Foreign entrepreneurs looking to set up a company in Dubai Mainland need to find a local sponsor for licensing purposes. Local sponsorship is compulsory for setting up a company in Dubai Mainland. Local sponsorship can be of three types. You can open a business in Dubai Mainland either through individual sponsorship, corporate sponsorship, or the use of a local service agent. The type of sponsorship you require will depend on the business activities you wish to undertake.
Individual Sponsorship:
- In individual sponsorship, an individual Emirati national sponsors your business and holds a 51% stake in your company.
- Individual sponsors must be UAE citizens aged above 21 years, male or female.
- An individual sponsor needn’t have any experience running a business in your chosen field. However, the sponsor should be either a professional, a business owner or a government employee.
- In exchange for a set annual fee, the local sponsor can hand over the full power of attorney and full control of the business and its day-to-day activities to the foreign investor.
- All earnings are held in the name of the company and not in the name of the local sponsor.
- Both commercial and industrial licenses require a local sponsor.
Corporate Sponsorship:
- Corporate sponsorship is similar to individual sponsorship.
- The corporate sponsor is a UAE national company and not an individual UAE citizen.
- The corporate sponsor holds a 51% stake in the business.
- The corporate sponsor receives a set fee or profit share to let the foreign investor run the company with full control. Foreign entrepreneurs also maintain 100% of the profits from the business along with full control.
- The process of corporate sponsorship is less risky as it is completely clear and structured from start to finish. It provides entrepreneurs with more security and legal protection by ensuring agreements are reviewed by a first-tier legal counsel and terms set from day one.
- Dealing with individual sponsors can create ownership problems if the partner passes away or retires early. To mitigate this risk, you need ‘succession planning’ or a legally-binding plan in place. But with a corporate sponsor, you don’t need any succession planning.
- Corporate sponsorship provides you with the support of an entire corporate team rather than just one individual.
- One of the biggest advantages of a corporate sponsor is that it will never interfere with the business.
Local Service Agents:
- Local service agents are required when professionals, such as doctors, engineers, and chartered accountants, set up their businesses in their areas of expertise.
- By partnering with a local service agent, foreign entrepreneurs can apply for a professional license and hold 100% ownership of their business. They also maintain the full power of business operations. Local Service Agents have no administrative powers.
- However, the local service agent acts as their representative in all administrative dealings with government departments. Local Service agent plays the role of signatory for fulfilling all government-related tasks.
- The local service agent does not hold any stake in the business.
- Local service agents are simply paid an annual fee for their services.
If you are looking for a local sponsor or a local service agent for your Dubai business, then contact Creative Zone. We can help you find the right local sponsor or agent for your business as per your requirement. Call +971 4407 0540 to schedule a free consultation with one of our business setup advisors today!
