Company Formation in China: Things You Must Get Right

Is your business back home performing poorly, and you think it is time to go offshore? Perhaps it is the other way round – your business has achieved all the objectives you had set and now think it is time for a new challenge. If you are thinking of opening a business in China, this might be the best idea in your business journey, and we are going to tell you why.

For about 40 years, China has adopted a pro-business approach to growing its economy, and everything appears to be working. Its GDP has been growing rapidly, the infrastructure is excellent, and above all, there is a huge market. See – it has everything that an investor would want in a single package. So, do not be left behind as others incorporate their businesses in China. As you make the bold move of going offshore, here are the most important things that you need to get right.

The Type of Business Vehicle to Use 

In China, there are a number of business vehicles that you can use, and it is paramount to ensure you pick the best. Indeed, what you can do largely depends on the type of business formation. Here are the main categories of businesses that you can register in China.

  • Wholly Foreign-Owned Enterprises (WFOE): As the name suggests, this type of company is 100% owned by a foreigner/s. It provides you with full control over the decisions about the company operations, from recruitment to product development.
  • Joint Venture (JV): Unlike a WFOE, a joint venture requires you to enter into a partnership with a local Chinese to form a limited liability company. The Chinese partner is required by law to have the controlling shares. However, China is discouraging this type of company formation to attract more investors to the country.
  • Representative Office (RO): This is the simplest type of company that you can form in China. However, it comes with a lot of limitations because you are not allowed to engage in any profit-making deal. Therefore, most investors prefer it for market research in China.

Taxes that You Will be Required to Pay 

China takes tax matters very seriously, and it is important to start by understanding all the obligations well. Because most cities have varying types of taxes, it might be a good idea to look for the one with a low tax regime. To enjoy even lower rates, consider forming a company in the encouraged areas, away from the coastal cities, and within the free trade areas. If your company is dealing with the latest technologies, you might also qualify for lower corporate tax.

Company Incorporation in China 

Finally, you need to get it right on company registration. In China, company incorporation can be a lengthy process that starts with selecting the right company name and ends with opening a bank account. Also, you need to deal with different departments, such as Ministry of Commerce of the People’s Republic of China (MOFCOM), the Public Security Bureau (PSB), and the Tax Bureau, among others. This is why you should identify and work with a good agency of experts to help you with company registration.

The lovely thing about bringing experts on board is that you will not only be assisted to deal with different departments but also in crafting strategies for success. Having assisted other businesses to establish themselves in China, a good agency might be all that you need to get started and grow rapidly in the new market.

In this post, we have listed the three most important things that you need to get right when taking your business to China. You might want to also include market research and competitor analysis because they will come in handy to help you win a bigger market share.

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