The process of setting up a business in Dubai is one of the most fulfilling processes! Why? Because it is clear that here, any entrepreneur can try to take advantage of the booming market of the Middle East. However, before starting your company in the UAE mainland, you should first be aware of the local sponsorship system.

A local sponsor is very important when helping foreign investors comply with the UAE’s business regulations. And it is even more important when setting up a company based on the mainland. But how do you find the right sponsor? What are the costs involved? And what are the legal obligations of the sponsor?

This is a comprehensive blog that contains all the information you need to know about local sponsorship in Dubai in 2025.

So What Is a Local Sponsor in Dubai?

A local sponsor is a UAE national who collaborates with foreign business people who want to set up a business on the UAE mainland. The sponsor can be an individual or a company.

According to UAE Federal Law No. 32 of 2021, some types of companies cannot be 100% foreign-owned and must have a local sponsor. Traditionally, an Emirati sponsor is one who owns 51 percent of the company. And that too with a foreign investor who owns 49 percent of the company.

However, in reality, most sponsors are silent partners, and the foreign investor can run the business with the sponsor and earn a profit. Even if he receives an annual fee instead of a share of the profits.

Dubai Local Sponsorship Types

There are three types of local sponsorship arrangements in the UAE that you can choose from depending on the nature of your business.

Corporate Local Sponsor

A corporate sponsor is a company registered in the UAE that will be a 51% shareholder in your business in the mainland. This type of sponsorship is usually found in medium and large businesses.

• Corporate sponsors have a number of benefits, including:

• Stability and reliability in the law.

• Organizational system of professional regulation.

• Limited personal liability

• Easy association with the authorities.

In most cases these companies are not engaged in day-to-day business, but are owned solely to meet legal requirements.

Individual Local Sponsor

A local sponsor is a UAE national (male or female) who legally owns 51% of your business. The sponsor generally does not interfere with the business operations and management.

A clearly worded Memorandum of Understanding (MOU) is signed to give control to the foreign owner party. Additionally, the investor has control of all business operations and the sponsor has a fee each year.

This structure is good for all small and medium-sized companies and start-ups looking for flexibility and a simple structure.

Local Service Agent (LSA)

A local service agent is not a shareholder under any circumstances, unlike other types of sponsorship. Instead, an LSA is required for professional service licenses such as doctors or artists established in Dubai.

In this setup:

• The agent helps to communicate with the UAE government agencies.

• The company is 100 percent owned by a foreigner.

• The agent collects a set amount of fees annually and is not entitled to any company assets or earnings.

This would be perfect for people who offer professionals and who prefer to have full control over the company.

How to Locate an Appropriate Local Sponsor in Dubai?

One of the most important business decisions you will make will be choosing the right sponsor. A sponsor is not just a legal formality, but can also affect the credibility, regulatory compliance, and long-term security of your company.

The following is the way to identify an appropriate and reliable local sponsor:

• Conduct Thorough Research

• Begin by searching business directories and industry sites, e.g.:

• Dubai Chamber of Commerce directories.

• DMCC member directories

• Professional contacts through LinkedIn.

• Gulf News business directories and MEED.

• Shortlisting of candidates before checking their reputation and cross-checking.

• Participate in Networking and Business Expos.

Dubai hosts major industry events every year, such as GITEX Global, Arab Health and Gulfood, where business people can find sponsors or professional intermediaries.

Further Reading: Setup Holding Company in Dubai, UAE: Costs, Steps & Requirements

Consultancy And Legal Assistance

Business establishments can be assisted by business setup consultancies in:

• Preparation of clear Memorandums of Association (MOA).

• Carrying out due diligence on sponsors.

• Bargaining on reasonable sponsorship costs.

• Assurance of the UAE Commercial Companies Law.

Professional legal assistance means that your partnership is secure and there will be no conflicting situations in the future.

How and When to Change Your Local Sponsor?

If your current sponsor is unresponsive or you feel the sponsor is not right for you, you can legally change sponsors.

Usual Reasons to switch a Sponsor:

• Breach of service contracts.

• Failure to align with business objectives.

• Unavailability of sponsor or sponsor misconduct.

• More than 30 days of non-communication.

• Important Legal Issues to Sponsors and Investors.

• Ensure that side agreements show ownership rights, profits division and management in authority.

• Confirm that all the contracts are notarized and registered with the concerned authorities in the UAE.

• Both sponsors and investors are expected to have copies of agreements to assist in transparency.

• It is now possible to own 100 per cent of certain business sectors, but please consult the current laws on UAE company ownership before acting.

Conclusion

Finding a reputable local sponsor in Dubai is not just a formality, as the choice of a business partner can affect the stability of your business. And its ability to comply with certain regulations and its opportunities for expansion.

With a reliable sponsor, you are guaranteed to deal with the authorities and you can focus on running your business. Regardless of whether you are forming an LLC company or not, do your due diligence, transparently verify your partnership and provide formalities.

With the right local sponsor deal, you can be sure that you are moving forward with business in Dubai. And, will be able to navigate the dynamic business world in the UAE with ease.

Continue Reading: Top 15 Profitable Business Ideas for Women in Dubai, UAE (2025)