“Setting a Company in China: Consultation and Notes You Must Know”

As a foreign investor, if you want to set up a joint venture enterprise in China, you need to understand some basic procedures and precautions. So what conditions do foreigners need to meet to set up their own enterprises in China? What is the specific process like? What are the specific materials that need to be submitted?

There are three main types of enterprises registered by foreign businessmen in my country

Wholly Foreign-Owned Enterprise, Sino-Foreign Joint Venture and Individually-Owned Enterprises.

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1. Wholly Foreign-Owned Enterprise（WFOE）

a. WFOE is the most popular type of company, established by foreign investors and does not involve investors from any continent. Because the company is under the sole control of foreigners, the company has greater flexibility in its operations to engage in profit-making activities and hire local and foreign employees.

b. WFOE is a limited liability company (LLC). Shareholders only need to bear limited liability for the company’s debt losses, even if it is limited to the principal and amount of capital contribution.

c. The establishment process usually takes 2 to 4 months, and the minimum registered capital varies according to the type of business, generally 100,000 to 500,000 yuan.

2. Sino-Foreign Joint Venture（JV）

a. A joint venture is two or more companies that agree to jointly establish a separate enterprise with a limited liability company (LLC).

b. Participants in the joint venture will jointly bear the amount of investment, management responsibility and the company’s debt losses.

c. In China, joint ventures are generally established by a Chinese company in cooperation with a foreign company or foreign investors.

3. Individually-Owned Enterprises（IOE）

a. Individual-Owned Enterprises are the simplest type of company, which is usually suitable for simple businesses, such as non-chain stores and small restaurants. It is not only Chinese citizens who can set up self-employed enterprises, so foreigners can consider starting a business in this way and running some small businesses.

b. There is no need to register capital, hire employees, and can enjoy lower tax rates and operating costs because they are not a corporate company.

c. However, precisely because self-employed enterprises belong to unincorporated organizations, partners and operators must bear unlimited liability for them. When the company’s assets are insufficient to repay their debts, they need to repay them with their personal property.

Precautions

Foreigners need to face some challenges in registering companies in China, such as language, culture, law and other differences. Therefore, it is recommended that foreigners can seek professional legal, accounting and business consulting services before registering a company to help them understand the relevant regulations and procedures.

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