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How to setup a company in China

How to setup a company in China.The process of getting your business registered in China depends on the type of business you want to start: representative office, wholly foreign-owned enterprise or joint venture. Within a few months, you can have your business setup in China. This process involves various procedures and a few Chinese government authorities such as:

  • The ministry of commerce
  • State Administration of Foreign Exchange
  • State Administration for Industry and Commerce
  • State Administration of taxation
  • National Bureau of statistics

Many businesses may choose from the following options to set up a Foreign Investment Enterprise (FIE): representative office (RO), wholly foreign-owned enterprise (WFOE), a joint venture (JV) – of which there are two types. One of them is a foreign-invested partnership (FIP). The scope of your business must be stipulated at the start of the process as this information must appear in your business license in China. The business scope will be the parameters which your business will be allowed to function in the country. If you need to make any adjustments to the range of your business, it can be done for you by Corporation China. The government requires that this be done if you will be amending your business scope. However, this can only happen if the government approves of the changes.

Starting  your Chinese business

The following are four options you may choose from for your Chinese company:

Representative Offices (RO)

RO is the most straightforward business structure to register in China. It is popular with Australian businesses who want to test out the Chinese market and make business connections. There are designated capital requirements; however, it does have a limited business scope.
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Wholly foreign-owned enterprise (WFOE)

A WFOE in China is a limited liability company that is financially supported by two or more foreign companies. A WFOE is the most popular business structure used by foreign investors as it allows freedom in the management of the business. WFOE must also oblige to its business scope and meet with financial commitments.
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A joint venture (JV)

A JV is forged through a partnership between foreign investors and Chinese investors who have an agreement to share the profits, losses and management thereof. There are two variants of JVs in China: equity joint ventures and cooperative or contractual joint ventures. These two types differ in the way that the gains and losses are shared.
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How to setup a company in China Step by Step Guide

Step 1: Do Your Homework

You need to talk to people who have started businesses in China and find out how they failed or succeeded. It is advisable to make a trip to China and engage with people at local trade shows. Relationships are an integral part of operation an business in the country. Find out about the industry you are in and what is its position in the country. Be sure to check the five-year plan that the government posts like this gives an idea into what types of businesses they are looking for. The primary goal is creating companies that will cause job creation and bring about development inland.

2. Choose your location

Although you may have a country at your disposal, it is essential that you choose the right location for your business to be successful. You should learn more about the big cities and decide whether you need to setup there. Enquire about where the action is happening in your field of expertise. You may also decide that you want to move inland, but you should first consider your transportation needs, logistical needs, imports to China and what are the restrictions on your business. Once this is decided you should look for office space as registration of foreign companies requires proof of a lease.

3. Choose the status of your entity

Before registering your business with the government, you must first decide what type of entity you wish to express. Many of them has their pros and cons, so you need to carefully select which is suitable for you: RO, WFOE or JV.

4. Develop a business plan

A business plan is vital as once your business is approved, you can only operate within these parameters. You must ensure that your business plan allows you the freedom to run your business successfully. Notwithstanding, it should also be specific in detailing important information about your business. It should include your location, expected income, description of your product or service, the expected number of employees and budget requirements in the plan. You may want to tailor your policy to suit China’s five-year plan.

5. Find a liaison for your business

You need to consult a representative to assist you in registering your business. Get in touch with a trustworthy law firm like Corporation China to help you in this process. A liaison from the company will advise you where you need to register and will handle all the communication while you are there.

6. Organize the documents that you need

You can attain application forms from the company who will assist you on how to go about filling them out and what documents you will need for this process.

7. Ensure that you trademark your intellectual property

Intellectual property violations are a pertinent issue for foreign investors in China. Companies who have trademarks in the US tend to believe that their brand will hold ground in China; however, this is not true. In China, whoever registers a trademark first, owns the rights to it.

8. Seek out a bank

Many banks in China have a huge presence, so this is rather quick and simple. You can try HSBC or Bank of America, or you can find an alternative. Ensure that the bank you choose has a relationship with a corresponding bank in America. You may also consider an offshore bank account and onshore bank account combined. Shanghai Free-Trade Zone company lets you open a multi-currency free-trade enterprise (FTE) bank account. With this account, it is possible to receive payments from abroad and send payments overseas in foreign currency.

9. Hire your staff

Hiring managers can be tricky, and you need to ensure that you pick the right people, not just those who can speak English. Check that the person is smart and business savvy. You can request the manager you choose to come to your country and get a feel of how the business is run and what it stands for. Then they will return to China with greater insight. The excellent staff doesn’t come at a low price, so you must be willing to pay them for their expertise. Your managers will assist you in hiring the rest of the staff that you will need.

10. Don’t be afraid to go slow

Once you have setup, you must be willing to take things slow to grow eventually. Don’t make hasty decisions based on profits; building business relationships will take time.

How to setup a company in China- Conclusion

This article serves as a guide on how to setup a company in China as a foreign investor. The process is quite simple once you team up with a knowledgeable liaison who will help you. Don’t be startled by information about the cost of setting up a business in China as the rewards are rather gratifying. Once your company has grown in China, you will be pleased by the returns. With Corporation China do do not require registered capital or a Real Office.
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