6 Ways To Considering a Local Sponsor For Business Setup In Dubai

Finding the right local sponsor for a new business setup in Dubai can be daunting and overwhelming and shouldn’t be undertaken lightly. Choosing the right partner is crucial to the future success of your busines, so it is important to make the right considerations to choose the best local sponsor for your business in the UAE. 

Decide What you Want From A Local Sponsor

First things first, you need to decide whether you are looking for a silent or an actively involved sponsor for your new business setup in Dubai. An actively engaged sponsor will partake in the day-to-day running of the decision-making and operations of the business setup in Dubai and contribute towards your new business setup in Dubai. In return, they take their entitlement to profits. On the other hand, a professional corporate sponsorship platform acts as a ‘nominee’ partner, where you take full reigns of the operational and financial matters and alleviate the risks associated with appointing an unknown individual. In return, they charge an annual fee for their troubles. 

Make Sure The Local Sponsor Will Deliver What They Promise

It is easy to be wooed by promises of ‘open doors’, contracts, and introductions that high profile individuals promise, but its also important to make sure that they make good on those promises. We have seen cases where these promises turn out to be empty and shallow. Rather than structuring your new business setup in Dubai around such promises, a better way is to set up a contract to remunerate the organization or local individual based on what they deliver.

Define Your Financial Commitment To Your Local Sponsor

The financial remuneration you offer to your local or corporate sponsor will depend on the terms of engagement. While actively engaged partners usually ask for a share of the profits, a professional corporate nominee on the other hand, will determine a fixed annual fee, depending on the number of your employees and the risk and liability of the activities of the company. While drawing up a contract with your sponsor, be sure to delineate how fees may be increased in the future, so that there are no nasty surprises down the lane. 

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See How The Local Sponsor Manages Their Other Companies

An individual sponsor could be managing hundreds of other companies. If so, you need to look into how they make sure that they all remain compliant without a dedicated administrative team in place. If they are not making sure that their other ventures remain compliant, they might put your company at risk as well. Your potential sponsor could get into a tight spot with the Ministry of Human Resources and Emiratization, and until that block is banned, it could prevent all the other sponsored companies from processing visas. If you were hindered from bringing in staff for a contract right in the middle of the process, imagine the impact it would have on your business

Consider The Impact On Your Business If The Sponsor Dies

When choosing a local partner, you need to be clear about what happens in the event of their death. In most cases, when a sponsor dies, their estate is distributed among their family members who may or may not have any intention of continuing with the partnership, not to mention, there’s no knowing what they will do with their share of your business. Think about what would happen to your business in the events that their heirs got into a feud over the estate. This is why most people wish to go for corporate sponsorship where you are guaranteed business continuity no matter what. This leaves no room for uncertainty and process disruption. 

Discuss The Exit Strategy

It can be quite difficult to terminate agreements in the UAE. Their cultural norms make them view liquidation as a failure, and this makes them hard to lose the business even if a large exit fee is involved. This is why, it is important to plan a clear exit from the word go, and especially one that includes no fees. Often times, a business may wish to be released from an agreement with a local sponsor but are asked to pay a hefty fee for the termination. Sadly, many companies aren’t aware of the fact that they can be relieved of this fee if they included this clause in their contract. If you and your sponsor agree on this at the time of business setup in Dubai, you will not be obliged to pay up this fee in case of termination. Many companies are unaware that they don’t have to pay up an exit fee if it is not listed in their contract explicitly and then end up paying an arm and a leg, even when they don’t have to.


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