Company Registration in China

What is company registration in China?

Going through the procedure of the Company registration in china, you will realize that it is not at all simple to incorporate a company in China. So before deciding to incorporate a company in China you need to consider the options, whether it is absolutely necessary to incorporate a company, or your project can be completed via an Umbrella company.

Umbrella Company is an entity in China that works for and on behalf of any foreign entity or individual who wants to do some business in China. It manages employees and your work on your behalf. Usually it takes care of all your sales, marketing, import-export or any other kind of consultant needs. It takes care of recruitment, salaries, accounts etc.

In order to start a business in China in a less expensive manner, to start it as an umbrella company is the best option. Once you set your business on its feet, you can certainly set up your own company. However, this arrangement will only work if the business you are starting is of service. If the business concerned is of any other nature, you got to start your own company in China or get into a joint venture.

There are four major forms of business entity to register a business in China

  • Wholly Foreign Owned Enterprise
  • Foreign Invested Commercial Enterprise
  • Representative offices in China
  • Joint Venture Company registration in China
  1. Wholly Foreign Owned Enterprises (WFOEs)

Wholly Foreign Owned Enterprises (WFOEs) are in the form of limited liability companies, established under Chinese Company Law. It is a kind of organization where complete shareholding is of foreign individuals or entities. Only International business enterprises or foreign individuals (Citizen) can be shareholders in a Wholly Foreign Owned Enterprise. Liability in a WFOEis up tothe amount of registered capital injected into the business. Although the capitalmay in fact be a combination of two assets, cash injection and equipment, the total value of these also represents the extent of the WFOE’s liability.

The international investors wishing to manufacture, process, or assemble in China consider WFOEs the best investment vehicle. To establish a WFOE in China you don’t need a Chinese partner.No paid up capital is required for foreign investors to establish a Consulting, Trading or Information Technology business etc. in China. Also, there is no need of large amounts of registered capital to fund – Manufacture WFOEs.

Minimum Registered Capital Requirement

  • Consulting WFOE RMB 100,000
  • Trading WFOE RMB 500,000
  • Manufacturer WFOE RMB 500,000

Suggested registered capital

  • Consulting WFOE > RMB 300,000
  • Trading WFOE > RMB 1,000,000
  • Manufacturer WFOE > RMB 1,000,000

Registered Capital is the amount that is required by the business to operate until it can break even. The term “Minimum registered capital” is used by the local governments as a guideline only, and as mentioned, the WFOE needs funding via its registered capital until it is able to support itself from its own cash-flow.

Business Scope of WFOEs

WFOE can only conduct business within its approved business scope, which is ultimately mentioned on the business license. Any change in the business scope of WFOEs requires further application and approval. Generally, business scope includes investment consulting, corporate management consulting, international economic consulting, trade information consulting, technology consulting, marketing and promotion consulting, manufacturing, etc. With China’s entry into the World Trade Organization, more and more business is open to WFOE especially in Trading, Wholesale and Retail business.

  1. Foreign Invested Commercial Enterprise

Foreign Invested Commercial Enterprises (FICEs) are the establishments for the purpose of retailing, wholesaling, franchising or trading businesses in China. The regulation for registering a Foreign Invested Commercial Enterprise are comparatively quicker and enlarge the playground available for the foreign investor to conduct trading activities.

The minimum registered capital required

  • Wholesale FICE RMB 500,000.
  • Retail FICE RMB 300,000.

Suggested registered capital

  • Wholesale FICE > RMB 1,000,000
  • Retail FICE > RMB 1,000,000
  1. Representative Offices in China

There is no minimum capital requirement for Representative Offices in China. Representative Offices are typically are non-legal entities, representing the parent companies in China and used for market research activity in China to access the scope and depth of Chinese Market, to consider the future investment scope, or to start liaison activities between China based buyers of service or product sold by your international business. These representative offices can only work for Non-profit making activities like research etc.

Representative Offices are not allowed to be engaged in any business for profit, sign, contracts on behalf of the parent enterprise, receive revenue in China, issue official tax invoices, buy property or import production equipment.

China Tax Information

All expenses incurred by Representative Offices(including staff salary and rental) are taxable in China. Tax rate is approximately 10% of the total amount.

