Setting Up a Business

Written by: BUSINESS

The Main Drawback of Setting Up a Business Overseas

Most of us dream of turning our business into a global entity. However, on one hand, when this idea looks lucrative, on the other hand, there can be several setbacks. Dubai is certainly one of the most attractive places in the world to start a business these days.

While authorities in the UAE are keen on inviting foreign investment into the country, they have liberalized many regulations and offered various benefits to interested entrepreneurs. But there are still many drawbacks that businessmen have to deal with. Before you decide in favor of setting up overseas, you must consider some of its drawbacks.

Reasons To Reconsider Setting Up a Business Abroad 

Well, these are not meant to scare you but give you a reality check and help you make future plans accordingly. We have listed down some of the most common and major setbacks of setting up a company overseas. Make sure to read between the lines as you may find a few solutions too.

Setting Up a Business Overseas

  • Linguistic Barriers

Different language is one of the greatest challenges for many businessmen when setting up a business abroad. Expanding your business to the global markets certainly requires knowing multiple languages, which makes things quite difficult. Mostly all countries conduct their official paperwork and documentation in their own official language. In order to handle everything perfectly without being prey to fraudulent activities, you either need to hire an interpreter you can trust or know the language yourself.

Of course, there are various tools like Google Translate, but it’s not at all easy to translate many languages using those. If you are trying to sell a product in a different country, you will definitely need to advertise in a language that the locals understand. Therefore, foolproof, smooth communication could be one of your problems when setting up a business in a foreign land.

  • Cultural Differences

Just like language, cultures across different countries vary a lot. Countries like the United Arab Emirates have a specific blend of cultures and traditions. From their traditions to social norms, everything can be completely different from yours. You should be careful of this when setting working hours for your staff, selling/advertising products, or communicating with people around you. This can be daunting.

  • Confinements

If you were planning to get the cheapest free zone license in the UAE for doing business activities, you should also consider the limitations it has. Obviously, the free zones in the UAE provide numerous benefits for foreign investors like easy registration, tax exemption, etc.

However, a major downside to these free zones is that you will be limited to a specific free zone. If your objective is to expand your business to various other parts of Dubai, then a free zone may not be the best place to get your business registered. You will be limited to the free zone area only for conducting business activities as the rules and regulations vary for setting up business in Abu Dhabi and Dubai mainland.

Thus, setting up a business abroad will put various limitations on your business, keeping it from growth and expansion if you are not aware of the decisions you make.

  • Ownership of the Business

Foreign ownership is an issue in most countries. Let’s consider Dubai again since we began with it. Foreign investors setting up their business in Dubai mainland cannot get complete ownership of their business. It is mandatory to have a local sponsor or Emirati citizen as a 51% partner in the company to get it registered.

If you are one of the well-established companies already, this doesn’t seem so lucrative. However, as far as Dubai is concerned, foreign investors can enjoy complete ownership of the business only when the business is registered and set up in a free zone. So, if you desire complete ownership of your business, you must be making decisions accordingly.

  • Restrictions on Branch Offices

Majority of foreign investors like to keep their business minimal in foreign countries by establishing branch offices there. It is one of the best ways to take your business to international markets while the parent company grows. However, this may not be possible if you are planning to set up your company in a Dubai Free Zone. Even if you start a branch office here, it will be considered a separate entity. For many business owners, it may not be possible to set up a completely different company in another country which makes it a drawback.

Dealing With the Drawbacks

Apart from the five drawbacks mentioned above, there can be various other limitations, including restrictions on company type, currency exchange, or unreliable security of other business resources. In any case, it’s important to be prepared for the consequences and take decisions that prove to be beneficial for your business. When planning to set up business overseas, these setbacks/limitations should be kept in mind.

Last modified: June 24, 2021