For entrepreneurs from every corner of the world, Dubai has long been a friendly and attractive business environment. This is a huge factor why nearly 90% of the UAE population is a foreign national. However, while the appeal of the Emirate is obviously enough to encourage too many to do business here, but one should not imply that getting established in Dubai is not without its peculiarities and complications. One such aspect that is sometimes listed as a challenge to international businessmen starting a business in the UAE is the law of the country on foreign ownership.
International businessmen who intend to start their venture must have awareness and understanding as to why they require a local business sponsor in Dubai and what the implications would be. This is because they could be 100% foreign-owned and established with the aid of local service agents. But if you are interested in commercial, industrial, or trade operations in Dubai Mainland, you would certainly need to find a local sponsor in Dubai.
What is a Local Business Sponsor or Local Service agent?
A local sponsor or a local service agent is a person or corporate entity that complies with UAE company law and regulatory criteria for non-UAE or GCC nationals (foreign investors) who intend to invest and operate and establish a company in Dubai, Abu Dhabi, Sharjah or elsewhere in the UAE.
Foreign investors are expected to hold either a Local Emirati Sponsor or a Local Service Agent. This can be an entity or corporate arrangement for onshore firms under UAE rule. It helps onshore companies to hold labor and citizenship files and to complete the process of incorporation of a company. After finishing this phase, businesses will then recruit people and obtain a residency visa to lawfully enable staff and investors to operate.
Who Can Be A Local Sponsor or Local Service Agent?
There are different types of local sponsorship available in UAE and they are as follows:
- Corporate local sponsor
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, will hold 51% of the shares of a company 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.
- Individual local sponsor
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.
- Local service agent as a sponsor
The third type of local sponsor is a service agent who is a local resident and agrees to act as a sponsor. If you are willing to open a professional business in Dubai, then this form of local sponsorship is suitable.
Factors You Need to Understand Before You Hire a Local Sponsor
Local sponsors typically do not work with companies in their projects or any other job. They merely give their services as a local representative and facilitate a foreign entrepreneur to set up business in the mainland. And a fixed annual fee or a certain profit sharing is charged for such facilities.
In the UAE, you will find several high-profile or even celebrity sponsors that claim to be distinguished from others by providing network incentives or opening doors to particular sectors because of their standing. Even though this may be accurate, you ought to be careful so you don’t end up spending more money on anything that you might possibly access from certain platforms for a smaller amount. Things can go wrong in some cases. For instance, in case of death of a sponsor, their share will be passed on to their heir; and if the heir is not interested in being your local sponsor then you will be in major trouble and will not be able to continue trading. So, you can avoid such a situation by going for corporate sponsorship.
Importance of Selecting the Right Local Agent or Sponsor
Business in the UAE is flourishing with every passing day. Entrepreneurs from all around the globe are constantly looking to make the best of new possibilities. It is essential to find the right partner because of local rules and regulations in effect for foreign-owned businesses and investors. The perfect partner is someone who will bring value to your investment and secure your company and UAE property. This partner should also help you develop your company smoothly, advise on local enforcement and law, and have connections. It is going to help you make your company a success. In view of the complexity of the market, it is much more critical to have a well-connected agent on the ground who brings real value to your business.
Advantages of Hiring a Local Sponsor
In addition to getting access to the local market, you can also gain other big advantages when you get a local business sponsor in Dubai. Limited liability companies established with a local sponsor are fully tax-free and a foreign investor may repatriate 100% of their earnings. You may also open several branches of your business throughout the UAE and get hold of different government projects that you can not do if you are a free zone corporation. Eventually, partnering with a local business sponsor in Dubai grants you the rank of an investor in the UAE that helps you to secure a residency visa for you and your family.
To sum it up, getting a local sponsor in Dubai is like a solution in dealing with unyielding business situations. A local sponsor in Dubai is not a liability, but a beneficial resource for the business. This regulation by the government of Dubai helps not just the local sponsors, but also the businesses who employ them, as the well-known local supporter would become a ready-made reputation for the client. Are you looking for a UAE local sponsorship? The best way to find a local UAE sponsor in Dubai is with Riz and Mona Consultancy. Choosing the best local partner can be a difficult challenge, but don’t worry because we, at Riz and Mona Consultancy, can secure your partnership! Our firm is a one-stop-shop service, all we need is a little information and few documents from you, and we’ll do the rest.
Changing a local sponsor is very important while setting up a new branch or business. What a detailed article it is. All the points which you have mentioned in this article are very helpful. Thank you so much.