Company Registration in China
Thorough Assessment. Detailed preparation. Comprehensive Support.
Setting up an entity in China is a major decision that comes with serious liabilities. Deciding to register an entity should come after thorough evaluation. Based on our experiences, most activities in China can be accomplished without a local entity by using outsourcing companies. For pre-establishment solutions please visit: Market Entry Operational Support
Assessing the need
We ask the following questions:
- What is the entity’s purpose?
- What are the entity’s licensing needs?
- Where would be the best place to establish an entity?
- Who would manage the entity?
- What type of entity is required?
Once these questions are answered, PTL Group assists its clients with the entire establishment process, until the company is fully operational (including all necessary financial and HR aspects).
Types of entities that can be registered in China
Wholly Foreign Owned Enterprise (WFOE): A limited liability company wholly owned by the foreign investor/s.
- Requires registered capital and its liability is limited to its equity.
- Can generate income, issue local invoices.
- Can employ an unlimited number of foreign and local employees.
- Pays tax in China and its profit can be repatriated back to the investors’ home country.
Representative Office (RO): Also known as REP Office, a RO is a liaison office that belongs to a parent company.
- No registered capital required.
- Limited to promotion, market research and quality control activities.
- Prohibited from any business activity; import, export, generating revenue or entering into contracts with any local businesses.
- Limited number of foreign and local employees, that can be hired only through a 3rd party HR agency.
- Heavily taxed based on the RO expenses.
- Requires regular bookkeeping, and annual tax audits.
Joint Venture (JV): A limited liability company formed between a Chinese company and a foreign investor. The parties agree to create an entity by mutually contributing equity and sharing revenues, expenses and enterprise control. A JV presents various challenges that requires from the foreign party extra caution and preparation.
Hong Kong Subsidiary: Foreign companies can choose to establish any of the above mainland Chinese entities as a subsidiary of a Hong Kong company, thus serving as a buffer between the China entity and the foreign company and taking advantage of Hong Kong’s corporate law. However, due to the recent difficulties in opening a bank account in HK, this option may not be suitable for every scenario.
Registration of any of the above entities requires thorough preparation. The registration process may take several weeks to several months, depending on entity type and required licenses.
A few milestones that require consideration and planning:
- Choosing a Chinese name for the new entity.
- Preparing, translating and notarizing all relevant documents from the parent company.
- Deciding on company structure and role distribution: GM, Directors, legal representatives, supervisor, CFO, etc.
- Planning the annual budget and matching registered capital to the entity’s needs.
- Opening a bank account in China (normally requires the attendance of the legal representative).
Business System set up in China
Once the entity acquires its business license, several set-up steps need to be implemented, such as:
- Tax and financial software purchase and implementation
- Tax registration account opening at the tax bureau
- Social benefit account registration
- HR procedures set up (employees handbook)
- Financial accounting system set up
PTL Group’s professional team provides complete management support services from the assessment stage, through the registration all the way to the systems set up and the ongoing support for the entity, including: payroll, bookkeeping, accounting, tax planning, compliance and other advanced HR and financial services. Read more about our Operational support for registered entities.
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