If you’re planning to start a business on the mainland of Dubai, understanding the role of local sponsors is crucial. Though recent reforms in the UAE business laws allow 100% foreign ownership for certain business activities in Dubai mainland, certain business activities still require a local sponsor in Dubai.
As Corporate Business Services (CBS), a leading Emirati-owned consulting firm, we aim to simplify this process for you. With our in-depth expertise in company formation in Dubai, we’ll guide you through everything you need to get local sponsors in Dubai.
In this guide, we’ll explore what a local sponsor is, why they’re necessary, and how CBS can simplify the process for getting a local sponsor and setup a company in Dubai for you.
What Is a Local Sponsor in Dubai?
A local sponsor in Dubai refers to a UAE national (Emirati) or an Emirati-owned corporate entity that facilitates establishing foreign-owned companies in the UAE mainland. By law, certain business activities in Dubai Mainland require 51% ownership by a local sponsor, with the remaining 49% belonging to the foreign investor.
Local sponsors act as a bridge for foreign entrepreneurs, ensuring compliance with UAE regulations and offering invaluable local insights to help businesses thrive. Their role extends beyond formalities, often influencing business success in Dubai.
Who Needs a Local Sponsor in Dubai?
Not every business requires a local sponsor, but those setting up on the mainland for activities like retail, real estate, corporate consulting, travel and tourism, services, construction, or hospitality typically do.
Companies operating in freezones or under 100% foreign ownership exemptions may not need sponsorship, making it essential to assess your business type beforehand.
Why Do You Need a Local Sponsor in Dubai?
Dubai mainland businesses benefit from unrestricted trade opportunities within the UAE and internationally. However, to operate in this space, foreign investors must meet specific regulatory requirements, including having a local sponsor for particular business activities. Here’s why:
- Legal Compliance: UAE regulations mandate a local sponsor for mainland companies in sectors like trading, real estate, retail, and construction.
- Operational Flexibility: Partnering with a local sponsor allows you to conduct business without geographic limitations within the UAE.
- Access to Government Contracts: Many government tenders and contracts in Dubai are only accessible to mainland companies with local sponsorship.
- Ease of Licensing: A local sponsor facilitates obtaining business licenses and approvals from UAE authorities.
Types of Local Sponsors in Dubai
There are three primary types of local sponsors available for business setup in Dubai mainland:
- Individual Sponsors: An Emirati national, typically a UAE citizen, sponsors the business as an individual. They must hold 51% of the company’s shares but generally agree to transfer decision-making authority to the foreign investor through a side agreement.
- Corporate Sponsors: A UAE-owned corporate entity serves as the local sponsor. This option is ideal for businesses that require a professional partnership with a reputable local firm.
- Local Service Agents (LSAs): Unlike individual and corporate sponsors, LSAs are primarily needed for professional license setups. They facilitate regulatory and licensing procedures but don’t hold any equity in the company.
How to Choose the Right Local Sponsor in Dubai
Selecting the right local sponsor is a critical step in setting up your business. Here’s what to consider:
- Assess Compatibility with Your Business Goals:Â Â The ideal sponsor aligns with your company’s industry and objectives. Evaluate their experience and connections within your sector for maximum benefit.
- Transparency in Agreements: A written agreement outlining profit-sharing, responsibilities, and dispute resolution is critical. Legal documentation safeguards both parties and prevents misunderstandings.
- Prioritize Reputation and Experience: Partnering with a reputable and experienced sponsor enhances your credibility in the UAE market. Sponsors with a proven track record ensure smoother business operations and compliance.
At CBS, we connect investors with reliable and professional Emirati sponsors, ensuring a smooth and transparent process.
Steps to Partner with a Local Sponsor in Dubai
- Identify Your Business Activity: Check if your business activity requires local sponsorship.
- Choose the Right Sponsor Type: Decide whether you need an individual, corporate sponsor, or LSA.
- Draft a Legal Agreement: Work with a business consultancy firm like CBS to create a contract outlining the sponsor’s role.
- Obtain Necessary Approvals: Secure initial and final approvals from relevant authorities.
- Register Your Business: Complete the company registration process with the Department of Economy and Tourism (DET) with the help of a reputable business consulting firm like CBS.
Advantages of Working with Corporate Business Services (CBS)
At Corporate Business Services (CBS), we specialize in helping businesses navigate the complexities of setting up in Dubai. Here’s why choosing CBS is a smart move:
- Expertise in UAE Laws: Our advisors are well-versed in the latest business setup regulations and ensure compliance with all legal requirements.
- Wide Network of Sponsors: We have a network of trustworthy local sponsors tailored to various industries.
- Transparent Services: We prioritize transparency, so you’ll never encounter hidden fees or unclear processes.
- Comprehensive Support: From initial consultations to post-launch support, we’re with you every step of the way.
Costs Involved in Partnering with a Local Sponsor
The cost of local sponsorship varies based on factors such as:
- The type of business activity.
- The sponsor’s reputation and expertise.
- The complexity of the business setup process.
Partnering with CBS ensures you receive competitive pricing and transparent fee structures, eliminating unexpected costs.
Common Challenges and How CBS Solves Them
Setting up a business in Dubai mainland can present challenges, such as:
- Finding a Trustworthy Sponsor: CBS connects you with reputable Emirati sponsors to mitigate risks.
- Legal Complexities: We simplify the legal processes by drafting clear, binding agreements.
- Time-Consuming Procedures: Our experienced advisors handle all bureaucratic steps, saving you time.
FAQs About Local Sponsors in Dubai
Can I start a business in Dubai mainland without a local sponsor?
Some activities, such as professional services, allow 100% foreign ownership through Freezones or Local Service Agents. However, most trading and commercial activities in the mainland require a local sponsor.
What Are the Responsibilities of a Local Sponsor?
A sponsor’s responsibilities include facilitating government approvals, ensuring compliance, and offering operational support per the agreement.
How do I ensure my rights are protected in a local sponsorship arrangement?
Work with experienced business consultants like CBS to draft legally binding agreements that safeguard your control over the business.
Can I change my local sponsor later?
Yes, but it involves formal procedures and approvals. CBS can assist with the transition process seamlessly.
Does the local sponsor have a say in my business operations?
Not necessarily. With nominee sponsorship agreements, you maintain full control while complying with local laws.