It can be quite complicated to set up a business yourself. There are many legalities that need to be discussed. The process gets even more difficult when it comes to starting a business in a different country. Dubai, being home to thousands number of expats, is also a land where international businessmen mostly choose to set up their companies. Foreign ownership is one of the most prevalent difficulties faced by expats as they plan to establish a company or business in Dubai. Every enterprise in the city’s mainland that comes under commercial or industrial licenses can only be 49% owned by an expatriate. A local sponsor in UAE must own the remaining 51% of the share. Now the main question which comes to your mind is who exactly is a local sponsor.
A local sponsor or a local service agent is a person or corporate entity that complies with UAE company law and regulatory requirements for non-UAE or GCC nationals (foreign investors) who wish to invest and run and establish a company in Dubai, Abu Dhabi, Sharjah or anywhere in the UAE. As per the United Arab Emirates law in regard to the establishment of a mainland company, foreign investors are mandated to have a local resident, a UAE national, as a sponsor. Generally, the sponsor, in exchange for the fee, hands over the entire control of the business and the authority to run its day-to-day activities to the foreign investor with the help of a power of attorney. This also helps all earnings to be held in the name of the business and nothing in the name of the local partner.
A corporation formed and licensed in Dubai must have a local sponsor to set up a business in Dubai. The UAE national, which is the sponsor, Corporate sponsor is the corporate firm that will hold 51% of the shares of a company with the remaining shares owned by individuals or a group of expats. This type of sponsor is common and very suitable for opening an LLC in Dubai. The corporate sponsors can be of any local or government authority, depending upon the nature of the business which the investors want to set up in Dubai.
As the name suggests, this is when an individual Emirati national sponsors the business and holds a 51% stake of the company. Individual sponsors must be UAE citizens and can be male or female. It may not be necessary for the local sponsor to be involved in business activity or being a business owner. This type of sponsorship is suitable for opening a commercial business in Dubai. The individual sponsor should hold at least 51% of the total equity shares.
The third type of local sponsor is service agent who is a local resident and he will be the representative of the company without holding any shares. If you are willing to open a professional business in Dubai then this form of local sponsorship is suitable.
A local partner helps the company pursue local trade within the UAE industry. Such LLCs which have a local sponsor are 100% tax-free, and the foreign investor has the option of liquidating 100% of their income.
The businesses also enjoy the benefit of opening unlimited divisions or branches across the country and pitching for a variety of private and government ventures that are not available to free zone firms or professional services firms that have no local sponsors. The foreign investors are also entitled to the investor status that allows them to obtain residence visas for themselves and their dependents.
Local sponsor is not only responsible to share the shares in the company. But instead, the local sponsor is also responsible for some important dealings as mentioned below:
A local sponsor should be cross checked before hiring. Here are some points to remember:
There are many issues that arise because of the lack of time, not proper information and know-how or limitedresources to invest in the necessary research, evaluation and relationship building.
If you do not already know a reputable sponsor, there is another option available to foreign entrepreneurs looking to set up a company in mainland Dubai which is the option of corporate sponsorship.
While new businessmen may be under the impression that a local Dubai sponsor is the only way to set up a mainland company, another solution exists. Corporate sponsorship offers the same benefits as dealing with an individual sponsor while providing services that are designed to address the challenges that can arise with an individual sponsor.
Here are three core advantages to this approach:
In the UAE the market is thriving and flourishing. Businessmen from all over the globe are constantly trying to maximize current trends to the limit. It is extremely critical to have the right partner because of the local laws and restrictions in place for foreign companies and investors. You need the right associate to contribute positively to your investment, and secure your business and protect your rights in the UAE.
Your partner will help set up the business efficiently, counsel on local law enforcement and regulations as well as provide connections. This will assist you in making the business a success. Considering the diversity of the market makes it even more important to have a well-connected agent on the ground who adds real value to support your company. Selecting an appropriate sponsor for your business is key to launching a mainland enterprise. Explore the options out there. Be familiar with the risks and advantages. After all, the individual or corporation on that dotted line will be a partner in your business.
The following legal entities must have a service agent to support the company set up and operations in the UAE:
Naturally, the thought of handing over a major chunk of shares in your business can cause the investor to have some pre apprehensions. However, in reality, that is not the case when it comes to working with a local sponsor in the UAE and Mainland Dubai. Depending on the type of agreement you put in place, it is still possible to retain your profits. In fact, from a financial standpoint, it is not much different from operating in a free zone – you will get the same tax and repatriation benefits for example. Of course, there is a lot to think about when entering into any business arrangement and hopefully this page has given you a clear idea of what’s involved and how to look for a suitable local sponsor for your company or business.