Registering a company in China: 3 steps to choose the best legal form

Registering a company in China: 3 steps to choose the best legal form

At present, the request to open a business in China is one of the most popular among our customers. This material will help you to figure out, which type of company to choose for a business in China in order to conduct business as profitably as possible.

Step 1. Exploring benefits and features of WFOE (Wholly foreign-owned enterprise)

WFOE is an enterprise, in which a foreign capital is 100% and the director is a foreign person.

Registering a WFOE in China: advantages and disadvantages

Main advantages include:
  • A full control over the management, without the intervention of Chinese partners;
  • China's limited legislative jurisdiction compared to Joint Ventures & domestic companies;
  • A free transfer of profits abroad;
  • The registration procedure is easier compared to Joint Venture (the latter show an increased attention from authorities);
  • The elimination procedure is simpler, than in the case of Joint Venture;
  • It does not require an actual advance payment of the authorized capital.

We provide comprehensive legal services on registering a company in China. If it is difficult for you to choose the type of company yourself, we can help.

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WFOE disadvantages:
  • A restriction on types of the economic activity by authorities;
  • It is more difficult to gain the access to sales markets compared to Joint Ventures or a Chinese company, when managed by Chinese citizens.

Opening a business in China in the form of WFOE: share capital requirements

There are 2 options:
  • a minimum fund is 300,000 RMB;
  • contributing to easier registration is 1,000,000 RMB.

Funds are contributed by shareholders.

But, registering a business in China is not only possible through WFOE. Let's consider more profitable options.

Step 2. Learning benefits and features of Joint Venture in China

Registering a Joint Venture in China is a way of opening a business in China, when either side can be a manager.

Registering a JV in China: advantages and disadvantages

JV advantages:
  • The access to business areas, controlled by the Chinese government;
  • Thanks to the participation of a Chinese partner, it is easier to conduct business (the access to markets, goods and services).
JV disadvantages:
  • A state control over the transfer of shares from one partner to another;
  • The distribution of shares in a company is subject to a legislative regulation (at least 25% must be paid by a foreign partner);
  • Restrictions on the withdrawal of assets from the authorized capital during the existence of the company.
Registering a business in China in the form of JV: share capital requirements

Each party contributes a share equal to its participation in the capital. The minimum authorized capital of a Joint Venture in China is 300,000 RMB.

To register a Joint Venture in China or find out, which legal form to choose for a business in China, contact us. We can also assist in opening a corporate bank account in China.

Step 3. We study advantages and features of a Domestic Company in China

Domestic Company is an enterprise, that is registered in China and is considered a local company.

If you want to register a DC company in China, you need to understand, that it is more difficult to withdraw funds in this form, the full legislative jurisdiction of China is applied, and the company is also controlled.

Opening a DC business in China: share capital requirements
  • The minimum size of funds is 30,000 RMB.

We provide our clients with comprehensive support in establishing a company in China. To choose the most suitable legal structure for a particular business, we recommend you to order professional advice on setting up a business in China. This will help to possess a relevant information and to register a startup in China in the most favorable form.

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