Need of Local Sponsor for Business Setup in Dubai
The business environment never looks bad in the UAE. The state of 7 growing economies is renowned as an incubation hub for innovative business ideas. The enriched city of Dubai offers all the start ups, entrepreneurs and worldwide recognized companies a stable work environment, strategic locations, amazing infrastructure for trading and solid transport which makes people grow in no time. Another attraction is the friendly taxation laws, foreign investment and tax-free trade. Several news papers recently published the news that the UAE is now amongst the top 5 regions in Middle East and Asia Pacific for being one of the safest places to conduct business by Pinkerton Risk Index Report. The business confidence hit the mark of 7.4 points in 2016 and a larger number of new licenses for trade were issued by the government whereas the numbers of cancellations were less in the same period. The commercial license took the first position in terms of numbers. While the business friendly city offering ease in trading, business set up local sponsor is still a mandatory condition for all sorts of foreign investors who are willing to conduct their operations throughout the mainland.
Based on business activity, location and other criteria, the local sponsorship or business setup in Dubai is categorized in to 3 major options
1. Limited Liability Company:
This form of set up can be formed with a minimum of 2 and a maximum of 50 partners, whose liabilities are limited to their share in the business capital. Foreigners opting for an LLC are required to go into partnership with an Emirati partner. The Emirati partner acting as a sleeping partner in most cases, holds 51% of the shares and it is essential that the right partner is chosen.
2. Sole Proprietorship & Civil Companies:
Sole Proprietorship is owned and controlled by one individual, the person will be responsible for 100% of the business debts and financial obligations. A professional sole establishment / civil company owned by a foreigner must be supported with a Local Service Agent.
3. Foreign Branch / Representative Office:
For foreign companies looking to establish a presence in the UAE, they can opt for a foreign branch or a representative office. A branch office can be formed under the same legal identity as its parent company and conduct business under the same name.
Alternatively, a representative office allows for promotion of the parent company. This means that office based in the UAE, is only allowed to perform activities relating to gathering of data, marketing projects and so on. The set up also limits the number of employees that can be hired.
Understanding each of the above steps and the choices available to you are crucial to the future of your business. What we have listed here simplifies and introduces the key concepts to you, however, there is more to do and for this we advise that you sit down with an expert like us to guide you through the entire process.