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How to Open a Company in China

Shanghai, China - July 7, 2016: Lujiazui financial district of Shanghai. Amazing sunset over the city with chinese flag in the picture. River Huangpu

As the world’s second largest economy and a major manufacturing base, China is an appealing place to open a company and establish a business presence.

Opening a company in China can be a challenging process, particularly for entrepreneurs used to the process of opening and operating a company in the West. However, opening a business in China as a non-citizen is possible, albeit with several major cultural and legal differences.

Unlike the UK or USA, China only provides limited business ownership opportunities for people that are not citizens of the PRC. As a non-citizen, the type of company you can own and run is known as a WFOE, or wholly foreign owned enterprise.

A WFOE is owned entirely by a foreign entrepreneur. Unlike a Chinese company, a WFOE can return many of its profits abroad, allowing it to easily trade with businesses in different countries and distribute its profits to foreign investors.

There are also other company types open to non-Chinese entrepreneurs in China, such as joint ventures and equity joint ventures. However, these companies do not provide full ownership to a foreign entrepreneur.

A WFOE is similar to the Western limited liability company. From a legal perspective, it exists on an independent basis from its owners as a separate legal entity.

There are several ways to open a WFOE in China. As China is a large country, the most suitable way to open a company depends not only on the industry you intend to enter in China, but also the region in which you intend to operate.

For example, the Shanghai Free Trade Zone, which was established in 2013, makes it easier for small and mid-sized businesses to operate in China. Within the FTZ, there is no minimum share capital requirement for company, as well as more stringent incorporation rules.

After you’ve decided on a location for your business, you can begin the process of registering and incorporating the company.

The most effective way to begin opening a company in China is to speak with an experienced, China-based business lawyer. A lawyer or firm that specializes in China business registration will be able to complete most of the application process on your behalf.

It’s particularly important to work with an experienced lawyer throughout the process as China doesn’t always operate like the West. Procedures can be slower than you may be accustomed to, and wildcards can disrupt the process for you as an outsider.

An expert China-based lawyer can also assist you in the process of opening a Chinese bank account, allowing your company to operate effectively within China and abroad. China has a large business banking market that includes well-known companies such as HSBC.

Finally, an experienced lawyer can act as a local liaison, allowing you to find office space for your China-based business, hire local staff and complete a range of important processes that can be difficult for non-citizens and non-Chinese speakers.

Starting a business in China can be a challenging process, but the country’s rapid growth and large economic size make it a prospect worth considering. Just make sure you use the advice about to avoid the most common Chinese business incorporation mistakes.

 

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