Representative Offices need to submit a monthly report to the Tax Administration Department in China.

Staff Recruitment

Representative Offices are not allowed to recruit local staff in China by themselves. These offices need to turn to an HR agents appointed by China government for the purpose of recruitment.

  1. Joint Ventures Company registration in china

Joint Ventures in China are of two types

    1. Equity Joint Ventures
    2. Cooperative Joint Ventures

Joint-Venture, usually is an arrangement where both the domestic entity and international entity work together. It is type of a company controlled by both foreign and Chinese partners.

A Joint-Venture usually is created for the purpose transfer of technology. Given the very usual problems of infringement associated with intellectual property that plagues China, foreign companies who intend to make or sell high value products (such as a patented product or software), often prefer to opt for a WFOE.

In case, that the international entity wishes to operate in a “restricted” industrial sector, a Joint-Venture is the only option. WFOE and Joint-Venture are very similar in nature.

  • China’s Labor Law, allows enterprises to decide for themselves the timing and means of recruiting staff as well as the relevant requirements and number.
  • If a company in China hires a foreign employee, the company needs to register this employee with the local social security authority within 30 days of the employee receiving their work permit.
  • China’s corporate tax rates range from15% to 25%. (The rate depends on the jurisdiction where the company is registered and the industry sector that a company is engaged in). All the enterprises in China are required to report to the Tax Administration Department monthly, quarterly and annually.
  • Any limited companies in China shall submit an annual audit report to the concerned authorities periodically or as may be prescribed. The annual audit cost is approximately RMB 6,000. If the Annual Audit Report is not submitted in a timely manner the company in default will be subject to a fine.
  • Profit repatriation is freely allowed by China Government. It allows Foreign Invested Enterprises to remit their profits out of the country and such remittances do not require any prior approval of the State Administration of Foreign Exchange (SAFE). However, dividends cannot be distributed and repatriated overseas if the losses of previous years have not been covered. Dividends, if not distributed in previous years may be distributed together with those of the current year. Repatriating the registered capital to home countries is not allowed by the Chinese Government during the term of business operation.
  • The Business duration for a manufacturing WFOE is typical of 15 to 30 years. This duration of WFOE can be extended by obtaining prior approval from the government. The projects in which the amount of investment is large, or the construction period is long and the return on investment is low, projects producing internationally competitive products, or the projects producing sophisticated products using advanced or key technology provided by the foreign partner, for the term of WFOE may be extended to 50 years. With special approval from the State Council, the term may be extended even longer than 50 years.

After you have done all the basic and deep exploration, here comes the procedure to start a company in China:

First, choose which city to register your China company

  • The answer to the above wholly depends on your business.
  • Free trade zones in China, like the shanghai free trade zone, guangzhou free trade zone, shenzhen free trade zone…. are nice options for some industries in China.
  • For example, the guangzhou free trade zone is quite quick for export tax refund.

Second, choose the company mode:

  • Joint Venture (The China party should be a Chinese company)
  • Wholly Foreign Owned Enterprise (limited company 100% owned by a foreigner; hottest choice for most industries)
  • Repsentative Office (the mother company should be exist at least two years)

Third, choose the investor to be an individual or an overseas company, then prepare the investor notarization.

  • The investor notarization is easy to understand since Chinese government cannot reach your personal or business data inside of China, they need your country’s local notary office to certify your personal passport or overseas company overseas before you go for the China embassy or China consular’s notarization.

Fourth, make one china company name for approval

  • You can put the english name of your china company on the company business seal for keeping the business united front convenience.

Fifth, prepare the legal file drating before you submit to the China industrial and commercial bureau to get the business license and approval certificate and letter.

Sixth, make company chop and make a record of them.

  • Yeah, you will have business seal, legal representative seal, financial seal, invoice seal. The record of them have the same function of leaving your personal signature in the bank. To some cities, the record of the seal is a must when you are ready for the business bank account opening.

Seventh, make an appointment with the bank to open the business bank account.

