You can start a business in Dubai without a local sponsor by establishing your company in one of the UAE’s free zones. These zones allow 100% foreign ownership in various sectors, such as technology, e-commerce, and consulting. The process includes choosing the right business activity, selecting the appropriate free zone or jurisdiction, registering your business, obtaining necessary licenses, and securing office space. Additionally, you will need to apply for work visas and set up a corporate bank account. Starting a business in Dubai without a local sponsor offers the advantage of full control over operations and profits.

How to Start a Business in Dubai Without a Local Sponsor

Dubai offers entrepreneurial investors a robust economy, strategic location, and superb infrastructures alongside the option to start and run a company within its confines. As with many other locations, Dubai’s foreign investors face a sponsor-related concern. Traditionally, there was a prerequisite in Dubai that an Emirati’s 51% stake must be held in a mainland company to operate it. However, for foreign entrepreneurs seeking to set up a base in Dubai, the city has undergone tremendous transformations in forgoing the need for local sponsors and local partners in many situations. This article focuses on how to start a business in Dubai specifically without a local sponsor, the prerequisites, and essential measures to take.

What Is A Local Sponsor?

In terms of conducting business in Dubai, a local sponsor refers to a UAE national or an Emirati who needs to comprise 51% of the equity in certain businesses, especially while establishing a company on the mainland. A local sponsor holds a partnership interest in the business, although it does not actively manage or operate it. They function primarily as legal husbandman to ensure compliance with contractual obligations like the UAE citizen’s majority stake in businesses established on the mainland.

To engage in specific business activities, especially those within the mainland, foreign investors must acquire a local sponsor in order to facilitate the legal processes of the company set up in UAE or DUBAI. In free zones, however, the requirement for a local sponsor is lifted, and foreign ownership is unrestricted.

How Does a Local Sponsor Help?

The primary duty of a local sponsor is to assist foreign business people with respect to local policies, legal frameworks as well as integrative factors unique to the UAE. Here’s how a local sponsor helps:

A. Legal Compliances

• The local sponsor takes responsibility for the compliance of the business with legal provisions concerning companies in the UAE. They have a particular responsibility in the registration phase of the business at the level of the mainland.

B. Facilitates Access to Local Markets

• In some instances, Dubai’s mainland-based businesses have to deal with a local sponsor in order to trade directly within the UAE market. This local sponsor can act as a proxy for the company and enable free zone businesses to carry out business negotiations with the market, something that is fully restricted by free zones.

C. Legal Ownership Requirement

• Having a local sponsor for foreign businesses maintains the requirement of having UAE local and national control of the company by owning 51% of it. This enables the company to operate in the Dubai mainland market legally.

D. Aiding with Government Approvals and Licensing

• Local sponsors actively participate in the application for different permits and licenses required to operate a business. Their connection with governmental players can help smoothen these processes.  

E. Supporting in Obtaining Local Contracts

• A local sponsor can assist with local contracts and other business dealings because of their already established connections with these locals and aids the foreign business to transact with locals.6. Cultural and Business Etiquette.  

F. Cultural and Business Guidance

• Local sponsors offer invaluable guidance concerning the culture and business etiquette in the UAE, which can prove to be very useful to foreign investors who may not fully understand the local market dynamics. They are helpful in dealing with the subtleties of business etiquette and aid in relationship management with local business partners.  

Key Considerations:

As in all cases, local sponsors are uniquely positioned to assist, but are often limited in their input regarding the management and operation of the business activities on a day-to-day basis. Most of their input is more ceremonial than practical since the foreign investor retains functioning control. There is no doubt that there must be strong arrangements in place to create mutual benefit for both sides.

What Does Starting a Business Without a Local Sponsor Mean?

Traditionally, foreign investors wishing to start a business in Dubai needed to partner with a local sponsor who would hold 51% of the company’s shares. However, thanks to recent changes in UAE law, it is now possible for foreign nationals to set up a business in Dubai with 100% ownership in certain free zones and specific business activities.

This reform eliminates the need for a local sponsor, providing foreign investors greater control over their business and the profits generated. It applies mainly to businesses set up in free zones, where foreign ownership is allowed, and some mainland sectors have also been opened to 100% foreign ownership.

Benefits of Starting a Business in Dubai Without a Local Sponsor

Dubai’s business environment is known for its attractiveness and ease of setup. Here are some key advantages when starting a business without a local sponsor:

A. Full Ownership of Your Company

• With no local sponsor required, you can retain 100% ownership of your company. This gives you complete control over operations, decision-making, and profits.

B. No Revenue Sharing

• Since you’re not required to have a local partner, you don’t have to split profits or pay annual fees to a UAE national. This leads to greater financial control and cost savings.

C. Access to Global Markets

• Dubai’s strategic location connects businesses to Europe, Asia, and Africa. Establishing a business in Dubai provides access to global markets, expanding your potential reach.

D. Tax Benefits

• Businesses established in Dubai’s free zones enjoy tax exemptions on income and profits. This is a huge advantage for foreign investors, enabling businesses to grow and operate more profitably.

