianchandani, the chairman of Jitendra Consulting Group, another business advisory in Dubai.
Getting started is not always easy, either. Some entrepreneurs lament that it takes months to launch, despite being told by licensing authorities it would take only about 10 days. The latest figures from The World Bank, for 2010, say it takes an average of 15 days to complete the procedures to start legally operating a business in the UAE. That is just behind the UK, at 13 days, but longer than the six days in the US and Hong Kong and the one day in New Zealand.
But today, says Samer Qudah, a partner at the law firm Al Tamimi & Company, starting an SME in the Emirates is taking on average of about four weeks.
Experts regard the following as among the most crucial steps in launching a venture:
1 Pick your business
Choose the products or services the venture will provide. Different classifications of businesses are outlined by economic development departments in the individual emirates.
2 Take legal advice
Individuals should consider the different legal structures available to them before formally establishing their business, whether as sole shareholders or with multiple partners, among other options. "Legal structure is decided by the investors, based on their residency status in [the] country [and by] keeping in mind the tax implications," Mr Gianchandani says. Regardless of the decision, he adds, the procedure to incorporate will remain the same.
3 Location, location, location …
Before aspiring SME owners can begin the necessary paperwork, they need to know where they are going to set up. One option is to select among the country's more than 30 free zones, which tend to be divided into sectors such as technology or media. Another option is outside the free zones where, in most cases, a business needs to find a UAE national to sponsor the business and control at least 51 per cent of its shares.
There are exceptions, though, as expatriates can retain full ownership of their UAE operations in the following two cases: when foreign companies are setting up branch offices in the Emirates; and professionals such as lawyers, consultants or architects can apply for professional licences.
Those applying for the latter must, however, be well qualified and hold relevant degrees, says Prajit Arora, the managing director at Sentinel Business Centres, a consultancy that helps businesses to get started in Dubai.
4 Business licence application
Generally, applications for business licences are simply templates. "The applicant tells the authority what their objectives are in establishing the business," says Mr Qudah. Forms can vary from emirate to emirate, as well as from free zone to free zone, but many need to include details such as where the business will be located.
The documents then have to be cleared through bodies such as the Department of Economic Development, the Immigration Department and the Ministry of Labour, or free-zone authorities. Manufacturing companies that require large factory facilities must submit business plans or project reports before approval. A trading company or consultancy, which may need only a small office in a free zone, has to produce details such as its proposed activities and work visa requirements. Experts also recommend reserving a business's trade name during the application process.
5 Legal documents
Legal documents need to be submitted in Arabic and English. "This is where the bulk of the time lies," warns Mr Qudah. Some documents should be notarised. Information covered under notarisation include details about individual business partners and the proportion of shares each will hold. Everyone must also have a UAE ID card and sign the documents in the presence of the notary officer. Passport copies must be submitted to licensing authorities.
6 Open a bank account
First, the good news: not everyone will need to take this step initially. This process was recently abolished outside free zones, shortening the time it takes to get started, says Mr Qudah. In free zones, though, once an application is approved, a bank account must be opened with money deposited. Getting all the relevant paperwork done and completing this process could take between one day and three months, experts warn, citing factors such as the perceived credibility of the company submitting the application.
7 Obtain the licence
Once the approvals are given, the licensing authorities will ask for payment. Then, at long last, they issue a trade licence, Mr Gianchandani says. In free zones in Ajman, Sharjah, Ras Al Khaimah and Fujairah, the process can be much quicker.
Once an email has been sent confirming that a business has secured office or warehouse space, an entrepreneur can pay the necessary fees and collect his or her licence the next day. In some cases, it is possible to pay and collect on the same day, if the process is started early enough.
8 Apply for employee visas
Many business owners have already started posting job advertisements and combing through CVs so they can, by this point, identify staff and simply apply for employment visas. These days, though, SME owners are running into more delays, depending on the countries from which they try to hire workers. "It depends on the political situations in the [relevant] region," says Mr Qudah. Sometimes, visas are refused for some prospective employees.
9 Soft launch
Many big businesses such as hotels and restaurants have a so-called "soft launch", where they test their services and iron out problems. More SMEs, especially in the technology sector, are also using this approach to signal to clients that they are still just getting started.
10 Formal launch
The company is up and running.
[ nparmar@thenational.ae ]
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