How to register a Foreign Partnership Enterprise in China.
How to expand your business to China by setting up a Foreign Partnership Enterprise

Setup a China Foreign Partnership Enterprise in 2022.

What is a foreign partnership enterprise all about?

A Foreign Invested Partnership Enterprise (FPE) is an unlimited liability business entity without minimum requirements on registered capital.

The term partnership enterprise refers to general partnerships and limited partnerships which may be established within China by individuals, legal persons, and other organizations.

The term partnership enterprise refers to general partnerships and limited partnerships which may be established within China by individuals, legal persons and other organizations. A state-funded company, state-owned company, listed company, public welfare-oriented public institution or social organization may not become a general partner of a limited partnership.

Also know as Foreign-investment partnerships.

Foreign-invested joint stock companies (otherwise known as foreign-invested companies limited by shares) are not very common in China and tend to be for larger organizations.

The other is the recently introduced foreign-invested partnership (otherwise referred to as a general partnership or limited partnership).

FIP’s have different benefits not offered by WFOE, including a set-up process without registered capital verification, tax savings, the options of domestic and foreign ownership (both corporate and individual) and hiring of foreigners. The challenge with FIP’s is the unlimited liability of the general partner.

Following are different types of FIPE (FPE).

General partnership Enterprise (GPE).

General partnership enterprise may be formed by general partners who bear unlimited joint and several liability for the debts of the partnership. The general partners share unlimited liabilities for the debt of the partnership.

Limited partnership enterprise (LPE).

A limited partnership enterprise is formed by a combination of general partners and limited partners where the limited partners bear the liabilities for the partnership’s debts to the extent of their capital contributions.

Special General Partnership enterprise (SGP).

A special general partnership enterprise resembles a general partnership except that it must be a professional service institution offering services requiring professional knowledge and special skills. The structure shields co-partners from liabilities due to the willful misconduct or gross negligence of one partner or a group of partners. It is very similar to limited liability partnership in Europe and America.

The advantages of establishing a FPE.

No corporate income tax for partnership enterprise.
No requirements on minimum registered capital.
Fewer procedures comparing with Wholly Foreign Owned Enterprise or Joint Venture.
The capability of converting RMB profits to US dollars for remittance to its parent company outside of China.
Foreign Enterprise or Individual is allowed to establish a Partnership Enterprise with Chinese individual (While Chinese individual is not allowed to have Joint Venture with a foreign investor).
The profit distribution of a PE could follow an informal negotiated agreement or abide by the scheme adopted in the partnership agreement (While for LLC, profit distributions is according to the percentage of investment of shareholders).

The disadvantages of establishing a FPE.

Unlimited liability; A partnership must pay all its debts with property contributed to the partnership by the partners. If the partnership is a general partnership then the partners bear joint and several liabilities.
Limited business names options: Can’t have a business name with “Company” in it, eg, can’t have name lie XYZ Co., or XYZ Co., Ltd. and could only choose names like XYZ Firm (PE), XYZ center (PE).
Property rights of partnership enterprise are difficult to be transferred to a third party as according to the Partnership Enterprise Law: the property rights of partnership transfer MUST be agreed by all partners in a PE.
China has not adopted Natural Person’s Bankruptcy system, the credibility of the partners would be hard to maintain if PE involves into a hard situation.
As for the trading business of a PE, since PE is not a general taxpayer, PE can’t get VAT status, and can’t apply for VAT rebate accordingly.

China Foreign Partnership Enterprise

When setting up a company in China, there are numerous things to consider and hence it is important to seek appropriate legal help. Corporation China has developed an unparalleled expertise in this area and can provide you with everything necessary to set up your consulting company. Corporation China offers first class solutions to all of the following requirements.

Corporation China is the Largest Foreign Direct investment firm in Asia Pacific,
covering 44 locations throughout China.

Registered company location.

Prospective clients and business partners will often ask you where your company is located in China. Hence, a good location is an asset. At Corporation China, we offer excellent solutions for this through our Virtual Office System China Presence™ or our China Virtual Entity™ system.

Registered company bank account.

Due to existing restrictions on international money transfers in China, your mainland-based clients will only be able to pay you within China. Therefore, a bank account in which local companies can transfer you Chinese RMBs is necessary.

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