Finding a reliable local UAE sponsor can be challenging, especially if you’re new to the country and looking to start a business in Dubai or any other emirate. In the UAE, it’s a legal requirement to have a local partner when setting up a business, and this local partner is typically an Emirati national.
Until recently, foreigners who wanted to start a business on the mainland needed a local sponsor to own a majority of the company. For example, if you wanted to setup a business in Dubai mainland, then you had to find a local sponsor who must own at least 51% of your company, and you could own the rest of the 49% percent.
Securing a local sponsor in Dubai is pivotal for establishing a business. Choosing the right sponsor is crucial as an incorrect choice may lead to complications in managing your company. Before delving into the process of obtaining a local sponsor in Dubai, it’s vital to understand the significance of this step and why it is necessary.
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What is Local Sponsor in UAE?
A local sponsor in UAE is an Emirati or UAE national holding a family membership card (Gincia), serving as your business’s service agent. Companies in the UAE can have an individual or corporate local sponsor, with corporate sponsors requiring 100% ownership by UAE/GCC Nationals.
According to UAE Companies Law and Civil Law, forming a mainland Limited Liability Company (LLC) mandates a minimum 51% local share. Foreign ownership is capped at 49%, with profit distribution being mutually agreed. Certain professional and civil companies can be 100% owned by an expatriate shareholder, with the local sponsor acting as a Local Service Agent (LSA).
What is the Role of Local Sponsor in UAE?
The role of a local sponsor in UAE extends beyond sharing company shares. They are also responsible for crucial tasks, including:
- Cancelling employees’ work visas
- Managing the cancellation of labor status for employees
- Closing bank accounts
- signing on your behalf in contracts and government applications
- assisting with license renewals and translations in Arabic
- Addressing any outstanding debts, if applicable
Why do you Need a Local Sponsor?
A key requirement for starting a business in Dubai or anywhere in the UAE is teaming up with a UAE national, often called a local sponsor. You need a local sponsor in the UAE to ensure compliance with the country’s commercial companies’ law. Additionally, having a local sponsor enables you to access the special advantages associated with establishing a limited liability company.
How to Find a Local Sponsor in the UAE?
To find a reliable local sponsor for your business in Dubai, follow these steps:
Step 1: Make sure your sponsor is trustworthy, especially if it’s an individual sponsor. Do a quick background check to learn about their background and only sign a contract when you’re completely satisfied. The best individual sponsors are often those with strong reputations from respected families. You can also seek assistance from business advisors like Company Setup Consultants for your incorporation needs.
Step 2: Choose a UAE company sponsor that matches your business requirements. For example, if you want to work with government projects, consider hiring someone with a background in government. Also, check their language skills to avoid communication issues.
Step 3: Have a clear discussion about the fees, compensation, and benefits of the sponsorship contract. Keep records of your agreements and ensure you’re not paying more than the standard compensation fee. Some individuals may claim to have a vast business network, but it’s your responsibility to verify their claims and make an informed decision.
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Types of Local Sponsors in Dubai
There are different types of local sponsors in Dubai that you should know about if you’re starting a business there:
1. Corporate Local Sponsor
This could be a government or local organization that agrees to partner with you. They must own at least 51% of the company, and the type of business you want to run plays a role in choosing the right corporate sponsor.
2. Individual Local Sponsor
You can partner with an individual local sponsor to start a business in Dubai. They also need to own at least 51% of the company. Individual sponsors are often chosen because they typically don’t get involved in the day-to-day operations of your business.
3. Local Service Agent as a Sponsor
If you plan to provide professional services in the mainland area, you can choose a local service agent. This person must be a UAE resident.
How to Change a Local Sponsor in Dubai?
To change your local sponsor in Dubai, follow these steps:
#1. Talk to Your Current Sponsor:
First, have a conversation with your current sponsor. Try to resolve any issues or disagreements outside of legal proceedings. Understand their perspective and work together to find solutions.
#2. Consult Other Shareholders:
It’s essential to get everyone involved, such as your business partners, on the same page regarding changing your current sponsor. Discuss the situation with them and ensure you have a collective agreement on the change.
#3. Gather the Required Documents:
Collect all necessary documents, like a notarized Memorandum of Association (MoA), labor and immigration documents, etc. These documents are crucial for a smooth transition. Share them confidentially with the court or the relevant jurisdiction handling your case.
#4. File a Court Application:
Submit an application to the court to request the change of your current local sponsor. Your existing UAE sponsor must also acknowledge this change officially in court to make the process legitimate. Once everything is verified, the legal authorities will file a new application to renew your trading license.
#5. Find a New Local Sponsor:
After completing these steps, you can bring in a new local sponsor for your business in Dubai. It’s crucial to select a reliable one, like Company Setup Consultants, as changing UAE sponsors can be a time-consuming and costly process.
What is the Local Sponsor Fee in Dubai?
The local sponsor fee in Dubai averages around AED 6,000 per year. But, the actual cost can vary based on different factors, such as the type of business, the extent of the local sponsor’s legal involvement, their role in daily business activities, and how long your partnership lasts.
At Company Setup Consultants, we act as your silent partners for an annual fee, allowing you to have full control of your business operations.
Does your business need local sponsorship in the UAE?
In the UAE, if you’re planning to establish a Limited Liability Company (LLC), partnering with a UAE national is a legal requirement. This means that businesses operating in the mainland of the UAE, under an LLC structure, need local sponsorship.
Various businesses fall under this requirement, including those involved in general trading, contracting, real estate, advertising, technical services, manufacturing, logistics, textiles, cosmetics, electronics, cleaning equipment, fuel, jewelry, and more. To determine if your business needs local sponsorship in the UAE, you can connect with an expert.
Do you still require a local sponsor in Dubai?
Not if you’re establishing a company in UAE free trade zone. Companies in free zones enjoy 100% ownership without the need for a local sponsor. However, the limitation is that business activities are confined to the specific free zone, restricting trade outside these designated areas.
How can Company Setup Consultants help you?
If you’re in need of a UAE local sponsor, the smart choice is Company Setup Consultants. With Business Setup Consultant, we can be your trusted partner. We become your local partner, and the key here is that we do it on your terms to ensure your complete protection.
This rule mainly applies to commercial and trading businesses. We make sure your business remains entirely yours, and you get to keep all the profits.
In essence, Company Setup Consultants is your silent partner. We use a legally binding agreement called the Investor’s Right Protection Contract to grant you full operational control over your business. Our lawyers create robust contracts to safeguard your interests, ensuring your protection at all times. As your UAE local partner, we charge a reasonable annual partnership fee.
Navigate the legalities of launching your business in the UAE with our support. Enjoy Free PRO services for the first year under our company setup sponsorship. Connect with a business setup consultant today! Click here: Contact Us or call us at +971582595164. For email inquiries, reach us at info@companysetup.ae, or message us on WhatsApp at +9971582595164.
