There is much misunderstanding over the many sorts of businesses that foreign entrepreneurs can Business Setup in the UAE.
Therefore, do you genuinely require a UAE citizen as a Local Sponsor?
Okay. Now, the answer is dependent upon the sort of business you wish to establish and whether it will be located on the UAE mainland or in a free zone. These are the two critical variables that decide whether a firm needs a sponsor.
A local sponsor is a mandatory prerequisite if a foreign entrepreneur wants to establish a firm on the UAE mainland. The sponsor should be a national of the UAE. However, this is not the case in free zones. If the firm is established on the UAE mainland, the local sponsor will hold 51% of the enterprise. They are compensated by a sponsor fee that is agreed upon at the business’s formation.
Therefore, if an entrepreneur wishes to establish a firm in the UAE, it is critical to understand the requirements. Individual sponsorship, corporate sponsorship, or a local service agent can all be used to establish a business in the UAE mainland.
Individual Sponsorship: As implied by the name, individual sponsorship is a type of sponsorship. This occurs when an individual UAE national supports your firm and owns 51% of it. This individual must be over the age of 21 and may be male or female. They may or may not be business owners in your field. However, this person’s sponsor must be a professional, an employee of the UAE government, or a merchant.
However, there is another significant possibility for this sort of sponsorship. The sponsor may grant the foreign entrepreneur power of attorney and complete business management in exchange for a predetermined yearly sponsor fee.
Corporate Sponsorship: Similar to individual sponsorship, however, the sponsor is a UAE-based business. And they own 51% of your business.
Local Service Agent: When a professional, such as a doctor, engineer, or accountant, desires to Business Setup in the UAE and offer their skilled professional services, a local service agent is necessary. The agent will act as the company’s representative in all administrative matters and interact with government officials and Ministries on the company’s behalf. They do not own 51% of your firm; instead, they get an annual set fee. It varies according to the activities or services provided to the firm.
The foreign entrepreneur can own their firm by establishing it in a free zone.
Free zones: This is the optimal choice for foreign entrepreneurs that wish to own 100% of their firm. Free zones are areas in the United Arab Emirates that provide the advantage of 100 percent expatriate ownership and total personal and corporate tax exemption.
Professional Services Licence: This is the sole option available to foreign entrepreneurs who wish to establish a firm outside of a free zone and who control 100% of the business. A professional services license is issued to service providers and companies that provide professional services.
LLCs are required for businesses that hold a commercial or industrial license and desire to conduct business locally, including retail/trade businesses. Additionally, there are fewer restrictions on the sorts of companies that LLCs may establish, except banking, insurance, and investment businesses that UAE nationals control at least 51 percent. However, earnings are not distributed.
So, do you now require a sponsor?
However, having a sponsor will be your best choice if you do not fulfill professional service license requirements and wish to conduct business directly with the UAE market.