How to Find a Local Sponsor in Dubai – 2025 Guide for Business Setup Success
How to Find a Local Sponsor in Dubai – 2025 Guide for Business Setup Success
Blog Article
Finding a local sponsor in Dubai means partnering with a UAE national or licensed entity to help set up your mainland business.
Local sponsors serve as legal representatives who assist with licenses, permits, and government dealings. To find a reliable sponsor, start by understanding your business needs, check legal requirements, and meet potential sponsors face-to-face. Follow our step-by-step guide and ask the right questions to secure a trusted partner for your business setup in Dubai.
How to Find a Local Sponsor in Dubai – 2025 Guide for Business Setup Success
Locating a local sponsor in Dubai requires an understanding of your business activity, determining if you fall under the UAE’s negative list (still requires sponsorship), and connecting with either a verified UAE national or corporate sponsor. Depending on your business type, you may decide to work with individual sponsors, corporate sponsors, or local service agents. Always use legal agreements to protect your rights, such as Power of Attorney or Memorandum of Understanding. For professional assistance, engage with business setup consultants in Dubai specializing in local sponsorships and local sponsorship agreements for expert guidance.What Is a Local Sponsor in Dubai?
A local sponsor in Dubai is a UAE national or an Emirati-owned company that partners with a foreign investor to set up a mainland company in Dubai. By law, certain sectors still require UAE nationals to control at least 51 percent of a company’s shareholding. Regardless of the level of involvement, sponsors tend to be passive investors who don’t actively manage the business or share in the profits. In exchange for an annual fee, they sign contracts with the sponsor clearly delineating the role, responsibilities, and terms of agreements beyond payment.Why Do You Need a Local Sponsor?
A. local sponsor is necessary if:- You’re setting up a mainland LLC in a restricted sector.
- Your business type falls under the UAE negative list
- You’re applying for specific commercial or industrial licenses
- Having the ability to bid on tenders.
- No foreign ownership restrictions in the UAE.
- Preferential treatment from DED, MOHRE, and immigration.
- Increased business legitimacy and acceptance.
Types of Local Sponsors in the UAE
A. Individual Local Sponsor
- A person who is legally capable and is a UAE national is above the age of 21 and holds 51% of the shares. It is common to undertake an LLC as a mainland company. They typically empower the ex-patriate with a power of attorney that enables them to run the business freely.
B. Corporate Sponsor
- A company that is fully owned by Emirates and that sponsors several other companies. Suitable for industrial or commercial license holders.
C. Local Service Agent (LSA)
- Applicable to professional firms such as consultancy, legal, or medical. They do not hold shares but act as their representative.
Steps to Find a Local Sponsor in Dubai, UAE
Obtaining a local sponsor is one of the first things to consider when setting up a business on the mainland of Dubai. With a wonderful sponsor, you can expand your business, but a poorly chosen one may lead to legal or operational headaches later on.Step 1: Know If You Actually Need a Local Sponsor
Locate if your preferred business venture is listed under the UAE’s “negative list,” (Business activities not permitted in Dubai). In case it does, you’re likely to need a local sponsor. Otherwise, you could qualify for 100% foreign ownership. This list involves local sponsorship:- Telecommunications and media (some categories)
- Oil and gas
- Defence industries, Banking and Finance
- Insurance
Step 2: Decide What Type of Sponsor You Need
These are the types of local sponsors available in the UAE:- Individual Sponsor – A UAE national who holds 51% ownership (as in LLCs)
- Corporate Sponsor – This is your sponsor, and it is a 100% Emirati-owned company
- Local Service Agent (LSA) – For professional businesses like consultants, doctors, and engineers, they hold 0% ownership.
Step 3: Search Through Reliable Channels
You need a professional and trustworthy sponsor. Look in places like:- Referrals from other business owners
- Business setup consultants (already have relationships with verified sponsors)
- Government directories or UAE free business matchmaking services
- Local chambers of commerce
Step 4: Check Background & Reputation
These are sponsor specifics to check before signing any document:- Ask for references
- Investigate their work within the UAE
- Check if the owner is either Emirati or a 100% UAE-owned company, and make sure there are no legal issues
- Look into any red flags
Step 5: Negotiate the Agreement
After you are satisfied with a prospective sponsor, remember to do the following:- Talk about the yearly payment (typically AED 8,000 to AED 15,000).
- Confirm that they will not try to meddle with your business processes.
- Request for a Power of Attorney or Memorandum of Understanding (MoU)
- Clearly define the exit clause and refund conditions.
Step 6: Finalize Legal Documents
Usually, you will have the following documents:- Drafted sponsorship agreement signed and completed.
- Notarized MoU or POA.
- Emirates ID copies, copyright, and trade license drafts.
