Freelancer Permit vs Trade License
The popularity of the UAE’s startup economy makes the demand for freelancer permits and trade licenses very high.
When looking to work as a freelancer in the UAE, you’re faced with two potential avenues to follow as an entrepreneur: a freelancer permit, or a trade license.
This blog will tell any sole-trading entrepreneur what a freelancer permit is, what a trade license is, and how to choose between a freelancer permit vs trade license.
What is a freelancer permit?
A freelancer permit allows individuals to work as independent contractors and offer their services directly to clients without the need for a local sponsor or a physical office space.
The permit itself is designed to support individuals who go from project to project or provide specialized services such as graphic design, writing, photography, consulting, and similar fields.
With a freelancer permit, individuals can conduct business under their own name, allowing them to build their brand around themselves.
What is a trade license?
A trade license allows individuals to engage in commercial activities within a specific trade or sector.
It is required for businesses involved in buying, selling, importing, exporting, or manufacturing goods. Trade licenses are typically obtained by companies and involve establishing a legal entity, such as a Limited Liability Company.
Trade licenses may require a local sponsor, a physical office or trading space, and compliance with legal elements relating to your trading name.
Pros and Cons of a Freelancer Permit
So, what does a freelancer permit provide you with?
Freelancers have the freedom to choose their projects, clients, and working hours, allowing for a more flexible work-life balance.
- Lower Costs:
Freelancers generally have lower overhead costs as they don’t require a physical office space or the expenses associated with setting up a legal entity.
- Quick Setup:
Obtaining a freelancer permit is often a streamlined process, with fewer requirements and paperwork compared to setting up a company.
And what would the potential drawbacks to a freelancer permit be?
- Limited Scope:
Freelancer permits are typically restricted to certain professional services and may not be suitable for businesses involved in trading goods or requiring specialized infrastructure.
- Lack of Liability Protection:
As a freelancer, you bear unlimited personal liability for your business activities, which may mean that you are personally responsible for any legal or financial issues that could arise in unfortunate circumstances.
Pros and cons of a Trade License
With that said, how do the pros compare between a freelancer permit and a trade license?
Well, here are the key reasons why you should become an entrepreneur with a trade license:
- Ability to expand:
A trade license allows for the establishment of a legal entity, such as an LLC, which offers opportunities for growth, expansion, and the ability to undertake larger projects.
- Liability protection:
Companies with a trade license provide limited liability protection, separating personal assets from business liabilities and reducing personal financial risk.
- Access to markets:
Having a trade license enables businesses to participate in government tenders, engage with larger corporations, and operate in a broader range of industries.
- Credibility and trust:
Holding a trade license enhances the credibility and trustworthiness of a business, as it demonstrates compliance with local regulations and a commitment to professionalism.
However, you should consider these aspects when thinking about getting a trade license:
- Higher Costs:
Setting up and maintaining a company with a trade license involves more expenses, such as registration fees, office rental, visa costs, sponsor fees, and compliance with regulatory requirements.
- More Complex Setup:
Establishing a legal entity requires navigating more administrative procedures, documentation, and potentially engaging with local sponsors or partners, which can be time-consuming and complex.
- Regulatory Compliance:
Businesses with trade licenses must adhere to specific regulations, submit regular financial reports, and comply with government requirements, which may involve additional administrative burdens and costs.
Overall, the main difference between a freelancer permit and a trade license in Dubai is that a trade license sets up your business to be more of a commercial operation than a freelancer permit would. A trade license allows you to buy, sell, import or manufacture goods, which will of course involve more compliance questions than the more project focused freelancer permit.