Setting up a Company in China with Bill Su, GM of Path to China

Please tell us a little about yourself and Path to China?

I have been qualified as a legal professional in 2005 after Chinese bar examination in 2004. I have worked for BP affiliates in China for 5 years.

I am with Path to China for about one year. Path To China is a professional agent for foreign investment in China, she has helped more than 1,000 foreign individuals and companies in the past 10 years.

What are the options for business structures in China?

In term of the direct investment, there are mainly Wholly Foreign Owned Enterprises(WFOE), Cooperative/Equity Joint Ventures(JV), Foreign Invested Partnership Enterprise( FIPE).

There is no Sole proprietor for foreigners. Two-year old companies outside mainland China are allowed to set up Representative Office in mainland China for liaison purpose.

What is the most common structure for a company looking to hire local workforce and sell into the Chinese domestic market, and why?

The WFOE( Wholly Foreign Owned Enterprise), as the owner/investor is either foreign individuals or companies( including the new ones), WFOE’s operation and finance could be 100% controlled by owner/investor.

All key positions under WFOE could be held by either foreigners or Chinese nationals if appointed. WFOE can directly hire local workforce, import and sell into the Chinese domestic market, or buy from Chinese domestic market and export outside China.

If a foreigner is starting a business in China, is it required to have a local partner? Or does the government allow foreign-controlled businesses?

The government allows wholly foreign controlled companies to be incorporated for most of the business. Only in some areas it’s necessary to have a local partner, such as construction and operation of power grids. From attached catalogue you may find the areas opened for foreign investment in China and prohibited.

What Business Permits and Licenses do foreigners need to register or understand about?

Generally, for foreign direct investment, the investors shall apply for the Certificate of Approval. If the business falls into the those encouraged industries, it’s easy to obtain such certificates. However, foreign partnership is allowed not to apply for such certificate now.

With a foreign partnership, there’s no need to get any business type visa’s or work permits?

Any foreigner working legally in China shall obtain both the work and residence permits. Under the foreign partnership, though partners do not apply fro Certificate of Approval for business, they shall apply for visas as well.

How long does it generally take to incorporate a business structure in China?

Generally, around three months.

What are the steps involved?

The key step is to apply for Certificate of Approval. Before that, the company name shall be confirmed, and other reports, like Feasiblility Report for the establishment shall be handed in for consideration.

After the Certificate of Approval, the application of business license, then prepare company’s common stamp for application of National Organization Code Certificate, which is the ID for government finance management, Tax registration, Open of bank account, injection of captial – generally, at least RMB100,000 as the initial, the balance could be paid up with two years as from business license.

Total for a trading WFOE is RMB500,000 and RMB300,000 for a service WFOE. Path To China also help to try with the minimum, total as RMB100,000. The last step is application of import/export licenses for trading companies.

The work/residence permits shall be applied under the WFOE, it happens after the company has established. For employees other than legal agent of the WFOE, the application shall begin after the initial injection of capital.

What does it cost to incorporate a business structure in China?

Path To China helps setting up a trading WFOE at USD6,000

What does the $6,000 Cover? Also, what are the on-going maintenance or other fee’s costs involved?

USD6,000 includes all documents preparation for the whole process, and service to obtain all certificates, such as Certificate of Approval, business license, National Organization Code Certificate, Tax registration certificates, bank account open related certificates, (e.g. FX registration certificate) and the import/export license.

The work/residence permits application could be done at rate RMB2800 service fee for each employee. The on-going maintenance service is bookkeeping, tax returns filing, annual audit reports and annual review of all company certificates.

The general cost is around RMB40,000 per year subject to company’s business turnover.

USD6,000 is our registration package, Path To China also provides a one-year all-inclusive package, that’s USD11,800 for both registration and the first year maintenance service.

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