Why Is It Necessary to Have a Local Sponsor in Dubai for Establishing Business?

Dubai has emerged as a center for business innovation offering business opportunities for various activities. The location offers entrepreneurs with benefits such as strategic location, superior infrastructure, investment-friendly climate and various sops that facilitate foreign direct investment. Entities intending to set up a presence in Dubai may sometimes be unaware of the policies and requirements for setting up business. This precisely why it is absolutely necessary to have a local sponsor in Dubai when establishing a business.

Role of a local sponsor
Local sponsor in Dubai generally refers to an individual for a shareholder of organizations that have been established with foreign investment. The individual needs to be a UAE national holding a family membership card. The local sponsor in Dubai is typically a sleeping partner in business with ownership pattern wherein the local resident holds 51% shares of the company. The resident needs to hold a valid Dubai passport and will receive a percentage of the share in the profits as decided mutually among all the shareholders in the business.

Different categories of a local sponsor in Dubai
There are different types of sponsorships available for businesses intending to establish the presence, these include:

#1. Corporate local sponsor
A firm or corporate body that is registered in Dubai can play the role of a corporate sponsor to a company that is intended to be established in Dubai with foreign investment. The local entity will hold 51% of the shares while the remaining shareholders will retain 49%.

#2 Individual local sponsor
Individual local sponsor in Dubai refers to a resident of Dubai who will play a role of local sponsor. Such individuals will ideally not be involved in any business activities of the established entity. The individual will hold 51% of the shares of the entity and profits will be shared as per mutually agreed terms.

What needs to be borne in mind before identifying local sponsors?
Businesses that intend to identify and use the services of local sponsors need to bear in mind certain aspects. By virtue of the local sponsor being a total stranger to the business entity, it is absolutely essential and necessary to ensure that the credentials of the sponsor are fully verified and cross-checked before utilization of services.

The local sponsor needs to be a resident of Dubai. It is important to know that a valid passport holder of Dubai may actually be a resident of a different location. It is therefore essential to choose a local sponsor who is a resident of Dubai. This will prevent the need for extensive traveling while completing formalities.

It would be ideal to use the services of a local sponsor who is qualified. This will eliminate communication barriers and will also be easy when it comes to the issue of agreements regarding the share of profits. A local sponsor who has goodwill in the area will be an added advantage. The right local sponsor will help of business iron out various formalities and regulatory approvals quickly.