What is the Procedure to Register a Company In China?

China is an investors’ paradise and a global economic hub for establishing a business. It provides a launching pad for businesses wanting to invest globally. Moreover, an entrepreneur can enter an extended marketplace by registering a company in China.

Types of Company Structure in China

The following are the types of company structures that a foreign entrepreneur can form and establish in China:

• China Wholly Foreign-Owned Enterprise (WFOE): The WFOE is a legal entity structured as a limited liability company with foreign ownership. It allows foreign companies to conduct business activities locally in China with clients, customers and partners. The liability of the directors and shareholders is limited only to a particular amount.

• Joint Venture Companies (JVC): Usually, a JVC company is formed by a foreign investor. A foreign investor and a Chinese shareholder will enter into a JVC agreement, and the Chinese shareholder will have a certain percentage of equity interest in the company. A joint venture allows foreign companies to benefit from a local partner and an in-country network. The JVC can conduct business as a regular Chinese company under the terms and conditions of the partnership agreement regulating profit sharing, operational control and technology ownership.

• Representative Office (RO): The Chinese government allows foreign companies to open various representative offices in China. The RO does not allow foreign companies to perform direct business activities in China. Such activities must be performed by the parent company abroad through the support of a local partner in China. However, a RO in China offers security when paying and hiring a local team.

• Sales Office: When foreign companies want to maximise their control over staff, i.e. its own legal, HR and administrative departments, the China Sales Office is the appropriate type of structure.

Process of Company Registration in China

Below is the process to register a company in China:

Select an agency 

Although the Chinese government provides support for foreign businesses, the process of registering a company is complicated. Entrepreneurs must prepare the necessary documents and understand the interpretation of company laws. Thus, choosing a professional agency to take care of the entire process of registering a company is recommended. An entrepreneur benefits from the expertise of professionals who know the intricacies involved in company registration in China when they partner with an agency.

Rent office space

An entrepreneur must provide valid address proof of the company’s official headquarters for registration of the company. The authorities will communicate with the company at the official headquarters address when they have queries about the company operations.

Apply for name

An entrepreneur wishing to start a company in China must reserve the business name of the company. The approval for the business name is required from the Administration of Industry and Commerce (AIC). The business name should not be similar to an already established business name for it to get approved. An entrepreneur can also get the name approved through the State Administration for Market Regulation (SAMR).

Choose company scope

The Chinese government has categorised business sectors and emphasises areas that can grow the economy quickly. Thus, learning about the country’s business landscape is recommended by viewing the ‘Catalogue for the Guidance of Foreign Investment Industries’ and selecting the company scope. For example: When your business is a manufacturing business, your venture is likely to be supported heavily by the Chinese administration.

Approval certificate

Entrepreneurs should apply for the operating license and approval certificate from the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM). They must also submit the necessary documents to obtain approval. These authorities will review the application and inform if the certificate has been declined or approved.

Business license

After receiving the certificate of approval, an entrepreneur should apply for the required additional licenses. The necessary licenses vary and depend on the industry in which the company is operating. In China, businesses that operate in manufacturing, construction, hospitality and telecommunication usually require additional licenses. The Chinese government has taken the initiative, i.e. ‘five in one filing’, where an entrepreneur can obtain all business licenses. Under the ‘five in one filing’ initiative, the following licenses would be issued to the company:

• Business license
• Organisation code or organisation registration certificate
• Tax registration certificate
• Social security registration certificate
• Statistical registration certificate

Register with PSB

The Public Security Bureau (PSB) registration will make a company eligible to obtain the company chops. In China, company chops are equal to the value of a signature of a company in western countries. Without a chop, an entrepreneur cannot validate a contract in China.

Open bank account

After obtaining the required licenses and company chop, the company should open a corporate bank account. It must have a bank account to operate its business. A Chinese business bank account enables a company to pay expenses and receive payments and is beneficial when filing returns.

Register with tax authorities

In China, all businesses must comply with the relevant tax regulations. Thus, all companies in China should register with the Tax Bureau. A company must comply with various tax obligations, which include the following:

• Corporate income tax: This is charged at 25% on company profits. However, the rate is reduced if the company operates in certain ‘encouraging sectors’.
• Transaction tax or turnover tax: This tax is generally charged in the range of 3%-5% upon the total sales.
• Custom duties: This tax is charged on goods imported or exported from China.
• VAT (Value Added Tax): Currently, VAT is charged in slabs of 3%, 6%, 9%, and 13%.

Documents Required for Company Registration in China

The below-mentioned documents are required for company registration in China:

• Approved name of the business
• Registered office address 
• ID of the legal representative
• ID of the company supervisor
• Shareholder and director information
• Notary documents of the shareholders
• Articles of Association (AOA) and Memorandum of Association (MOA)
• Registered capital of the company
• Feasibility study along with budget
• List of controlling partners 
• Managerial structure

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