A foreign entrepreneur who wants to start a business in Dubai or in any other emirate in the UAE may need a local sponsor, according to the local legislation. So it is recommended that, before registering a company in Dubai, you should be informed about the special conditions for registering a business in this region.
The most common type of company chosen by foreign investors in Dubai is the limited liability company and it can be used for performing a wide range of businesses. In this case, you will need a local partner (UAE citizen) who will own 51% of your company and who is called a local sponsor. This can be a natural person or a local company and it is necessary if you want to locate your company outside a free zone, where the 100% foreign ownership is allowed.
If you don’t want a local sponsor be part of your company, then it is recommended to choose a free zone to incorporate your company. In this case, you may perform only certain types of activities that don’t need to be located in a city and avoid businesses such as shops, restaurants, different services etc.
Another type of business for which you don’t need a local sponsor is a partnership between two or many foreigners, but there is a major condition for registering this – the partners must finance their business with minimum $2.7 million capital inflows. Another condition is that foreign investors should relocate their headquarters to Dubai.
There is no need to have a local sponsor for the citizens of the Gulf countries and they also are allowed to form a partnership with foreign citizens for doing business in Dubai.
For having a local sponsor involved in your company in Dubai, you must pay him a yearly fee that can be negotiated. You have to sign a contract with your local sponsor in order to be sure that both parties have settled their obligations and fees. It is not recommended to have only a verbal understanding with your local sponsor in Dubai.
For more details about how you can have a local sponsor in Dubai or how you can avoid this condition, you may contact our company formation agents in Dubai. They will help you open a company and start doing business in this city that offers important business opportunities.