How can foreigners own a company in China

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Introduction

It’s wised to own a company in China as China’s economy and trade have emerged in recent years.

This has attracted a large number of foreigners. They come to China for trade. And many foreign friends settle in China. Or they start a partnership with the Chinese.

So, how can foreigners own a company in China?

Conditions for foreigners who want to own a company in China

First of all, let’s take a look at to set up a company in China. What are the conditions foreigners need?

First, foreigners can register companies in China.

The legal representative may not only be a Chinese, but also a foreigner.

However, the conditions are different between these two situations:

  1. to register a company in China in the name of an individual.
  2. to register a company in China in the name of a company.

An individual start a company in China

Conditions for corporate legal person registration:

Have Chinese resume with foreigners

Original and copy of :

  • a valid passport
  • Taiwan compatriot card for foreigners
  • home return certificate
  • travel certificate
  • Health certificate for foreigners. And it’s from Beijing Entry-Exit Inspection and Quarantine Bureau.
  • Have copy of the employment registration form for foreigners. And seal at the employing unit.
  • Prepare two two-inch photos

Registration in the name of the company

Foreign companies apply for company registration in China.

This company needs to meet the conditions included in the following materials.

Provide 2 originals and a copy of the registration certificate.

These include company registration certificates, tax certificates, and company regulation.

Provide audit reports of last year.

The accounting firm needs to audit this report.

And it is the translated Chinese version, with the official seal of the translation company.

There is a bank credit certificate issued by a foreign bank.

It indicates that the company is in good operating condition.

And its deposit amount meets the registered capital requirements to invest a company.

2 original lease contracts for company office.

And the lessee must be the legal representative.

Moreover, the lease period needs more than one year with the Housing Authority. There is also proof of relevant property rights.

photos of the legal representative, original ID card or original passport.

When handling bank accounts, you need to provide original documents for verification.

A foreign company in China has:

  • A compliant name and company regulations.
  • Ability to assume civil liability with its independent property
  • Business management institutions, financial institutions and labor organizations. And they are suitable for the scale of production and operation
  • Necessary business premises and facilities
  • And they include full-time staff of not less than 8
  • A sound accounting system.
  • Capability to implement independent accounting
  • Ability to bear its own profits and losses.

Registered capital

The registered capital shall meet the prescribed amount. And it is suitable for the business scope. The specific capital requirements are as follows:

  • Production company: not less than RMB 300,000 RMB
  • Wholesale commercial company: not less than 500,000 RMB
  • Retail commercial company: not less than RMB 300,000 RMB
  • Consulting service company: not less than RMB 100,000 RMB
  • Legal person of other enterprises: not less than RMB 30,000 RMB

Company shareholders

Here is the branch type.

Usually, we divide foreign-funded companies into two types:

Between them, the shareholders of a wholly foreign-owned company could be foreign enterprises or foreign individuals.

But, the Chinese shareholders in a joint venture company can only be Chinese companies.

Business Scope

We all know that the company’s business scope must be clear.

However, everyone should note that China is now subject to the approval system for the registration of foreign-invested companies.

Some industries are restricted for foreign-invested companies.

Find the details of specific business scope on China WFOE formation & its process and registration.

Company address

To register foreign-funded companies in China. It’s must be commercial houses.

And at the time of registration, it is necessary to provide the lease agreement and related certificates.

How many types of foreign companies in China?

Company in China #1: Joint venture

Chinese and foreign companies invested and operate joint ventures together.

According to the investment ratio, both the Chinese and foreign parties are responsible for the risks, profits and losses of the enterprise.

Features

Chinese and foreign parties establish a joint venture together.

The company’s project needs approval from the government’s approval authority.

It is a limited liability company.

Chinese and foreign joint management.

Production and operation activities included in the country’s special regulations.

It is a Chinese legal person in China.

Advantages

  1. Resource sharing
  2. complementary advantages
  3. Make full use of the network of Chinese companies and established well-known brands. They are good for entering the Chinese market successfully.
  4. Joint ventures can enable foreign investors to take advantage of the geographical advantages of Chinese companies. It reduces various financial expenses reasonably and legally. Moreover, it greatly reduces operating costs.
  5. Enjoy preferential treatment for foreign investors.
  6. They can direct export the products of Joint venture.

Company in China #2: Corporation

Both Chinese and foreign cooperative parties fulfill their respective rights and obligations, and these rights and obligations are formulated through the contract of the cooperative enterprise.

They are cooperation agreements and contracts formulated after consultation between the Chinese and foreign parties.

The Chinese and foreign parties formulate the rights and obligations together with consultation.

both parties of the cooperation sign the contract.

And the approval authority approves it.

Meanwhile, it is protected by national laws.

Both parties should perform their obligations according to the contract.

