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How to start a business in China
To incorporate in China, start by choosing the right business structure and hiring knowledgeable liaisons.
China is a lucrative market, one that’s home to a fast-growing middle class. That’s just one of many reasons it may be a smart move to do business in the country.
As it stands, creating a business in China can be a tricky endeavor. But with the right knowledge and expert help, you can incorporate to legally operate in Asia’s largest economy.
What's in this guide?
- Different types of business entities in China
- Establishing a WFOE in China
- Should I hire a professional?
- What kind of documentation will I need?
- Other factors to consider
- International billing and payments
- Use a money transfer to manage your international business payments
- Bottom line
- Frequently asked questions
Different types of business entities in China
Four main types of businesses entities exist in China:
Joint venture (JV)
In a joint venture, you partner with a Chinese citizen to start a business entity or contractual arrangement. This is a limited liability entity.
Experts warn that a joint venture is unwieldy because partners rarely hold the same business vision. Even still, many individuals choose to enter into joint ventures because they can’t start a WFOE.
Partnership enterprise (PE)
Unlike a WFOE or a JV, you don’t create a legal entity by entering into a partnership. Instead, you simply create a contract between one or more partners to conduct business.
There are other major differences. For example, a PE is an unlimited liability company, so you could be on the hook for full costs incurred through your business. PEs are also excluded from many Chinese industries.
Creating a representative office is the easiest way to build a business entity in China. It’s also an inexpensive option. However, a representative office excludes you from performing many operations in the country. For example, you can’t sign contracts or even earn money. Essentially, a representative office gives you a presence in China, and not much more.
Wholly foreign-owned enterprise (WFOE)
This is a limited liability company entirely controlled by you. It’s not quick or easy to set up a WFOE. However, the WFOE is often considered an effective entity for foreign investors because it affords complete control over business activities. We’ll expand on the WFOE because it is the most complicated and most common.
Establishing a WFOE in China
Create your Chinese business name
This isn’t as simple as just translating your business name. Instead, you have to recreate your brand name in the Chinese language and have it approved before moving forward.
Prepare appropriate documents
The list of documents required is extensive, including at the minimum:
- Two copies of a Certificate of Incorporations, Articles of Formation, or equivalent certified by a Chinese embassy or Chinese consulate.
- Two copies of Passports for investors certified by a Chinese embassy or Chinese consulate.
- Two copies of a Bank Reference Letter from investor’s bank
- Passport copy of the parent company’s director, the Chinese company’s legal representative, and the Chinese companies supervisor
Apply for a Chinese business license
This includes sending in additional documents:
- Six photos and a resume for the Chinese Legal Representative
- Eight proposed Chinese names of the Chinese company
- Listed office address in China with two copies of leasing contracts or two copies of real estate ownership
- Four letters of authorization
- Extensive Five-year business plan
You’ll have to register your company with many agencies through a People’s Republic of China representative who will submit all documents (in Chinese) on your behalf, including:
- Name registration with the State Administration of Industry and Commerce (SAIC)
- Chops creation and registry with the Public Security Bureau (PSB)
- Organization Code License from the Technical Supervision Bureau (TSB)
- Tax Certificate Registration from the Taxation Bureau
- State Administration of Foreign Exchange Registration (SAFE)
- Capital Verification Report registration with a Certified Public Accountant (CPA)
Should I hire a professional?
It’s an excellent idea to hire a liaison to navigate tricky incorporation waters. Work with someone from mainland China who speaks fluent Chinese. They’ll interact with officials on your behalf, and they’ll tell you the appropriate places to register your business entity.
What kind of documentation will I need?
Here are a few documents you’ll need to register your business when using a method different than WFOE:
- Certificates of incorporation
- Bank reference letters
- Passport copies
- Resume and photo
- Description of the scope of your business
- Lease contracts of Chinese office address
- Business license
You may need different documentation depending on where you’re registering and which officials you meet with. Strongly consider working with a company that helps foreign investors create businesses in China.
Laws & Legal Docs for International Money Transfers to China
Other factors to consider
- Stating your business purpose. You need to accurately categorize your business with the Chinese government. Some industries don’t allow certain business structures, and you’ll want to correctly identify the business activities you’ll pursue in China.
- Corporate name requirements. Create a Chinese name for your business entity — it will be the sole legally binding name of your company. You may need approval to use certain words, such as “China” and “international.”
International billing and payments
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.
Use a money transfer to manage your international business payments
It’s important to choose the right business entity to operate in China. Consider working with an organization that specializes in helping foreign businesses incorporate in the country — this will streamline your progress and help you avoid pitfalls along the way.
Frequently asked questions
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