Starting a business in Dubai as a foreigner is one of the most frequently asked questions among international entrepreneurs and investors interested in entering the Middle East market. For a long time, the concept of a “local sponsor” was almost inseparable from the process of business setup in the UAE.
However, the situation has dramatically changed. In most scenarios, foreign investors can now fully own their businesses without having to share equity with a local sponsor.
This guide will help you understand whether you still require a local sponsor, the current ownership structure in Dubai, and how to calculate the actual cost of doing business in Dubai.
Understanding the Old Local Sponsor Rule
Traditionally, foreign investors who wanted to start a company on the UAE mainland were required to appoint a UAE national who owned 51% of the company. This person was commonly referred to as the “local sponsor” or “local partner.”
While this structure allowed overseas investors to operate in the market, it raised concerns about control, profit distribution, and long-term security for foreign founders.
However, reforms introduced by the government of the United Arab Emirates have fundamentally changed the business landscape.
Do You Still Need a Local Sponsor in Dubai?
In most cases, the answer to this question is no; you do not need a local sponsor anymore.
Foreign investors can now enjoy 100% ownership of their companies for most commercial and professional activities on the mainland.
This is valid for all kinds of business activities, such as:
- Trading and general commerce
- Consulting and professional services
- Information technology and digital services
- Marketing and advertising services
- Industrial and manufacturing activities (subject to approval)
The authority responsible for the licensing of business activities on the mainland in Dubai is the Dubai Department of Economy and Tourism.
When is a local sponsor still required?
Despite the current flexible regime in the regulation of ownership, the following may require the involvement of a local sponsor:
- Strategically important sectors
- Defense, security, and military-related sectors
- Specialized financial services
In such instances, the regulators will assess the local component. In most instances, entrepreneurs who want to learn how to start a business in Dubai will not fall in such categories.
Starting a Business in Dubai as a Foreigner – Your Main Options
If you want to start a business in Dubai, you can choose between two main forms:
Mainland Company
A mainland company gives you the privilege to operate anywhere in Dubai and the UAE without any restrictions as to the areas you can trade in.
The advantages of a mainland company include:
- 100% foreign ownership for most activities
- Ability to work with government entities
- No geographic restrictions within the UAE
- This option is good for companies that want to trade directly with the local market.
Free Zone Company
Free zones refer to economic zones that provide support to companies in terms of infrastructure. Dubai Multi Commodities Centre (DMCC) is one of the most popular free zones.
Free zones provide:
- 100% foreign ownership
- Profit repatriation
- Simplified registration procedures
- Office and flexi-desk space
However, free zone companies cannot trade directly with the mainland without the support of a local distributor or a mainland branch.
Benefits of Starting a Business in Dubai
Understanding the benefits of starting a business in Dubai is vital before choosing the best location to establish your business.
- Strategic Global Location
Dubai serves as a business gateway between Europe, Asia, and Africa. The business-friendly infrastructure enables rapid access to new as well as established markets.
- Tax-friendly Environment
The UAE continues to have one of the most favorable tax environments in the world. Though corporate tax has been implemented, the overall tax regime remains highly competitive.
- Political and Economic Stability
Dubai provides a stable business environment with a highly regulated system.
- World-Class Infrastructure
Dubai boasts state-of-the-art infrastructure in terms of digital connectivity, logistics, transportation, and office space.
- International Talent Pool
Businesses can take advantage of a multicultural workforce along with an immigration system that supports skilled workers and entrepreneurs.
How to Start a Business in Dubai – Step-by-Step
If you are planning how to start a business in Dubai, the process below applies to both mainland companies and free zone companies with minor changes.
Step 1: Define Your Business Activity
Your business activity will impact:
- Licensing Authority
- Eligibility of the Company to Own
- Compliance
- Approvals
This is one of the most important decisions you have to make when you open your business in Dubai as a foreigner.
Step 2: Choose the Jurisdiction
Determine whether a mainland or free zone structure is most conducive to your commercial objectives.
Ask yourself:
- Will I be serving UAE clients directly?
- Do I require physical retail or office space in Dubai?
-
Will I be conducting international business only?
Step 3: Select a Company Name
Your company name must comply with UAE naming conventions and cannot include prohibited or sensitive keywords.
Step 4: Prepare and Submit Documents
- Passport copies of all shareholders
- Visa or entry stamp (if applicable)
- Business Plan
- Application forms
Step 5: Obtain Initial Approval
Your activity and ownership structure are assessed by the concerned authority before obtaining initial approval.
Step 6: Lease Office Space
You need an address for most licenses, even if you are opting for a flexi-desk or shared office space solution.
Step 7: Final Licence Issuance
Once the payments and approvals are received, your business license is issued, and you are ready to start your business. This is the general format that anyone looking to start a business in Dubai successfully will have to follow.
Cost of Starting a Business in Dubai
One of the most common queries that entrepreneurs want to know is the real cost of setting up a business in Dubai. It is important to note that the cost of setting up a business varies depending on the following:
- Jurisdiction (Mainland or Free Zone)
- Number of business activities
- Office space required
- Number of visas
- External approvals
Some of the cost components of setting up a business in Dubai include:
- Trade Name Registration
- Initial Approval/License Cost
- Office Space Cost (Lease) or Flexi Desk Package
- Establishment Card Cost
- Immigration File Cost
- Visa Cost
- Regulatory Approvals (where applicable)
Mainland vs Free Zone – Which is better for you?
There is no universal answer. The right structure depends entirely on your business model.
Mainland companies are best for:
- Serving the local Dubai and UAE market
- Signing government contracts
- Opening multiple branches within the UAE
Free zone companies are better for:
- International trading
- Holding companies
- Start-ups that do not need direct local trading access
Both options support starting a business in Dubai as a foreigner without a local equity partner in most sectors.
Final Thoughts
For most entrepreneurs today, the answer is quite straightforward:
You can start and own your own business without the need for a local sponsor.
In order to simplify the whole process of setting up a business, DXB VIP provides complete assistance in company formation, licensing, visa, and compliance in Dubai. International entrepreneurs can now start their business fast, stay fully compliant, and grow their business with ease through DXB VIP.