LOCAL SPONSOR IN DUBAI
Local Sponsor in Dubai, UAE
Starting a business in Dubai can be a complex process, especially for foreigners who are unfamiliar with the legal requirements and regulations. Dubai attracts a large number of international businesses and entrepreneurs due to its favorable business environment and opportunities. However, a major challenge faced by expets when setting up a business in Dubai is foreign ownership. According to the laws in Dubai, any enterprise that operates under a commercial or industrial license can only be 49% owned by a foreign national. The remaining 51% of the ownership must be held by a local sponsor, who is a UAE national. The requirement for a local sponsor is one of the most significant hurdles for expats to overcome when starting a business in Dubai. Understanding who a local sponsor is and how they play a role in the business is crucial for the success of a company in the city.
Who is a Local Sponsor?
Establishing a business in Dubai can be a complex process, especially for foreign investors, as there are many legal requirements that must be met. The law in the United Arab Emirates requires foreign investors to have a local sponsor, who is a resident of the UAE, in order to start a mainland company. A local sponsor acts as a legal representative and ensures that the company complies with UAE company law and regulatory requirements. In exchange for a fee, the sponsor transfers control of the business and the authority to run its day-to-day activities to the foreign investor through a power of attorney. This arrangement also ensures that all earnings from the business are held under the name of the company and not under the name of the local sponsor.
Who Can be a Local Sponsor in Dubai?
In Dubai, there are three different types of local business sponsorship options available for foreign investors who want to set up a company in the UAE. These include:
Corporate Local Sponsor: This type of local sponsor is a corporate firm that holds 51% of the shares of a company, with the remaining shares owned by individuals or a group of expatriates. To set up a business in Dubai, a corporation must have a local sponsor who is a UAE national. The corporate sponsor can be a local or government authority, depending on the nature of the business being established.
Individual Local Sponsor: This type of local sponsor is an individual Emirati national who holds a 51% stake in the company. The individual sponsor must be a UAE citizen, male or female, and does not necessarily need to be involved in the business activity or be a business owner. This type of sponsorship is ideal for opening a commercial business in Dubai.
Local Service Agent as a Sponsor: This is the third type of local sponsor, where the local service agent is a local resident who acts as the representative of the company without holding any shares. If you are looking to open a professional business in Dubai, this type of local sponsorship is suitable.
Why Do Businesses Need a Local Sponsor?
Having a local sponsor is essential for businesses operating in the United Arab Emirates, particularly in Dubai, as it provides numerous benefits and advantages. With a local sponsor, a company can access the local trade within the UAE market and take advantage of its business opportunities. Additionally, companies with a local sponsor are 100% tax-free and the foreign investor has the ability to liquidate 100% of their profits.
Moreover, having a local sponsor opens up a wider range of options for businesses, such as opening unlimited branches and divisions throughout the UAE and bidding for private and government projects which are not available for free zone firms or professional services firms that lack a local sponsor. Additionally, foreign investors are granted the status of investors, allowing them to obtain residence visas for themselves and their dependents.
Responsibilities of a Local Sponsor
Having a local sponsor in Dubai is not limited to just sharing equity in a company. The local sponsor also plays a crucial role in handling various important matters that are related to the business. Some of these responsibilities include:
Canceling employee work visas
Terminating the labor status of employees
Closing bank accounts
Resolving any outstanding debts
In addition to these, the local service agent can act as the point of contact between the business and the government authorities. They can handle the renewal process, communicate with government officials and Ministries, and assist in interpreting business contracts that are written in Arabic. By having a local sponsor, foreign business partners can have peace of mind knowing that their business interests are being represented by someone who understands the local laws and regulations.
Searching for a Local Sponsor in Dubai/ UAE
Local Sponsors typically do not offer operational support to businesses, they simply serve as local representatives to allow foreign entrepreneurs to establish their companies in the UAE mainland. For this service, they receive a yearly fee or a portion of the profits.
