Company incorporation in China?
The People’s Republic of China offers several possibilities for foreign individuals and enterprises to do business in China. The registration and formation of a local company is often required when having a small team employed in China: it provides staff with a local office space, a China-based human resources administration, and direct control over business operations in the country.
Our Company Registration package includes the following:
- DSC for one director and DIN for up to three directors
- Drafting of MoA & AoA
- Registration fees and stamp duty
- Company Incorporation Certificate
Company formation and bank account opening to start a business in China fast
Wholly Foreign-Owned Enterprise (WFOE)
When targeting direct control over payments/invoicing operations in China, the type of structure required is a Wholly Foreign Owned Enterprise (WFOE, sometimes also referred to as WOFE). This type of legal entity is a limited liability company with entire foreign ownership. It allows a foreign company to locally conduct business activities in China with customers, clients, and partners, therefore offering the possibility to limit the roles of third-party operators (such as distributors, importers, factories, etc.). Its main advantage is to incorporate both the employer of record duties and liabilities, along with getting control over local operations. Consequently, this structure maximizes flexibility for doing business in China. It increases the parent company’s local autonomy and controls while enabling profit making In practice, New Horizons can incorporate a WFOE on behalf of a foreign investor while the first staff is already hired through our Employer of Record entity, in order to ensure local presence throughout the entire incorporation process. Once the company is incorporated and the business license issued, the staff employment ownership is transferred from New Horizons umbrella company to the newly created WFOE.
When a foreign company wants to maximize control of its staff via its own HR, legal, and administrative departments, the Sales Office is the appropriate solution. It is one of the most used forms of local presence since most of the foreign businesses only need in-country representatives for business development, marketing or brand representation. Indeed, it is common practice to rely on local Chinese partners for import, export, trading, and logistics purposes, while all financial operations are controlled directly from the headquarters abroad. The Sales Office set-up only requires a single collaboration agreement with New Horizons as your onsite Professional Employment Organization (PEO) to ensure local compliant employer of records’ services, as well as a registered office provider for the lease agreement in the preferred working location. From a legal perspective, all the office and employment liabilities in China are transferred to New Horizons, which reports directly to the foreign company’s headquarters.
When a foreign company wants to maximize control of its staff via its own HR, legal, and administrative departments, the Representative Office (RO) is the appropriate solution. As for the Rep. Office, this type of local presence doesn’t allow foreign businesses to conduct any business activity but offers security when hiring and payrolling a team. The office and employment liabilities are under the direct legal responsibly of the headquarters of the foreign company. New Horizons offers incorporation, payroll and tax services for both the RO and its staff, and acts as an external services provider. On the other hand, it limits the flexibility of hiring staff in different cities – only possible throughout the opening of additional local branches, or via New Horizons’ PEO solution. In practice, it is widely used for the hiring of large teams for marketing support activities in China.
A Joint Venture (JV) is the most complex form of organization in China, due to the necessity of partnering with a local Chinese company. New Horizons can assist with the legal support in all major cities in China. While the incorporation process takes several months – after round of negotiations in order to determine the final structure of ownership of the JV -, it allows the foreign company to benefit from a local partner experience and in-country network. The JV can conduct business in China as a normal Chinese company, under the terms and conditions of the partnership regarding profit sharing, technology ownership, and operational control. This type of local presence is required when targeting a restricted sector of activity or when the support/experience of an exclusive local partner is needed. On the other hand, the management and performance of the JV requires a specific set of skills and experienced managers, from both the foreign company and its Chinese partner.
Shanghai Free Trade Zone Company Registration
Details about the Shanghai Free Trade Zone
- Automobile manufacture and design
- Beverage and liquor
- Biological medicine
- Commerce and trade service
- Export trading
- Financial services
- Medical apparatus
- Professional services
- Social services
Benefits of Setting Up Your Business in the Shanghai Free Trade Zone
There are many benefits to setting up your business in the Shanghai Free Trade Zone. Like Hong Kong has done before, there are free trade opportunities and new innovations that encourage foreign investment. There are no limits to the scope of the business. Foreign investors can establish Wholly Foreign-Owned Enterprises and operate these businesses without having to partner with Chinese companies or employees. This option provides you with greater control over the operations of your business, as well as the ability to increase your revenue and profits. Foreign entities can open a limited company in the Shanghai Free Trade Zone with no real capital requirements, providing an important gateway into the Chinese market. Some of the most notable benefits of opening a company in the Shanghai Free Trade Zone include:
- The minimum investment necessary – You can open a business in mainland China without having to invest in any real estate, minimizing your initial capital investment. This benefit allows you to enter a new market that may have been previously closed off to you.
- Faster setup – With the help of a PEO in China, you can launch your business in a matter of days
- Easier entry – The Shanghai Free Trade Zone encourages foreign investment. You can benefit from incentives for your investment in the region.
- 100% ownership – With the ability to create your own WFOE, you do not have to bring in outside investors or give away part of your business.
- No restriction on money transfer – Relaxed administrative controls and the Renminbi convertibility encourage cross-border money transfers.
- Low-risk entry – With minimal capital investment and loosened regulatory control, you can open your business in a low-risk environment.
- VAT tax benefits – The Chinese good export VAT rate is 17%. However, the government offers a rebate to exporters in approximately one month when in the Shanghai Free Trade Zone.
- Other tax benefits – In addition to the VAT tax rebate, there are other tax benefits to operating in the Shanghai Free Trade Zone, including that you only pay tax when entering in China while you operate in the bonded area
- Fewer restrictions – While foreign investment requirements in various industries and other regulatory requirements often keep foreign investors out, the Shanghai Free Trade Zone has fewer requirements and restrictions regarding industries that foreigners can invest in.