Top 5 Mistake People Will Do While Setting Up A Business

priyankamurali555
Sep 1
2 min read

Updated: Nov 3

Setting up a company in Dubai can be an exciting opportunity, but without proper guidance, many entrepreneurs make costly mistakes. From choosing the wrong service provider to missing critical compliance steps, errors during the setup phase can lead to delays, extra costs, or even business failure.

To help you avoid these pitfalls, here are the top five mistakes people make when establishing a business in the UAE and how to prevent them.

1. Choosing the Wrong Free Zone or Service Provider

Dubai offers both mainland companies and free zone entities, but not all free zones are equal. Selecting the wrong free zone or an inexperienced service provider can create hurdles such as:

Difficulty opening a corporate bank account
Delays in obtaining necessary documents
Limited access to essential services

Tip: Work with a reputable corporate service provider who understands the nuances of each free zone and can guide you to the one that aligns with your business goals.

2. Selecting the Wrong Business Activity

Choosing the correct business activity is crucial for legal compliance and banking. An incorrect activity can:

Affect licensing approval
Limit operational capabilities
Cause banking complications

Tip: Carefully define your business activities from the outset, ensuring they reflect your operations accurately and comply with UAE regulations.

3. Delaying the Opening of a Bank Account

A corporate bank account is essential for smooth business operations. Delays in opening one can lead to:

Complications in managing finances
Difficulty processing payments
Missed business opportunities

Tip: Open your corporate bank account as early as possible to maintain cash flow and financial flexibility.

4. Neglecting Financial Planning

Proper financial planning goes beyond budgeting—it includes forecasting, resource allocation, and preparation for unexpected expenses. Without it, businesses risk:

Running out of funds before reaching profitability
Mismanaging cash flow
Facing operational disruptions

Tip: Develop a robust financial plan with realistic projections, and consult experts to ensure resources are allocated efficiently.

5. Failing to Register for Corporate Tax and VAT

Dubai has implemented 5% VAT and 9% corporate tax, and while small businesses may be exempt from corporate tax below certain revenue thresholds, registration is still mandatory. Failure to comply can lead to penalties and legal issues.

Tip: Register your business for corporate tax and VAT promptly, even if your business is exempt from tax payments. Filing returns on time ensures compliance and avoids fines.

How Expat Businesses Can Help

At Expat Businesses, we streamline business setup in Dubai, helping expatriates avoid common mistakes and ensuring a smooth start. Our services include: