Business Setup UAE: How to Set Up a Business in Dubai with a Local Sponsor
Dubai is one of the most thriving business hubs in the Middle East. For entrepreneurs aiming for business setup UAE, understanding the role and importance of a local sponsor is crucial. Establishing a company on the mainland requires partnering with a UAE national — your local sponsor. This partnership is mandatory for certain business activities and offers multiple advantages in terms of market access and business operations.
What is a Local Sponsor in UAE?
A local sponsor is typically a UAE citizen who acts as a partner or service agent in your business. For specific company structures in mainland Dubai, such as an LLC (Limited Liability Company), the law previously required a UAE national to hold 51% ownership. Although recent reforms have allowed 100% foreign ownership in many sectors, a local sponsor is still essential for strategic mainland business categories.
Key Requirements for Business Setup in UAE with a Local Sponsor
When planning a business setup UAE with a local sponsor, you must meet certain conditions. These include:
- Choosing a business activity governed by UAE mainland laws.
- Finding a reliable and professional local sponsor.
- Completing documents like Memorandum of Association (MoA).
- Getting necessary approvals from the Department of Economic Development (DED) and other regulatory bodies.
For more detailed steps, read our Step-by-Step Guide on How to Establish a Company in Dubai.
Benefits of Partnering with a Local Sponsor
Having a local sponsor provides several business advantages. These include:
- Unrestricted access to the UAE mainland market.
- Eligibility to undertake government contracts.
- Faster approvals through sponsor’s local networks.
- Greater credibility among local clients and authorities.
Types of Local Sponsorship in Dubai
There are three major types of local sponsorship models commonly used in the UAE:
1. Individual Sponsorship
This is where a UAE individual becomes a 51% shareholder of your business. Used mostly for commercial and industrial licenses.
2. Local Service Agent (LSA)
Applicable to professional licenses where the UAE national acts only as a service agent without owning any business share.
3. Corporate Sponsorship
A UAE company, fully owned by Emiratis, acts as your sponsor instead of an individual citizen. This model offers more stability and structured agreements.
Step-by-Step Guide to Starting a Business in Dubai with a Local Sponsor
Follow the steps below for a successful business setup UAE in mainland Dubai:
Step 1: Define Your Business Activity
The first step in the business setup is determining your business activity. This affects license type, required documentation, and approval processes.
Step 2: Choose the Right Legal Structure
Depending on your ownership preferences and business goals, choose from structures like LLC, sole establishment, or branch office. An LLC requires a local sponsor.
Step 3: Find a Reliable Local Sponsor
This individual or corporate entity will hold 51% shares (where applicable). It is crucial to choose someone trustworthy and transparent.
Step 4: Reserve a Trade Name
Submit a few preferred trade names for approval through the Department of Economic Development (DED). Ensure they comply with UAE naming conventions.
Step 5: Prepare and Sign MOA
Draft a Memorandum of Association (MOA) outlining profit sharing, responsibilities, and other terms of your legal partnership.
Step 6: Secure Initial Approvals
Apply for preliminary approvals from DED and other relevant authorities based on your business activity.
Step 7: Lease Office Space
A physical office address is mandatory for getting a trade license. Choose a location that aligns with your business goals and activity type.
Step 8: Obtain Trade License
Finally, submit all documents, receive final approvals, and get your DED-issued trade license.
Roles and Responsibilities of a Local Sponsor
Your local sponsor’s responsibilities often include:
- Signing government applications and licensing paperwork on your behalf.
- Participating in administrative procedures.
- Possibly advising on local market practices and regulations.
Most local sponsors do not interfere with daily operations, and financial agreements are mutually discussed and fixed contractually.
How Much Does a Local Sponsor Cost?
The cost of hiring a local sponsor ranges depending on your business type, sponsor reputation, and industry. Typically, annual fees start from AED 10,000 and can go up significantly based on agreement specifics.
Free Zones vs Mainland Business Setup Dubai
While many entrepreneurs consider free zones for 100% ownership, the mainland offers broader operational freedom within the UAE market. A local sponsor is only required for mainland business setup UAE, not for free zone businesses.
Tips for Choosing the Right Local Sponsor
Selecting the right sponsor can have long-term implications. Here are some pro tips:
- Check for Transparency: Ensure all terms are clearly defined in signed agreements.
- Use Corporate Sponsorship: Prefer registered companies over individuals for structured partnerships.
- Legal Advice: Always consult a lawyer to draft your MOA and review contracts.
Legal Reforms Affecting Local Sponsorship
Recent amendments to the UAE Commercial Companies Law allow full foreign ownership in many sectors. However, industries like banking, telecom, and some engineering services still require local sponsorship. Always check for the latest updates at the official UAE Government Portal.
Conclusion: Is a Local Sponsor Required for Your Business?
To determine whether you need a local sponsor, assess your business activity and intended market. If targeting consumers on the mainland, especially in regulated sectors, a local sponsor remains essential for your business setup UAE. With the right sponsor, the setup process becomes smoother, minimizing risks and delays.
Ready to launch your business in Dubai? Read our full guide here for everything you need to know.