These rights and obligations include:

  • Conditions of investment and cooperation
  • Revenue and product distribution
  • Risk and loss sharing
  • Management methods
  • Ownership of property at the termination of the cooperative enterprise

Classification

Cooperative enterprises can

We generally divide the cooperative enterprises into two categories:

  1. Cooperative operating enterprises with legal personality
  2. Cooperative enterprises without legal personality

It is the opposite of a corporation operated by a legal person.

It has no independent property ownership, only has management and use rights.

Advantages

  • Share the resources of both parties to complement each other.
  • The method of establishment is flexible.
  • Foreign investors have priority on investment return.
  • Enterprises can enjoy various discounts for foreign investors

Company in China #3: Wholly foreign-owned enterprise

Entire capital of wholly foreign-owned enterprises is from foreign investors.

Generally, WFOE is limited liability companies or one-person limited companies.

However, it does not include branches of foreign economic organizations in China.

Advantages

It can be a global strategy for its foreign parent company.

Commercially have stronger operating capabilities, and can use RMB to settle surpluses and issue invoices to customers. That helps protect its own intellectual property rights and patented technologies.

No special requirements for import and export licenses of its own products.

Can enjoy all personnel management rights.

Company in China #4: Foreign Investment Partnership

A foreign-funded partnership enterprise is a partnership in China. And it’s between foreign individuals and companies.

Another one is a partnership between foreign enterprises or individuals and

Chinese individuals or enterprises.

Advantage

  1. Allow Chinese natural persons to directly participate in investment.
  2. The establishment of the company in China is simple, convenient and fast:
  • Don’t have to get an approval from the competent commercial department.
  • No capital verification required.
  • There is no minimum amount of fund.
  • Institutional management is simple and flexible

Partners have equal rights to the executive partners

The efficiency of foreign-invested partnerships is relatively high.

  • No corporate income tax

Foreign-funded partnerships avoid double taxation. Meanwhile, this effectively reduces the operating costs of the enterprise. Therefore, investors can get more profits.

Disadvantages

  1. There are industry restrictions. Forbidden projects in the “Guidance Catalogue for Foreign Investment Industries” cannot establish foreign-invested partnerships.
  2. Although general partnerships do not limit the rights of partners, a limited liability company limits the partners’ right of management.
  3. The law prohibits them from exercising partnership management rights.
  4. And they do not execute partnership affairs.

How to open a company in China as a foreigner?

Process

The establishment of a foreign-invested enterprise generally goes through the following steps:

  1. Commercial Bureau approval
  2. Business registration
  3. After consultation, receive and fill in the following documents:
  4. Go to the relevant approval department
  5. Go through the approval procedures
  6. Receive the approval documents.
  7. Submit application materials.
  8. Receive the “Notification of Approval of Establishment Registration”
  9. Pay the fee to the Industry and Commerce Bureau according to the date determined
  10. Obtain a business license
  11. Approved by the Quality and Technical Supervision Bureau
  12. Apply for tax registration certificate
  13. Apply for a bank account opening license

All documents after registration

  1. Original and copy of business license
  2. The original and copy of the code certificate
  3. a code IC card
  4. A original and a copy of the local tax registration certificate
  5. The copy and original of the national tax registration certificate
  6. Originals of approval documents and approval certificates
  7. A set of official seal, financial seal and corporate seal
  8. Articles of Association
  9. Account Opening License
  10. Foreign exchange IC card
  11. The original and copy of the financial registration certificate

Materials needed

The application materials and the model text of the application form

  1. The original of <Application for Registration of Foreign-invested Enterprises>. And the legal representative signs it.
  2. The original of the notice of approval of the registration of the enterprise name
  3. Examination and approval department’s approval of the contract and articles of association
  4. Original copy of approval certificate
  5. Original of contract and company regulations.
  6. In this situation, state-owned enterprises investing in kind. They must provide original confirmation documents. The documents are from the state-owned asset management department.
  7. Bank credit certificate of foreign investor
  8. Originals of the appointment documents of board members
  9. The record form for the registration of the general manager. And it is with the signature of the director.
  10. The director’s identity certificate, also can be a copy of it.
  11. certificate of house property right or certificate of land use.
  12. If it’s a rented house, it will need a lease agreement with at least one-year term.

Conclusion

Foreigners can start a company in China.

Within the scope of business permitted by law, not only foreign individuals can open a company in China, but also foreign companies, within the business scope.

There are four types of company in China you can choose. They are joint venture, corporation, WFOE, and foreign investment partnership.

Follow the steps in this article, prepare the materials, and show your ambitions in China.

Compared with the registration of domestic-funded companies in China, registered foreign-funded companies are very different in terms of process and materials.

If you feel cumbersome, it is recommended to find a professional agent business service company to register.

If the article helps you with your investment, feel free to share it with your friends, thank you.

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