The UAE business climate is lucrative, with immense business setup opportunities across a multitude of industries. With the corporate world’s flexibility and the latest visa rules updates, Dubai, specifically, is becoming a global incubator for startups and businesses alike. Thus, if you are dreaming of opening a new business in Dubai, it is crucial to understand this one step. Hiring a local sponsor for your business setup in Dubai is a must and understanding the rules of finding the right way is essential. This is where PRO services in Dubai can be of assistance so that you can be wireless and focus on where your business needs you the most.
Let’s start with understanding who a local sponsor in Dubai is and what part they play in your business.
Who is a local sponsor?
A local sponsor is a UAE national or local, often known as Emirati. The local sponsor does not participate in the daily operations of the business. However, they hold 51% of the share of the LLC company, while the foreign owner holds 49% of the shares.
Additionally, they don’t keep 51% of the revenue. Instead, sponsors receive a yearly fee in exchange for their services. Sponsors might be either private citizens or enterprises.
Note that a local sponsor is primarily needed for mainland business setup in the UAE.
A local sponsor’s primary responsibility is to represent you in all interactions with the government and other official institutions. These tasks also analyze business documents written in Arabic, close bank accounts, and revoke licenses like work visas.
The UAE offers various types of local sponsorship, depending on the business activity and its needs:
- Individual Sponsorship – A UAE local sponsor is given a minimum of 51% of the firm shares. The remaining 49% of the company’s shares are held by foreign investors. In Dubai, a lot of companies choose individual sponsorship. The local sponsor is not required to participate in the day-to-day management of the company establishment. Most often, foreign investors choose individual sponsorship when opening a business in Dubai.
- Corporate Sponsorship – To put it simply, a corporation rather than a single Emirati is the local sponsor in this case. A corporate body owns 51% of the company’s shares, and the remaining 49% is held by foreign investors. Most of the time, industrial and manufacturing limited liability companies choose corporate sponsorship.
- Local Service Agent – The local sponsor fulfills the function of a local service provider when it comes to a professional business or a service-oriented commercial enterprise. The local service agent’s equity participation differs from that of an individual or corporate sponsor. The LSA acts as the professional company’s liaison in exchange for a set yearly fee; nevertheless, it does not hold 51% of the company’s shares. In addition to professional businesses, foreign enterprises’ representative offices and branches may employ an LSA.
According to the latest updates on local sponsorship in business, not all activities need a local sponsor. However, if you are opening a business in any of the following industries in Dubai or elsewhere in the UAE mainland, you will need a sponsor:
- Oil production and exploration
- Military and security services
- Financial, insurance, and banking activities
- Pilgrimage-related services
- Electricity and water supply
- Fishing-related services
- Telecom and postal services
- Air and road transportation
- Publishing and printing
- Commercial firm
- Retail medicine (including pharmacies)
- Quarantines, venom/poison banks, and blood banks
Finding and selecting a local sponsor is a crucial business choice that you should not neglect. Despite not being conventional business partners, it is essential that you have a solid professional relationship with your local sponsor. It might be challenging for entrepreneurs new to the UAE to be sure they have found the correct match. Because, if you don’t find the right person to be your sponsor, it could have repercussions on your business.
Because of this, working with professional PRO services in Dubai is an ideal option. Depending on your needs and business activity, they can help you locate an excellent local sponsor. In addition, provide you with the assurance that your company is always in good hands. Finally, it is also of the essence to verify a local sponsor’s personal history and family background. For a first-time investor in Dubai, a lack of finances and insufficient business connections might make things difficult. However, PRO service agents ensure you have a hassle-free company formation in Dubai.