- DED approvals, along with the application for a business license.
Step 7: Register the Company
With your sponsor’s name officially inserted, remember to:- Hand in all documents to the Department of Economic Development (DED).
- Register for a trade license.
- Open a business bank account.
- Apply for residency visas for yourself and your staff.
How to Choose the Right Local Sponsor
- Look for a reputable sponsor with business knowledge.
- Check if they’ve sponsored other companies successfully.
- Discuss your exit strategy and get it documented.
- Ensure they provide a Power of Attorney, allowing full business control.
What to Include in a Local Sponsorship Agreement
- Fixed annual sponsorship fee (average: AED 8,000 to AED 15,000)
- Terms of profit share (if any)
- Non-interference clause
- Exit clause (change of sponsor, sale of business, sponsor death)
- Power of Attorney or Memorandum of Understanding (MoU)
- Court agreement or notarized letter
What Businesses Still Need a Local Sponsor in 2025?
Despite relaxed laws, many sectors still require local sponsors:- Oil & Gas exploration
- Banking & Finance
- Insurance
- Defence and Military Services
- Transport & Logistics (certain types)
- Telecommunication
- Pharmaceutical & Medical Retail
How to Change Local Sponsors in Dubai (2025 Guide)
Yes, it’s possible to change your local sponsor in Dubai, but you’ll need to follow the correct legal steps to avoid issues. Whether you’re unhappy with your current sponsor or planning to restructure your business, here’s how to do it.Reasons You Might Want to Change Your Local Sponsor
- You’ve lost trust in your current sponsor.
- The sponsor is not responsive or does not fulfill the agreed duties.
- You want better terms, lower costs, or more legal clarity.
- You’re planning to sell, expand, or transfer ownership.
- Your sponsor is retiring, relocating, or has passed away.
Steps to Change a Local Sponsor in Dubai
Step 1: Review Your Sponsorship Agreement
Check your current MoU, Power of Attorney or legal contract. Look for any exit clauses, fees, or notice periods. These documents will tell you how easy it is to terminate the agreement.Step 2: Get Consent (if required)
- Some agreements require written consent from the current sponsor.
- If your contract allows you to exit without consent, you may move forward with legal support.
- In case of a dispute, you should involve a legal consultant or file a case in the UAE courts.
Step 3: Prepare the New Sponsor Documents
Once you’re ready to switch:- Draft a new Local Sponsor Agreement.
- Include exit clauses, a non-involvement agreement, and fixed fee terms.
- Get all paperwork notarized and translated if needed.
Step 4: Update Company Records
Go to the Department of Economic Development (DED) and submit:- New sponsor’s Emirates ID copy
- Updated license application
- Trade name certificate (if applicable)
- Old MoA (Memorandum of Association) with changes highlighted
- New MoA signed by the new sponsor and partners
Step 5: Make the Change Official
- The DED will review the application.
- Once approved, they’ll issue a new business license showing your updated sponsor.
- Update your bank records, immigration files, and visa sponsorships if necessary.
Costs and Fees of Local Sponsorship in Dubai
The cost of hiring a local sponsor in Dubai depends on several factors, including your business activity, the type of sponsor, and the level of involvement or service provided. Here’s what you can generally expect:A. Individual Sponsor
- Annual Fee: AED 8,000 – AED 12,000
- Use Case: For mainland LLCs, the UAE national holds 51% of the shares but does not interfere in day-to-day operations.
- What’s Included: The sponsor’s name is on the license, there is minimal involvement, and often, a power of attorney allows you full control.
B. Corporate Sponsor
- Annual Fee: AED 10,000 – AED 20,000+
- Use Case: For more complex commercial or industrial activities, it is ideal if you want added credibility and structure.
- What’s Included: Legal documentation (e.g., MoU, POA), fixed agreement, more legal security, less personal risk.
C. Local Service Agent (LSA)
- Annual Fee: AED 5,000 – AED 8,000
- Use Case: For Professional licenses where the expat retains 100% ownership (e.g., consultants, doctors, engineers).
- What’s Included: Liaison with government entities; no ownership or shareholding.
FAQs: Local Sponsor in UAE
Q1: Do I still need a local sponsor in Dubai? Only if your business activity falls under the “negative list.” Otherwise, 100% foreign ownership is now possible. Q2: How can I get a refund if my sponsor backs out? It depends on the contract. Always add a refund and dispute clause. Q3: Can I run the business fully without sponsor interference? Yes, if you have a Power of Attorney and a non-involvement clause signed. Q4: What documents are needed for local sponsorship?- copyright copies (yours and sponsor’s)
- Trade name approval
- Initial approval from DED
- POA / MoU agreement
- Emirates ID (for both parties)