In which cases a local sponsor is necessary for registration of a company in the UAE?
Sole proprietors, as well as owners of businesses, often face a number of obstacles when registering a company in the UAE or a branch of a foreign company. One of the most frequently occurring issues is in which cases a UAE citizen should be attracted as a co-owner of a business.
The answer to this question depends on several factors, e.g. the type of business planned for opening in the UAE, the type of activity where business is carried out, and several other.
First, we will analyze the issue of a local sponsorship.
According to the “UAE law on commercial companies”, any natural person who plans to establish a company in the form “Limited Liability Company” (LLC) should do this in partnership with a local company or a natural person, who in turn should own a control block of shares (not less than 51%) in a new company.
LLC is a limited liability company. Meanwhile, a company can be registered in the UAE not only in the form of LLC; there are other options.
How to make a business in the UAE?
Making business in the UAE in free trade zone
Several dozens of free trade zones are established in the UAE. When a company is registered in a free trade zone, you do not have to involve a sponsor, and you may 100% own a company. Free zones offer company owners multiple benefits, e.g. absence of taxes, absence of customs duties, and low cost of registration of business.
Registration of company in the UAE in free trade zone – another service offered by us.
Starting business in the UAE by obtaining professional service license
A professional service license allows starting business in the UAE outside free zones, while you do not have to transfer a share of business to anyone. An owner of such business (doctor / engineer / architect) may offer professional services without attracting any local sponsor. But in such a case a local agent should be attracted, who will represent a business in state bodies.
A local agent, in turn, receives a fixed fee for this, and an owner of business owns a company for 100% and obtains a corresponding full profit.
Using local sponsorship
For those who wish to deal with commercial trade in the UAE outside free zones, a local sponsorship is mandatory. Accordingly, a businessman may attract a local sponsor – citizen of the UAE, or attract a local company as a sponsor.
- Local sponsor – citizen of the UAE
In this case, a citizen of the UAE should own not less than 51% of shares of a company. Usually, such sponsors agree for a fixed yearly payment and instead provide a power of attorney to a non-resident owner. As result, actual owners of business may receive 100% of profit and do not have to share it with a majority shareholder. Transactions of a company are registered in the name of a company, not in the name of a majority shareholder.
- Sponsor – local company
Corporate sponsorship is similar to a local sponsorship, but in this case a sponsor is not a natural person but a company that must be owned by citizens of the UAE. A corporate sponsor also agrees for a yearly payment, and in turn transfers full control to non-resident investors.
Registration of company in the UAE outside free zones — another service offered by us
Is local sponsor necessary when starting business in the UAE?
A local sponsor is not always necessary. Depending on the type of the company that you plan to establish in the UAE, you may need a local sponsor or may not. If you plan to register a company in the UAE in the form of LLC, you will need a local partner who will own a majority of shares of a company, while you may agree on 100% obtaining of profit.
Tags #Business in the UAE #Registration of company in the UAE