Wondering whether you need a local sponsor to open a business in Dubai? The answer is…it depends on the business. In this article, we’ll explain what a local sponsor is, when you need to work with one, and how you can make your business setup process smooth and stress-free.

 Dubai is one of the world’s top destinations for global entrepreneurs. Its fast-growing economy, world-class infrastructure, and tax-friendly policies attract investors and business owners from all over the world. 

Setting up a company in Dubai is relatively straightforward, once a few important factors are settled. One of these factors is whether or not you need a local sponsor to open your business. It's a valid questions, and one that scares off many business owners when they consider moving to Dubai. But sponsors are not always necessary for foreign-owned businesses in the UAE.

Let’s explore this in more detail.

What Is a Local Sponsor in Dubai?

Firstly, let's clear up the definition of a local sponsor. A local sponsor in Dubai is a UAE national who holds at least 51% of shares in a given company. These are mainly companies registered on the mainland. This is a legal requirement for certain business activities that involve direct trade within the UAE market.

However, sponsorship requirements have become more relaxed in recent years. Many activities no longer require local sponsorship. Especially if you choose to open a company in a free zone, you’ll likely be eligible for 100% foreign ownership, with no sponsor needed. This depends on your businesses scope, activities, and a few other factors.

Free Zone vs Mainland: Which One Should You Choose?

When opening your UAE business, one of the first decisions you’ll have to make is whether to open in the mainland or in a free zone. But what’s the difference between free zone and mainland companies anyway?

Here are the ownership options for both:

• Mainland companies may require a local sponsor, but this depends on the business activity chosen. Fields like banking and finance, insurance, oil and gas exploration, and military services will usually require a UAE sponsor.

• Free zone companies usually allow full foreign ownership, meaning no sponsor is required. However, there are limits to what type of activity can be done under a Free Zone company.

The choice you make will depend on your business goals. If you want to trade directly in the UAE, a mainland company might be best. If your business is online or is heavily export-focused, a free zone might be a better option. There are lots of options to consider before making your decision.

The rules around business ownership and licensing in the UAE are constantly evolving. That’s why partnering with a UAE-based business consultant is highly recommended. Working with the right team ensures that your activity is compliant right from the start, and helps to avoid costly fines and potential setbacks down the line.

Here’s why we recommend working with a trusted business consultancy service:

Why Work With a Business Consultant in Dubai?

A trusted business consultant can:

• Help you choose the best legal structure and location for your UAE business
• Evaluate whether or not you need a local sponsor
• Handle documentation, approvals, and government submissions
• Connect you with reliable local sponsors, agents, and even potential clients and customers
• Save you time, money, and energy across the entire process

The knowledge of a local consultant can be a huge help in certain situations, especially in more complicated cases. It’s always better to ensure that everything remains smooth and compliant right from the start, rather than having to fix mistakes down the line.

Final Thoughts

So, do you need a local sponsor to start a business in Dubai? 

It depends on where and how you choose to set up. Many UAE business activities allow 100% foreign ownership, especially in free zones. Others may still require a local sponsor, especially mainland companies in certain industries.

To make the right choice and ensure a smooth launch, the best move is to consult with a local Dubai business setup firm. With a team of experts to guide you through the process, you’ll be free to focus on growing and expanding your new business in the UAE!

Ready to get started on building a business in the UAE?

Reach out to our team of business consultants and legal experts, who can guide you through the process! We look forward to assisting you and helping your business succeed!