Do I need a local sponsor in Dubai?
Dubai has always been a welcoming and lucrative business incubation hub for entrepreneurs from all over the world. However, while the draw of the emirates pull many to do business here, starting a business in a sector that does not allow for foreign ownership, comes with its own quirks and complexities. Especially if you lack knowledge about the place, its norms, local culture, policies, or regulatory functions, you need to work with a local sponsor to set up shop in the UAE mainland. The great news is that it is not hard to find a local sponsor in Dubai, and you can reap great benefits from their expertise and local knowledge.
However, working with a local sponsor comes with its own set of challenges, especially to those new to the country. This is why it’s vital that you seek expert advice before committing to working with a sponsor. Not to mention, it is prudent to know your sponsor well before committing to a deal, especially through assurances from others within the UAE who have previously worked with them. Similarly, it is important for both the parties involved to know what they are getting from the arrangement and ensure that all the financial matters are clear and transparent. In addition, you need to decide who gets to make the important decisions in the business from offset, and in possible, get it in the form of a contract to avoid confusions and mismanagement down the road. A local sponsor may assert that they have no interest in what the company does, but their interests could vacillate with time.
Local sponsors on the whole are only responsible for facilitating foreign entrepreneurs to run businesses in the UAE mainland, and are remunerated at the end of the deal. Generally, the foreign investor resumes the running the business while the local sponsor receives their cut for acting as a local representative and separates ways. This is why it is to be clear on ownership. We have seen cases where local sponsors tried to claim ownership of the business. This is why you need to have a set of legally binding documents, outlining the mutually agreed upon boundaries.
Not to mention, your agreement should also include an exit plan for both you and your sponsor, so that in the events that the sponsor passes away, retires, or wishes to relinquish the agreement, or perhaps you wish to sell the business or return to your homeland, things don’t get messy. In case of death of sponsor, their shares will be passed to his heir, who may have no intentions of carrying out the deal. With no previous agreement in place you can land in hot waters and won’t be able to trade in Dubai.
Last but not the least, all such unnecessary troubles can be avoided by drawing up a clear and unambiguous legally binding contract with your sponsor, that safeguards all boundaries and interests.
Navigating local sponsor legislation
Depending on the nature and magnitude of your business, you can choose to work with a local or corporate sponsor. If you are interested to know more about local sponsors in UAE or in search of finding a local sponsor for your business setup in dubai, UAE, collaborating with a company formation specialist can help you avoid all the pitfalls that comes with working with a sponsor and helps you understand your business activities better.
Our experts can advise on whether you are eligible to retain 100% ownership and even help you find a suitable local sponsor. Not only that, we can also take care of the entire company formation process for you, leaving you free to concentrate on streamlining business activity. Be it opening a corporate bank account, applying for visas, finding suitable premises to set up shop, or applying for your license, we offer a one-stop shop service to help entrepreneurs carve a niche in the entrepreneurial hub of UAE.