How to start a business in China as a foreigner may be one of most frequently searched questions by foreign investors who intend to do business in this oriental country. Combined with the ease of manufacturing and the massive base of goods-oriented consumers, China’s financial stability makes it an attractive option for those looking to start their business overseas.
Types of Companies to Be Registered
There are multiple ways to set up your business in China, each with their own distinct features. These are three of the most common:
1. Wholly Owned Foreign Enterprise (WOFE)
WOFE allow foreign entrepreneurs to own 100% of their Chinese entity. Most WOFEs are LLCs, or Limited Liability Companies, in which partners only have responsibility for their own invested capital. Opening a WOFE will require registered capital, the amount of which varies between company activity types and provinces, however the minimum required registered capital is typically fairly low.
2. Joint venture (JV)
A JV is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to access a new market, particularly emerging markets; to gain scale efficiencies by combining assets and operations; to share risk for major investments or projects; or to access skills and capabilities. A JV is the second most common business type for foreigners operating in China.
3. Representative office (RO)
A RO is significantly easier to open than the other types of companies, however, it’s extremely limiting in what your company can actually do. A RO can’t manufacture products, import or export, or accept payment from Chinese clients. This option is typically only logical for offices that don’t do direct business, like the marketing arm of your company or your customer support staff.
General Business Setup Process
The following information details the process for opening a WOFE in China.
1. Selected company name and office address
Company name is one of the essential elements of a company in China. In China, name approval being the first step in establishing a company in China.
Under China's current laws and regulations, it is not allowed to apply for business registration by using a virtual office as its registered address. So when setting up a company in China, one must submit a document showing its registered address.
2. Determine your business scope
It’s important to check your business type against China’s list of restricted industries to ensure you choose the correct structure. You may make sure to have a good balance between being too broad and too limited.
3. Get your documents in order and apply for application
Tannet will help prepare all the statutory and necessary documents for your startup. We can take away those trivia and let you focus on more important things.
4. Apply for approval
In China, your business must be approved through two separate entities: the Ministry of Commerce, and the State Administration of Industry and Commerce.
5. Register and open a bank account
After you’ve received your approval, you must register with the Chinese Administration for Industry and Commerce (AIC) and apply for your business license.
It's of course technically possible to start your business in China without any assistance, hiring a local consultant can seriously ease the process if you have the means to do so. A consultant can help you decide on your business structure, organize and file your paperwork, act as your representative while you’re not in China, and generally guide you through the process of getting your business registered.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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