Company Registration Process in China: A Step by Step Guide

Sonal Pruthi

15 Jan, 2021

To start a business in a different land is always a challenge for new entities. Creating your own but to start a business has been a more complex process. There are certain conditions that must be taken care of in order to plan and establish a business entity in China. The business environment is different in China as compared to other countries. This article describes the process of Company Registration in China

Umbrella Company

The point to keep in mind that it is important to take viable and stable financial decisions during the initial phase of its company. It is important to start the company as an “Umbrella Company.” The function of an Umbrella Company^[1] is to provide a helping hand to the host country. It provides help such as:

• It gives the work visa for foreign employees.
• It helps in the recruitment of employees.
• It calculates the salary & subsequent taxation related to employees.
• It gets the receiving of payment from your Chinese counterparts.
• It makes orderly payment to the Chinese counterparts.
• Takes care of the renting office/warehouse/other property.

Classification of companies

They are such companies that can be registered in China:

Wholly Foreign-Owned Enterprise (WFOE)

A company that has been registered or incorporated in China which is formed by the  foreign national.

• There is no investment from the Chinese company or resident of China.
•  To make a WFOE, an investor must have an accepted the level of investment.
• It gives the complete transparency & freedom to operate in China.
• It is accepted that WFOE are incorporated in format of Limited liability Company wherein the Liability of the investor is limited to its share in the company.

A Joint Venture Enterprise

A company whose control is with both Chinese & foreign companies.

• A Joint venture which is a combination of a domestic and an international company.
• It shares the profit/loss of the joint entity instead it also helps in the transfer of technology, workforce, understanding the local business environment.
• It is a desired choice in such markets of China.

Foreign-Invested Commercial Enterprise (FICE)

• It is a type company registration in China where the whole purpose is of retail, wholesale, franchising & trading in China.
• There are  regulations are comparatively easy
• It helps in enlarging the scope of business for the foreign investor in order to conduct trading activities.
• The registration of a company in China of such enterprises is relatively easy as compared to WFOE/Joint Venture.

Representative Office in China (RO)

• RO is a kind of company registration which acts as a market research interface for the company to understand the scope & depth of Chinese market for future investments.
• RO are not allowed to make and enter into any profit making activity.
• They cannot sign on behalf of the parent company; neither receives any revenues or pay any taxes etc.
• However, they have to taxes on the expenses incurred by them.
• They have to submit the monthly tax report to the China tax authorities.

Process of Registering a Company in China

The process of registration of a company in China, it includes the scope of operations, registration, and submission of documents, then apply for appropriate licenses, and finally, company incorporation.

1. First, Choose the business scope
2. Find the location for your Chinese business entity
3. Make business status for your company
4. Find a reasonable business plan for the entity to be  operating in China
5. Then submit the name of your Company’s Chinese name for pre-registration which is to be approved by SAIC.
6. Then Registration and acquisition of the Letter of Approval (LOA) from the Ministry of Commerce (MOFCOM) has to be obtained.

Essential documents to obtain Chinese Government Approval

• a Pre-registered Chinese Brand
• company’s legal address
• AOA –article of association for the profit repatriation
• A minimum value registered capital value
• For the manufacturing firms, a feasibility study
• Registration with public safety bureau (PSB)

7. Registration State Administration of Foreign Exchange (SAFE)
8. Opening up of your company’s primary bank account & foreign capital account and deposit your capital
9. Then make a registration at the tax bureau & make the company’s primary financial information
10. Appoint the accountant & cashier or for availing the Accounting & Book-Keeping Services
11. A comprehensive staff Handbook is developed for the local employees
12. List of documents such as-Legal documents including reporting, analysis, remuneration, career management, and staff training
13. Obtain the Trademark for your Intellectual Property with the China Trademark Authorities

Steps in opening a company in China for WFOE’S

Wholly Foreign-Owned Enterprises or WFOE

Such types of company registration in China are those which can be quickly established/maintained by investors from foreign, and they have to bear in mind specific steps for registration of company in China for the opening WFOE’S

1. A business name has to be chosen and verifying its validity with the State Administration authorities for Industry and Commerce of the People’s Republic of China.
2. Appointing the Legal Representative and the board of managers for the WFOE in China.
3. Creating and agreeing with feasibility report, a mandatory request for investors in China.
4. A bank account must be opened and deposit in it the minimum share capital of RMB 30,000.
5.  Necessary Licenses and permits must be applied for your future activities in China.
6. Register for tax purposes and social contributions in China.

Joint Ventures Company registration in china

They are of two types of JV registration:

• An Equity Joint Ventures
• A Cooperative Joint Ventures

Joint-Venture is an arrangement or scheme where domestic business/entity and international company work together in one arrangement It is a type of a company which has been controlled by both foreign and Chinese companies counterparts.

• A Joint-Venture is created for transfer of technology.
• Most of the companies established in China due to increasing usual problems of IPR infringement associated in China, most foreign companies who are into business of manufacturing or selling high value products (such as a patented product or software), often go for a WFOE.

Conclusion

Read our article:Registered Office Requirement for Private Limited Company