Dear Members and Friends,
The China-Italy Chamber of Commerce is glad to share an article that its Member Hawksford has published on "The Simple and Better Way for China Company Registration"
The Simple and Better Way for China Company Registration
China is, without any doubt, a global economic hub and an investors’ paradise. Starting with its economic reforms of the 70s, the country has been experiencing exponential growth that makes it the perfect launching pad for businesses that want to expand and invest globally. To take advantage of this tested and proven offshore investment destination, you need to follow the right steps for China company registration.
Benefits of Registering Your Company in China
Before we proceed to look at the details of China company registration, you might want to check at additional benefits for taking your business there. Here are some of the unique advantages that you cannot afford to miss:
China Company Registration: Business Formation Options for Foreigners
Now that you know the benefits that come with China company registration, you better grab the opportunity to utilize this potent opportunity. There are three main business formation options that you can use:
Wholly Foreign-Owned Enterprise (WFOE)
The obvious business format for foreigners looking forward to starting businesses in China is a wholly foreign-owned Enterprise (WFOE). According to the Chinese law, WFOE is a limited liability company that is 100% owned by a foreigner or run by a foreign company. Since you fully own the business, it implies that you have greater control over its operations, profit targets, and revenue.
As a limited liability company, it also means that it is a separate legal entity and limits your liability to the contributed share capital. This is the most favorable option for an overseas business that targets entering the Chinese market.
Benefits of a Wholly Foreign-Owned Enterprise:
A joint venture is another type of business that takes the form of a limited liability company. Under this business format, you are required to identify and register a company with a Chinese partner. Another remarkable thing about JV is that the Chinese partner must have controlling shares (over 50%) in the company. This implies that unlike the wholly foreign-owned enterprise, your partner will have greater control of the daily operations of the company.
The main advantage of going for a joint venture is that you can rapidly grow into the Chinese market by using the already established firms to tap into their know-how, distribution networks, and sales channels. Furthermore, you do not have to worry about the entry challenges that characterize new businesses.
While these benefits are amazing, it is important to note that with limited control, you are simply trusting the investment into the hands of another person. For many investors, this is too big a risk to take. This is why you should go for WFOE as your first choice.
This is the simplest type of business formation that you can open in China. But unlike China company registration for a WFOE or joint venture that allows you to engage in profitable activities, a representative office comes with major limitations. The office is only allowed to engage in non-profit making operations such as offering customer support and market research.
The Best Time for a Representative Office
With all the limitations that come with running a representative office, it becomes less desirable for investors looking forward to growing their companies rapidly. So, what is the best time to open a representative office?
The Complete Procedure for China Company Registration
As we have mentioned, the best legal company formation in China is a wholly foreign-owned enterprise (WFOE). So, here are the steps to follow for registering a limited liability company in China.
1. Choose an Agency to Help You with the Registration
While the Chinese administration has put a lot of effort into supporting businesses, we must indicate that registering a company is not a simple task. From the interpretation of the company laws to preparing the required documents, the process can be overwhelming. But this should not dampen your resolve to expand to China. The best and sure option is using an agency.
Agencies are run by professionals who have helped other investors with China company registration. So, they know the best steps that you should follow, and the mistakes to avoid. Well, if you want to complete the registration faster, professionally, and enjoy every step, work with the best China company registration firm.
In addition to helping you with company incorporation in China, the expert firm will also come in handy to assist you with the following:
2. Select the Preferred Company Scope
In China, the government has categorized its sectors and put emphasis on areas with the potential to grow the economy faster. To learn about the categories, you should check the Catalog for the Guidance of Foreign Investment Industries. It is updated regularly, with the government encouraging investors who are focusing on innovation. For example, if you are in manufacturing, the business venture will be greatly supported by the administration. Well, this is the reason why Chinese manufacturing has exploded in a way never seen anywhere in the recent past.
3. Prepare the Required Documents
In order to get authorized to start operating your company, you need to prepare an assortment of documents and submit them for approval. Here are the documents that you need:
4. Apply for Approval Certificate
In order to get issued with an approval certificate and operating license, you need to deal with two entities. One, the Ministry of Commerce (MOFCOM) and State Administration of Industry and Commerce (SAIC). These authorities will review your application and notify you if the certificate has been approved or declined.
5. Apply for Business License
Once issued with a business certificate, you will need additional license/s depending on the niche you are operating in. In China, businesses in manufacturing, food, beverages, construction, and telecoms require additional licenses.
6. Register with the Public Security Bureau (PSB)
This registration helps you to get the company chops. In China, company chops are equivalent to the value of signature in western countries. If you do not have a chop, it is impossible to validate any contract.
7. Open a Bank Account
For your business to start operating, it must have a bank account. A Chinese bank account allows the company to get paid and be able to pay bills. The bank account will also come in handy when filing returns.
8. Register at the Tax Bureau
In China, all companies, including the wholly foreign-owned enterprises, are required to comply with the Tax regulations. Therefore, you should first register the business basic financial and operating info such as CFO verification and category, among others. When still at this, you need to note different taxes obligation. They include:
As we pointed out earlier, starting a business in China is a monumental task. Therefore, it is a great idea to have a professional holding your hand all the way. Note that working with an expert agency means that you have a partner to walk you through, even during the early days of company operations. So, do not wait any more; it is time to identify a great agency and take advantage of the high-potential Chinese market.
How Do I Register A Company In China?
Registering a company in China is a process that requires you to prepare the right documents and seek approvals from various departments. The best way to register a company in China is using an expert agency. Registering a company in China requires you to follow these steps:
What Are The Main Documents That I Need To Incorporate A Company In China?
There is a whole array of documents that you must prepare in the process of registering a business in China. Here are some of them:
Can Foreigners Own Companies In China?
The answer is, “yes.” They can own companies by incorporating them in China. For example, a foreigner can incorporate a wholly foreign-owned enterprise (WFOE), open a joint venture, or start a representative office.
How much Corporate Income Tax Reduction do Wholly Foreign-Owned Companies in “encouraged” sectors in China get?
If your company is in the “encouraged” sectors, the Chinese administration cuts the corporate income tax from 25% to 15%.
The full article is available here.