Why a Local Partner Is Important When Conducting Business in Dubai
Choosing the appropriate license for your business in the UAE can be difficult, especially for foreign business owners. When you take into account the necessity of collaborating with a local partner to launch a new business, it becomes much more challenging.
Foreign business owners must decide whether or not to base their operation in Dubai and the nature of their company. These variables will help them decide whether they need a local partner or if they can own their company outright.
Foreign investors can fully own professional services organizations and businesses founded in UAE free zones without the need for a local partner. These licenses are appropriate for companies that offer expert services like consulting, accounting, finance, advertising, etc.
However, firms engaged in commercial operations, retail, manufacturing, or requiring industrial permits must register as Limited Liability Companies (LLCs) and work with a local partner who owns a majority stake in the company, unless they are located in a free zone.
Working with a local partner in an LLC arrangement does not automatically entail that the rewards are distributed according to ownership stakes. Typically, the foreign entrepreneur keeps 100% of the benefits while the local partner is compensated annually for their participation. The agreement between the parties, however, can be flexible and negotiated. To ensure that the foreign entrepreneur has complete control, all earnings are held in the company’s name rather than the name of the local partner.
LLCs have a number of benefits, including the freedom to establish an infinite number of commercial branches, to conduct local commerce, and to take part in government programs that might not be open to those without a local partner. LLCs are also tax-free, and international business owners in the UAE are given investor status, which helps speed up the residency application process.
In general, being aware of the various business categories in the UAE, the prerequisites for local partners, and the advantages of forming an LLC can aid foreign business owners in opening up shop in Dubai.