Last Updated on October 27, 2022 by tabraiz579
Dubai is the new land of opportunities, a melting pot of cultures, and a tax-free market providing a gateway to your entrepreneurial dreams. Dubai’s 85% of the population are expatriates and thus has a flourishing market that supports new businesses. Due to the tremendous mutual benefits of Business Partnerships in Dubai, Local Sponsors are always looking to invest in companies and new business Ideas.
Let’s Understand How This Arrangement Work and Its Benefits:
Business partnership or local sponsorship in Dubai opens a window to hassle-free, well-guarded, and legally stronger businesses in the most beneficial geography, Dubai mainland. Certainly, there is a range of business setup options available in the UAE across free zones where companies can be 100% owned by non-GCC nationals. However, this also limits trading in the UAE mainland and doesn’t seem a sound option for businesses looking to branch out further.
With one’s required legal structure of a business that needs geographical freedom to practice any industrial, commercial, or professional activities, one will have to engage with a Local Sponsor or Local Service agent in Dubai.
What are Business Partnerships, Local Sponsors, or Local Service Agents in Dubai, and why you need them?
According to Article 10(1) of the Federal Law no.2 of 2015 of commercial companies;
“…any non-GCC national can only hold 49% of shares of a Limited Liability Company…” and therefore, the following are the options; There are two types of Local Partnerships/Sponsorships, and they both have their own benefits and drawbacks:
1. Corporate Partnership/ Sponsorship: Here, a corporate body holds 51% of shares and liabilities of the company.
2. Individual Partnership/ Sponsorship: Here, a UAE national (an Emirati) becomes a local sponsor in his/her capacity as a shareholder owning 51% and acts as an authorized representative to the government.
While a highly influential or prestigious Local Sponsorship in Dubai can open doors to their channels or connections for your company’s progress, they can also have a say or might meddle in your affairs depending on your agreement with them.
So, it is important to get a Business Partner or a Local Sponsor in Dubai with whom you can build a healthy business relationship. If you decide to proceed with an Individual partnership, it has comparatively less paperwork and legal structure fee.
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However, corporate sponsorship might also be an attractive option since they offer much stronger legal protection. A corporate body has its own legal counsel, better time management, no need for succession planning, and won’t meddle as much.
Even though under the business partnership/Local Sponsorship in Dubai, the local Sponsor owns 51% of your business, the profits need not be shared along the same lines. There is no stated law on how much the local sponsors must be paid. In usual cases, it’s an agreed-upon fee paid yearly.
Local Service Agent in Dubai
A good alternative to business partnership/ Local sponsorship is availing the option of a Local Service Agent who acts as a representative to enable a foreign entrepreneur to open a new business. This is the most sought-after option since the Local Service Agent shall not interfere in the business’s day-to-day running within an agreement and a general fee. They have absolutely no authority or right over the administration, assets, or functioning of the company.
The next question would be how does one choose the right option for setting up their business?
The process of setting up your business can be extremely exhausting since it involves a lot of work apart from handling the legalities and paperwork within the governmental departments. Thus, one needs a reliable and transparent advisor who takes up this responsibility while you focus on the rest. The best way to find a good reliable service provider is to read the online reviews shared by previous customers, and it gives you a fair idea of how satisfactory their service is.
As Corporate Business Enterprises quote, “Partnership is about mutual growth and benefit.” Since legal protection is the backbone for your business, one should ideally be careful in selecting a Local Sponsorship in Dubai. Setting up a business on a global map is an extremely hectic process thus, choosing the right service provider is an important step that lays the foundations for your dream.
In this global village where one aspires to branch out and set out to achieve any form of commercial or industrial growth, one needs a strong armour protecting it legally from the laws of the concerned geography that it is placed in. Thus choose your partner wisely, which will provide you a stronger foundation. Let your business be yours fundamentally and avoid compromising it; choose the right service provider/ Local Sponsor in Dubai today!