E. Simplified Setup Process

• Setting up a business in Dubai is now simpler and faster. The process is less bureaucratic, making it easier for international entrepreneurs to enter the market.

Steps to Starting Your Business in Dubai Without A Local Sponser

Now that you understand the benefits of starting a business without a local sponsor let’s dive into the step-by-step process for establishing your company in Dubai.

Step 1: Choose the Right Business Activity

The first step in starting a business in Dubai is selecting the right business activity. The UAE allows 100% foreign ownership for specific business types, such as:

• Technology
• E-commerce
• Consulting
• Trading
• Professional services

Consult the Dubai Department of Economic Development (DED) to ensure your business activity qualifies for 100% ownership. Understanding the restrictions and regulations for your business type will help avoid future complications.

Step 2: Select the Right Jurisdiction

You have two primary options when selecting a jurisdiction for your business:

• Free Zones: If you prefer 100% ownership and tax benefits, setting up your business in a free zone like DMCC (Dubai Multi Commodities Centre) or Dubai Internet City is ideal. Free zones allow foreign businesses to operate with minimal restrictions and zero income tax.
• Mainland: If you wish to trade directly with the UAE market, a mainland setup might be more appropriate. However, some activities still require a local service agent, meaning you may still need a local partner for certain businesses.

Step 3: Register Your Business Name

Choosing a unique business name that complies with Dubai’s naming regulations is essential. Ensure that your business name:

• Does not include offensive or inappropriate terms
• Avoids references to political or religious organizations
• Is not already in use

Once approved, your business name will be officially registered with the DED or the relevant free zone authority.

Step 4: Apply for a Business License

To legally operate in Dubai, you must obtain a business license. The type of license depends on the nature of your business:

• Commercial License: For trading activities
• Professional License: For consultancy or service-based businesses
• Industrial License: For manufacturing operations

Submit your application along with the required documents, such as a business plan and identification copies.

Step 5: Approvals and Paperwork

Before you can proceed, you must submit the necessary paperwork, including:

• Passport copies of shareholders and directors
• Business plan and relevant documentation
• Preliminary approval from DED or your free zone authority
• Memorandum of Association (MoA), if applicable

Ensure that all required paperwork is submitted correctly to avoid delays.

Step 6: Secure Office Space

Dubai businesses are required to have a physical office. Depending on your jurisdiction, you may have options such as:

• Virtual offices in free zones
• Shared workspaces for small businesses
• Private office spaces for larger businesses

Choose the office setup that best suits your business needs.

Step 7: Set Up a Corporate Bank Account

Once your license is approved, you will need to set up a corporate bank account in Dubai. Choose a bank that aligns with your business goals. Popular options include Emirates NBD, Mashreq Bank, and HSBC.

Step 8: Visa and Sponsorship Requirements

If you plan to hire employees, you will need to apply for work visas for yourself and your staff. Dubai offers visa options for business owners, investors, and employees, making it easier to operate with a global workforce.

Conditions for Setting Up a Business Without a Sponsor

To qualify for 100% foreign ownership, businesses must:

• Be established in a free zone that permits foreign ownership
• Choose an allowable business activity, such as consulting, IT, or trading.
• Submit required legal documents, such as the Articles of Association.
• Secure office space as per jurisdiction requirements

Documents Required for Company Formation in Dubai Without a Sponsor

The typical documents needed to set up a business include:

• Valid passport copies of shareholders and directors
• Business plan detailing company goals and strategies
• Proof of address (e.g., utility bills)
• Office lease agreement (if applicable)

Consult your free zone authority or business consultants in Dubai for specific requirements.

Common Questions About Business Setup in Dubai

Q1. Can I start a business in Dubai without a local sponsor?

Yes, foreign investors can start a business in Dubai without a local sponsor by setting up in one of Dubai’s free zones or specific sectors that permit 100% foreign ownership.

Q2. What are the best free zones for 100% ownership?

Dubai has several free zones, such as DMCC, Dubai Silicon Oasis, and Dubai International Financial Center (DIFC), that allow full foreign ownership and provide tax incentives.

Q3. Do I need a physical office to start a business in Dubai?

Yes, all businesses in Dubai require a physical office space. However, many free zones offer flexible options, such as virtual offices or shared spaces.

Q4. How long does it take to set up a business in Dubai?

The process can take anywhere from one to two weeks for a free zone business setup, depending on the complexity and your preparedness with the required documents.

Q5. Are there any hidden costs in the business setup?

While most costs are upfront, additional fees may arise for bank account setup, visa applications, and legal consultations.

Conclusion

Starting a business in Dubai without a local sponsor is now more accessible than ever. Thanks to free zones and legal reforms, foreign investors can retain full ownership and benefit from a business-friendly environment. By following the step-by-step process outlined in this guide and consulting with professional business consultants in Dubai, you can set up your company with ease.

Ready to start your business in Dubai? Reach out to business setup services in UAE for expert advice and a smooth setup process!