Company formation in China online

According to Chinese law, a foreigner or a foreign company has the right to register a legal entity in the territory of the People’s Republic of China. Such an organization will be called a “company with foreign capital”.
As the name implies, a wholly-owned foreign entity, also known as WFOE or WOFE (Wholly Foreign-Owned Enterprise), is a Chinese limited liability company (Co. Ltd) in which 100% of foreign capital is invested and which is owned only by foreigners.

This company has the right to conduct the same activities as any other Chinese company since it can freely trade, produce, provide services in China, receive income in Chinese yuan, work with VAT, can transfer profits back abroad, can export and import goods from or to China.
Here it is worth making a reservation: some types of activities are still restricted or prohibited for companies with foreign participation in the PRC (see our article on this topic)

Even if the WFOE is a subsidiary of a foreign organization that is based abroad, it operates as an independent organization in China.

Advantages of opening your own company in China:

– Control over your own business: the presence of a local co-founder is optional.
– No need for intermediaries -you can sell goods or provide services directly to Chinese customers.
– The ability to extract profit in the territory of the People’s Republic of China in yuan and withdraw it abroad in foreign currency.
– The ability to pay your suppliers in yuan, if they do not have foreign currency accounts.
– The ability to return VAT when exporting goods from China.
– The right to hire both local and foreign labor.
– The right to obtain work visas for their employees.
– The ability to use the Chinese credit system

 

Is the authorized capital required to register a WFOE in China?

The authorized capital in the PRC has traditionally been considered as a guarantee of the company to its possible creditors. For companies with foreign participation, a minimum authorized capital of one million yuan was required, with its full investment in the company within two years.

In recent amendments to foreign investment laws, perhaps in an effort to encourage more investment by lowering the barrier to foreign companies ‘ access, the government has removed the minimum capital investment requirement for registering a WFOE.

Companies can now determine the amount of the authorized capital (even in 1 yuan) and the time of its investment in the company (5-10-15 or more years).

Documents required to apply for company registration in China:

– A copy of the passport and Chinese visa of the founder of the company (personal presence is required when applying)
– A copy of the passport and Chinese visa of the legal representative (personal presence is required when applying)
– A copy of the passport and the Chinese visa of the observer/auditor (personal presence is required when applying).

The duties of the observer/auditor include:

 

1. Supervises directors, managers, and other management personnel in terms of violations of laws, regulations, articles of association, and decisions of shareholders ‘meetings;

2. Is responsible for checking the company’s activities and its financial condition;

3. Verifies financial information, accounting reports, and business reports that the Board of Directors intends to submit to the shareholders’ meeting.

– Company office lease agreement
– Business justification
– Chinese company name
– List of economic activities
– Apostille of registration documents of a foreign company (required if the founder is a legal entity)

Necessary steps to open a company:

– Filling out all the necessary forms for submitting an application
– Registration of the company name with the State Administration of Industry and Trade (SAIC)
– Filing an application to open a company with the local Department of Industry and Trade
– Applying for a business license
– Submission of an application for the certificate of the organizational code to the Bureau of Technical Supervision
– Registration with the State Tax Office and the Local Tax Office
– Production and registration of company seals
– Registration with the Bureau of Statistics
– Opening a corporate account, obtaining a certificate of account opening
– Applying for authorization to print or purchase financial receipts (fapiao)
– Registration with the labor committee (for hiring staff)
– Registration at the Social Insurance Center
– Applying for the necessary licenses (depending on the type of business activity, if necessary)

Terms of full readiness of the company to work:

10-35 working days depends on the place of registration of the company, the selected bank for opening a current account, the set and number of licenses required for business activities.

 

Stages of opening a company, where your personal presence is required (original passports are required, video recording is conducted):

– Filing an application to open a company with the local Department of Industry and Trade
– Registration with the State Tax Office and the Local Tax Office
– Production and registration of company seals
– Opening a corporate account, obtaining a certificate of account opening

The amount of time of personal presence in China required to register a company:

For Southern China:
Founder — 1 working day
Legal representative — up to 3 working days (due to the opening of bank accounts)
Observer/auditor — 1 working day

For Shanghai:
Founder — 1 working day
Legal representative — up to 10 working days (due to a longer procedure for obtaining a business license)
Observer/auditor — 1 working day

Please note that the founder and the legal representative may be the same person.

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