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What is a Local Partner and Why You Need One To Do Business in Dubai

local partner

Choosing the right UAE license for your company might be confusing, especially if you are a foreign entrepreneur. It can become even more complex when you become aware that opening a new enterprise would require you to work with a local partner. 

Foreign entrepreneurs need to determine the type of business they will establish and whether it would be based in Dubai. Based on this information and specific categorizations, entrepreneurs will know whether they will need a local partner. 

If you are looking to provide professional services in Dubai or establish a UAE free zone, you do not need local partners. These businesses can be 100% foreign-owned. Opening shops or restaurants, on the other hand, obliges foreign businessmen to work with local partners. 

All businesses falling under industrial or commercial licenses, except for being established in a free zone, need to be registered as a Limited Liability Company (LLC). This registration can be carried out through a local partner who has a majority stake in the business. This is not a drawback of this regulation and actually benefits foreign entrepreneurs from many aspects.

 

Different Types of Businesses in the UAE

  • Professional Services Companies As discussed earlier, obtaining a professional services license is the only way foreign investors can own their business 100% outside of a UAE free zone. These services are registered by a local service agent who receives a fee for setting up the business but has no control or authority. These licenses are preferred for businesses requiring a local presence such as Business Consultancy, Accounting, Finance Services, Advertising, and more.
  • Commercial Services Companies – Companies that wish to trade locally within the country will need to obtain commercial or industrial licenses and form a Limited Liability Company (LLC). Here a local partner is mandatory.
  • Businesses Operated in the Free Zones – Businesses set up in free zones can also be owned 100% by foreigners and include 100% personal and company tax exemptions. Business owners establishing their businesses in these areas cannot directly trade with Dubai’s local market, unless with the interference of a local agent or distributor receiving a fee.

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Working with Local Partners and LLCs

Manufactures, retail, and trade businesses – or any businesses requiring a commercial or industrial license – need to form an LLC. Except for insurance, banking, and investment, all other businesses can be conducted under an LLC. It is noteworthy that these corporates should be owned 51% by a UAE citizen. 

The important part of this entrepreneurship is that benefits are not shared based on these percentages among business owners. Usually, the local partner is paid an annual fee for maintaining the business, and thus the foreign entrepreneur receives 100% of the benefits. However, this is flexible, and if agreed among the partners, the local partner can share the benefits. All earnings are also held in the name of the business and not the local partner. This way, foreign entrepreneurs are in full control of their business. 

Moreover, many use this regulation as an opportunity for forming business connections through their local partners. Under an LLC, opening unlimited business branches and conducting local trades will be possible. Foreign entrepreneurs can also take part in government projects that are not available to those not working with a local partner. LLCs are completely tax-free to top all these advantages, and entrepreneurs will be given investor status in the UAE. This latter facilitates the process of applying for UAE citizenship.  

To learn more about Local Sponsorship, talk to one of our Business Setup Experts. Call +971552330077 today. 

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