Process of Company Registration in China

To register a company in China, the applicant needs to submit an application for establishment registration to the relevant company registration authority in accordance with the Chinese Company law. If the application filed satisfies the establishment conditions provided for herein, the company registration authority shall register the proposed entity as either a limited liability company or a company limited by shares; if the field application does not satisfy the required conditions, the proposed entity shall not be registered as a limited liability company or a company limited by shares.

Where laws or administrative regulations specify that the establishment of a company shall be subject to approval, the relevant approval formalities shall be gone through in accordance with the law prior to the registration of the
company.

The general public may apply to company registration authorities to inquire on company registration matters, and company registration authorities shall provide the inquiry services.

Company registration authorities shall issue business licenses of companies to the companies established under the law. The date of issuance of the business license for a company shall be the date of establishment of the company.

The business license of a company shall state therein such matters as the name, domicile, registered capital, business scope, and the name of the legal representative, etc. of the company.

Where any of the matters stated in the business license of a company is changed, the company shall go through the formalities for change of registration in accordance with the law, and the relevant company registration authority shall issue new business license to replace the old one.

Shanghai Free Trade Zone Company Registration

The Shanghai Free Trade Zone aims to generate a regulatory environment for better cross-border investment and trading. There is a tariff-free area; it is mainly used as a testing area for various investment, trade, finance, administration and legal changes.

SFTZ and the other free trade zones may have unique policies in place that might be expanded outside the zones. Shanghai Free Trade Zone Company Formation is a  negative list approach and faster company registration for foreign direct investment

The Zone

Now the Shanghai Free Trade Zone covers 120 square kilometers and as of now is composed of seven bonded zones 1) Waigaoqiao Free Trade Zone. 2) Waigaoqiao Free Trade Logistics Park. 3) Yangshan Free Trade Port Area: deep-water port, the major component of Shanghai Port. 4) Pudong Airport Comprehensive Free Trade Zone. 5) Lujiazui Finance and Trade Development Zone: a financial services hub. 6) Jinqiao Economic and Technological Development Zone: an advanced manufacturer services area 7) Zhangjiang High-tech Industrial Development Zone: an area specializing in high-tech manufacturing and medical services

100% Ownership

Wholly Foreign Owned Enterprise may be capitalized by foreign investors and operated without the need for Chinese partners or employees. It will provide you with greater control over your business’s operations, revenue and profit targets. A WOFE is a favorable option for both individuals or overseas company that wants to enter the Chinese market.

Advantages of Shanghai Free Trade Zone

  • No Registered Capital needed
  • Virtual Address Provided
  • Fast Set-up
  • Fully Bonded Zone
  • No restriction Money Transfer
  • Best Zone for Export
  • VAT returned in 30 days
  • Registration takes only 20 days
  • Corporation China – Official Partner

Encouraged Industry Fields

  • Shipping Industry
  • Financial Service
  • Biological Medicine
  • Medical Apparatus
  • Cosmetics
  • Commerce and Trade Service Industry
  • Professional Service Industry
  • Beverage & Liquor
  • Social Service Industry
  • Export Trading Industry
  • Media Industry
  • Automobile

Shanghai Free Trade Zone Registration

We take care of the complete China Company Registration process

  • Full Legal setup procedures
  • Company name approval
  • Certificates of Incorporation
  • Company Stamps and Chops
  • Company Business scope

Post-incorporation company setup

  • Company Bank Account
  • Tax & Accounting
  • Full Back office support
  • Register for Tax Invoice ( Fapioa Machine)
  • China Payroll Service
  • Applying for China work Visa

Documentation

SET UP AS AN INDIVIDUAL
  • A scan of your passport
  • A Personal Bank Reference Letter
  • Choose a name for the your China WFOE
  • Choose a location for the company in China
SET UP AS A HONGKONG COMPANY
  • Notarized copy of Passport of Director and Company Registration Certificate
  • Hong Kong Company Registration Certificate
  • Hong Kong Company Bank Reference Letter
  • The Hong Kong Company will then be the Holding Company for the WFOE We can set up a Hong Kong Company in about 5 days
SET UP AS A COMPANY
  • A Passport Scan of the Director(s)
  • A Certificate of Company incorporation
  • A Company Bank Reference Letter – stating no bad record
  • All Documents need to be notarized by the Chinese Embassy.

Book This Service Here

  • April 19, 2019