Why you Need a Local Sponsor for your LLC Company in Dubai?

by Zaara 22, Aug 2015

Why you Need a Local Sponsor for your LLC Company in Dubai?

If you nurture a desire of taking your business global, Dubai offers you a perfect launchpad. However, to make a beginning, you first need to explore the growth opportunities in Dubai. A setup in this bustling city can give your business the wings it needs to sprawl across the globe. But the law of the land mandates that to set up a locally registered LLC business; you need to partner with an Emirati national and apportion the majority share, i.e. 51%, to the local. Choosing the right partner on offshore land is always a tricky and risky decision.  In this blog, we would discuss how to choose a local partner to set up an LLC in the UAE.

Local Sponsor in Dubai for your LLC Business?

 

You must be knowing your business very well. But knowing it in the context of a foreign market is something different. Before you look for a partner, do your research to understand the market conditions for your business in Dubai and the competition around. Next, you need to compare it with your business plan to understand the prospects.  It's only when you feel confident that you can begin your search for the right partner.

Your local partner can be a company or an individual. Whoever you choose, they do not need to contribute to the start-up investment or participate financially at all. Whether you want your sponsor to be actively involved or silent is a decision left to you. An actively engaged sponsor will contribute to the business's setup and operational costs, partake in decision-making, and even day-to-day running of the business and take their share of profits. Unlike an active partner, a silent partner can be reimbursed in many other ways. Irrespective of whether you want your partner to be active or silent, he has to take on the liability for Immigration visas.

Factors to be Considered Before you Hire a Local Sponsor

One thing you must know about a Local Sponsor is that they do not work with companies in their projects or any other job. They merely give their services as a local representative and facilitate a foreign entrepreneur to open a company in the mainland. And a fixed annual fee or a certain profit sharing is charged for such facilities.

In the United Arab Emirates, you will find many high-profile or even celebrity sponsors that claim to be distinguished from others by providing network incentives or opening doors to particular sectors because of their standing. Even though this may be accurate, you ought to be careful so that you don’t end up spending more money on anything that you might possibly access from certain platforms for a smaller amount. Things can go wrong in a few cases. For example – in case of the death of a sponsor, their share will be passed on to their heir, and if the heir is not interested in being your local sponsor then you will be in deep trouble and will not be able to continue trading. So, you can avoid such a situation by going for corporate sponsorship.

Types of Local Sponsors in Dubai

The different types of local sponsors are –

Corporate Sponsors

Deemed to be the most common form of local sponsorship in Dubai, Corporate sponsorship comes into effect when a UAE national company owned by Emiratis (Locals) holds 51 per cent of the share and obligations of an organization that belongs to an individual or group of foreign investors. In this type of sponsorship, the business is sponsored by a company, rather than an individual.

Individual Sponsors

Individual sponsorship is another type of local sponsorship in Dubai. This sponsorship comes into effect when an Emirati national in his/her individual capacity becomes your sponsor. While the Emirati will hold a 51 per cent share and a 51 per cent liability of the company, the Emirati sponsor can hand over the power of attorney to the foreign partner in return for a fixed annual fee.  

Local Service Agent

Sponsorship by a local service agent is another significant local sponsorship in Dubai. Created for professionals like doctors, artisans or engineers, this type of sponsorship just requires the professional to appoint a local service agent. The agent is paid an annual fixed remuneration that doesn’t hold a 51 per cent

Why do you need a Local Sponsor in Dubai?

Here are some of the reasons why your business needs a local sponsor in the UAE –

Continuous Support and Access to the Sponsor's Authority

For all the government procedures (labour, immigration and all other UAE governmental authorities), that way minimizing the time for the sponsor to be available (in individual sponsorship).

Zero Involvement from the Sponsor

With corporate sponsorship, foreign business owners have full control over their business, even if the local sponsor is holding the majority of shares. Generally, corporate sponsors do not get involved in the day-to-day operations of the company.

Available Comprehensive Agreements

You don't have to worry about drafting the agreement and MOA, also searching for the right and legal wording. In most instances, corporate sponsors offer detailed agreements drafted by law firms to assure full transparency and legal protection for both shareholders.

How can you get a Local Sponsor?

Sometimes finding a local partner can be tiresome and time-consuming. A safe way out is to have a 'nominee' partner, and many companies offer a platform to own one. This kind of arrangement can provide you with complete operational and financial control and reduce the risks associated with appointing an unknown individual. Further, this arrangement obviates the need to part with a share of your profits because such arrangements are made as per a fixed annual fee.

All said and done, the process of acquiring a local partner in Dubai is complex and financially risky. As the law of the land categorically places you at the mercy of your partner, you may find yourself in a soup if you end up acquiring an unscrupulous one. Whether you plan to open a modest shop or a major enterprise, consulting a business set-up agency will make matters easy for you. A reputed agency like Commitbiz will guide you through the entire gamut of registration complexities, all while protecting your interests. Additionally, it will help you get acquainted with many other issues associated with opening a business in Dubai and other cities of UAE. Contact us today.