Do You Need a Business Partner to Start a Company in Dubai UAE?

06 Dec Do You Need a Business Partner to Start a Company in Dubai UAE?

Start a Company in Dubai UAE with a Business Partner

Foreign investors are often found to be unsure about the type of business they can set up in the UAE. Most of them explained the reason as the complex business setup process and the need for a local sponsor. So the question that really needs our attention is that do you really need a local sponsor/partner for setting up a company in Dubai UAE . 

The simple answer to this question is based on two major factors. Firstly, it depends upon the type of business that you are opting to establish, and secondly, whether your business will be based in any of the free zones or not. Understanding these two factors can help you determine the answer relative to your business need. Some corporations and business communities necessitate a local sponsor however, there are various other options available that do not have any such limitation. Ajman Free Zone is a great example of this. To guide you comprehensively, we have put together all the necessary information below.

Benefits of Having a Business Partner

Shared Responsibilities and Workload

Starting a small business in Dubai can be an exciting but challenging endeavor for an entrepreneur. Having the right business partner can make all the difference in your entrepreneurial journey. A well-chosen partner with complementary skills can bring expertise and resources to the table, increasing your chances of success in your business idea and business decision-making. 

One of the primary advantages of having a business partner is the shared workload and responsibilities. Running a company involves a multitude of tasks, from strategic planning and decision-making to daily operations and financial management like securing small business loans or business financing. With a partner, you can divide and conquer, allowing each individual partner to focus on their strengths and expertise.

Complementary Skills and Expertise

Furthermore, a business partner can provide access to additional networks, contacts, and resources that you as a sole proprietor or small business owner may not have individually. This expanded reach can open doors to new opportunities, partnerships, and potential clients, accelerating the growth of your business idea and venture.

Access to Additional Resources and Connections

A prospective partner can offer access to additional resources and connections that you may lack as a founder or sole proprietor, facilitating growth opportunities and mitigating personal asset risk through liability protection measures like forming a general partnership, limited partnership or limited liability partnership business structure.

Emotional and Moral Support

Finally, having a trusted partner can provide emotional and moral support throughout the challenging journey of entrepreneurship. Building a business is often accompanied by setbacks and obstacles, and having someone to share the burden and encourage you can make a significant difference in persevering through difficult times, fostering a strong business relationship.

Legal Requirements for Starting a Business in Dubai

Types of Business Structures in Dubai

Before embarking on your entrepreneurial journey in Dubai, it’s crucial to understand the legal requirements for starting a business. Dubai offers several business structures, including limited liability companies (LLCs), free zone companies, and mainland companies. Each structure has its own ownership regulations and restrictions, so it’s essential to choose the one that best aligns with your business goals and potential partner dynamics.

Ownership Regulations and Restrictions

The ownership regulations and restrictions vary depending on the chosen business structure. For example, in mainland companies, at least 51% of the ownership must be held by a UAE national or a company wholly owned by UAE nationals. Free zones, on the other hand, allow 100% foreign ownership but may have specific requirements based on the industry or location.

Licensing and Registration Processes

Obtaining the necessary licenses and registrations is also a critical step. The process involves submitting various documents, meeting specific criteria, and paying the required fees. Consulting with legal professionals or government authorities can ensure compliance and avoid any potential issues down the line.

Different ways setting up a business in the UAE

For setting up a business in the UAE, there are only three ways available for foreign entrepreneurs i.e. Acquiring Professional Service License, Setting up a company in Free Zones , and Forming an LLC.

• If you wish to set up a Professional Service Company with 100% exclusive foreign ownership and capital repatriation, then you will need a local service agent or partner. As suggested by the name the licenses will be issued to the professional service business and the service provider will charge a certain service fee from investors however they have no authority and liability to interfere in business operations, management, and profit.
• Another way to sustain 100% ownership and profit repatriation, is to set up your business in one of the free zones of UAE. However, you cannot deal with the local UAE market without a local service agent or distributor. There are a few free zones such as the Ajman Free Zone which do not require a local partnership however some of the collaborative institutions such as banks etc. may ask for a local partner.
• If not settled in the UAE fee zone and the nature of your business falls under the industrial or commercial license category, then you must register as a Limited Liability Company (LLC) ; and for setting up LLC you must meet the requirement of having a local sponsor who upholds the majority of shares.
• According to the Dubai Statistics Centre, collaborating with local partners is a safe and beneficial process for investors which is reflected by over 16,000 industrial and commercial LLC licenses that were issued in 2015. This testifies to the security, significance, and simplicity of the process.
• Mostly, the local partners are required to pay the annual fee and sometimes they may also demand a pre-determined percentage of profit or sales.

Business partnership in Dubai: Finding the Right Business Partner

Identifying Your Business Needs and Gaps

Identifying the right business partner is a crucial decision that can significantly impact the success of your venture. Start by assessing your business needs and gaps, both in terms of skills and resources. This will help you determine the ideal partner profile that can complement your strengths and mitigate your weaknesses. Leverage business brokers or professional networks to find a potential business partner.

Assessing Potential Partners’ Skills, Experience, and Compatibility

When evaluating potential partners, consider their relevant experience, industry knowledge, and track record. Look for individuals whose values, work ethic, and long-term vision align with yours. It’s also essential to conduct thorough due diligence and background checks to ensure transparency and compatibility.

Conducting Due Diligence and Background Checks

Conducting thorough due diligence and background checks on potential partners is crucial. This process may involve verifying educational and professional credentials, checking for any legal or financial issues, and evaluating their reputation and references through business news and personal finance reviews. Transparency and honesty from both parties are essential for building a strong foundation of trust.

Building a Strong Partnership

Defining Roles, Responsibilities, and Decision-Making Processes

Once you’ve found the right business partner, it’s essential to establish a solid foundation for your partnership. Clearly define roles, responsibilities, and decision-making processes to avoid confusion and conflicts down the line. Regular communication and transparency are key to maintaining trust and fostering a productive working relationship.

Establishing Clear Communication Channels

Establishing clear communication channels and protocols is vital for a successful business partnership. This may involve regular meetings, progress updates, and open discussions about challenges and concerns. Effective communication ensures that both general partners are on the same page and can address issues promptly.

Creating a Partnership Agreement

Creating a comprehensive partnership agreement is also highly recommended. This legally binding document should outline the terms of your partnership, including ownership stakes, profit-sharing arrangements, dispute resolution mechanisms, and exit strategies. Consulting with legal professionals can help ensure the agreement is comprehensive and enforceable.

Resolving Conflicts and Maintaining Trust

Even the strongest business partnerships may experience conflicts or disagreements. Having mechanisms in place for resolving conflicts constructively and maintaining trust is essential. This may involve seeking mediation, compromising, or revisiting the partnership agreement if necessary. Open and honest communication, as well as a commitment to the shared vision, can help navigate challenges and strengthen the partnership between general partners or limited partners.

Business Setup Consultants is a leading consultancy in the UAE. We have a reputed profile of assisting various clients in setting up their businesses successfully in Dubai or anywhere in the UAE. We can help you with the process of business setup and company license acquisition. Our team of experts is just a call away for service.

Please take out a minute to contact us directly at +971 4 4301245 or by sending us an email at info@businessetup.com . You can also leave a message by using the message window at the bottom.