While some high-profile or celebrity local sponsors may claim to offer additional benefits, such as networking opportunities or access to specific industries, it's important to be aware that these benefits can often be obtained through other means at a lower cost.
In some cases, things can go wrong. For example, if the sponsor passes away, their shares will be transferred to their heir, who may not be interested in continuing as the local sponsor. This can cause problems for the business but can be avoided by opting for a corporate sponsor.
Before hiring a local sponsor, it is important to conduct a thorough background check. Here are some important points to keep in mind:
Research the sponsor's family background. Hiring a sponsor from a reputable family in Dubai can be advantageous as they are likely to have a positive reputation in the area.
Consider hiring a government employee as a local sponsor, as they have direct connections to government agencies.
Before signing a sponsorship agreement, it is advisable to have it verified by a legal expert.
Be clear about the fees or compensation to be paid to the sponsor and the scope of their services.
It may also be helpful to seek advice from a business consultant in Dubai regarding a local sponsor. They can provide valuable information on the terms and conditions of having a local sponsor.
Finding a Reliable Local Sponsor in Dubai
Foreign entrepreneurs may face difficulties when looking to establish a company in mainland Dubai, due to limited time, lack of information, and resources for proper research and evaluation. A common solution for these challenges is to seek a corporate sponsor instead of an individual sponsor. Corporate sponsorship provides the same benefits as having an individual sponsor with added advantages, including:
No Interference: Corporate sponsors, who typically hold 51% of the shares, do not interfere with the day-to-day operations of the business, allowing foreign entrepreneurs to have full control and management over their company.
100% Financial Benefits: Unlike an individual sponsor, who becomes a 51% shareholder, a corporate sponsor allows the foreign entrepreneurs to retain 100% of the financial benefits.
Protective Contracts: Corporate sponsors often offer detailed contracts, drafted by top-tier legal counsel, that fully protect the rights of the business owners and their shareholders. This helps to mitigate the difficulties that may arise with side agreements when dealing with individual sponsors.
Overall, corporate sponsorship is a more secure and comprehensive solution for foreign entrepreneurs looking to establish a company in mainland Dubai, compared to dealing with individual sponsors.
Importance of Selecting the Right Local Agent
Having the right partner in the UAE is crucial for the success of a foreign business. The local laws and regulations for foreign companies and investors in the UAE make it important to have someone who can provide guidance and assistance with setting up the business. A suitable sponsor can help with establishing the business, navigating local laws, and providing valuable connections that can help the business thrive. With the diverse market in the UAE, it's essential to have a well-connected agent who can add value to the company. Therefore, it's crucial to carefully choose a sponsor that aligns with the business goals and objectives. It's important to consider the risks and benefits of each option available and understand that the chosen sponsor will be a key partner in the business.
What kind of Business Need a Local Service Agent?
In the UAE, certain legal entities must have a local service agent to support their establishment and operations. These entities include branches or divisions of foreign companies, which can either be a representative office or a full foreign branch office, professional licenses, and civil companies, which are partnerships between foreign and non-foreign investors.
A local service agent does not hold any shares in the company but acts as its representative. This type of service is typically charged on an annual basis as a lump sum.
While the idea of giving up a portion of the shares in your business may cause some concern, it is not necessarily the case with a local sponsor in the UAE or Mainland Dubai. Depending on the agreement, you may still retain your profits, and from a financial perspective, it can be similar to operating in a free zone with the same tax and repatriation benefits. It is important to carefully consider all factors and find a suitable local sponsor for your company.
Why Choose Us?
Raes Associates is a specialist company that focuses on finding dependable Local Sponsors in Dubai and throughout the UAE. If you are in need of a Local Sponsor, do not hesitate to reach out to their experts for assistance. You can contact them on WhatsApp at +971 55 501 2638 or send an email to firstname.lastname@example.org. Their team of experts will be more than happy to assist you in finding the right Local Sponsor for your business needs. With their extensive experience and network, they are well-equipped to provide you with a reliable and trustworthy solution that will ensure the success of your business in Dubai and the UAE.
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