creative zone

10 Penalties You May Incur If The Business Is Not Set Up Right

When you’re setting up a business in Dubai, you need to fulfill all the legal requirements, failing which you may incur heavy penalties. Foreign entrepreneurs, who adopt guidance from the internet or rely heavily on DIY documents, are at high risk of making expensive mistakes while setting up their businesses. Here are the top 10 penalties that you may incur if your business is not set up the right way.

  1. Penalty For Not Getting The Right License:

The first step in setting up a company is obtaining a license. All commercial activities require a valid license issued by the relevant authority. The Dubai Government provides several incorporation options to foreign entrepreneurs to choose from. Choosing the wrong company structure or having the wrong business license for your activity or not having a license at all can attract all sorts of penalties of all sorts. It can even expose shareholders to personal liabilities. Therefore, if you plan to set up a business in Dubai, then first get the right license. 

  1. Penalty For Starting a Business While Legally Employed:

If an individual, having a valid employment visa and legally employed as an employee to work in a company, starts a business of his own, then it is in violation of employment agreements and law and contract in Dubai. It should always be done with written consent from the employer.

  1. Penalty For Lack of Written Agreements & Contracts:

Although many business transactions are done based on mutual trust and verbal agreement of the terms, the most trusted and reliable form of agreement is always the written contract. In case of any dispute, a written and signed contract, that documents the detailed terms agreed by the parties, is only enforceable.

  1. Penalty For Not Registering Intellectual Property

Intellectual property is one of the most valuable intangible assets that a company can own. The Intellectual Property can bring future economic benefit to its owner and help exclude competitors from the market. Forgetting to register your intellectual property and leaving it unclaimed can lead to huge economic loss.

  1. Penalty For Not Assessing Worst-case Scenarios

A business can mitigate risks by either insurance or contract. If the pain points and possible worst-case scenarios are identified, assessed, and addressed in advance, then proper safety measures can be taken, either by insurance or through contracts, to avoid such situations. 

  1. Penalties For Violations Related to VAT Registration and Financial Records

Businesses need to ensure that they are VAT compliant. There are penalties for not registering your business for VAT or failing to keep the required financial records specified by the tax law.

  1. Penalty for Activity At Unregistered Location:

There are penalties for practicing a business activity at an unregistered location.

  1. Penalty For Work Hour Permit Incompliance:

Businesses can incur penalties for not complying with DED permission to work for additional hours.

  1. Penalty for Changing or Adding Activity Without Permission

Businesses have to incur penalties for changing or adding a business activity without obtaining permission from DED or the concerned government authority.

  1. Penalty For Practicing Business Activity in a DED-Closed Establishment

Companies who practice business or economic activity in an establishment closed by DED will have to incur a heavy penalty.


For successful business setup in Dubai, foreign investors must have complete knowledge and awareness of the legal requirements. Otherwise, they may end up making silly mistakes that could attract heavy penalties. That is why it is best to have a business setup consultant like Creative Zone guide you through the processes and legalities to ensure that your business is set up the right way. Call +971 4407 0540 or Fill an Online Form to schedule a free consultation with one of our business setup advisors today!

Get in touch

Recent Posts

Get in touch