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Company Formation
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- Passport copy
- Residential address proof – such as telephone bill, electricity bill or bank statement issued within the latest 3 months showing name and address in English.
- Business strategy / business plan and business proofs, such as contracts, invoices & bill of lading etc.
- More documents may be required by the bank officer after meeting
In China, there are 3 recognized forms of business establishments for overseas investors, namely:
A) Wholly Foreign - Owned Enterprise (WFOE)
A Wholly Foreign Owned Enterprise is a company with limited liability that is entirely owned by foreign investors.
Advantages of setting up a WFOE includes:
- Completely under foreign control for easier implementation of worldwide strategy
- Having human resources completely under foreign management
- Protection of technological know-how and business secrets
- Being allowed to issue invoices and receive incomes in RMB and export goods from China
Normally, the minimum paid up share capital for a WFOE starts from 1 million RMB (around USD140,000) with some provinces setting lower capital requirements to appeal to foreign investment. A WFOE is required to pay tax locally.
B) Representative Office (RO)
To establish a legal presence in China, the easiest and most economical way is to establish a representative office. - See more at: china-formation/#wholly-foreign-Owned-enterprise
A RO conducts market research and promotion and assist in business development on behalf of its parent company. It may involve in the liaison with businesses and customers.
Advantages of setting up a RO includes:
- Easy and quick to be set up
- Registered capital is not required
- Can be used for marketing and having representation in China
- As a starting point to build up business relationships in China
- Allowed to form partnerships or sole proprietorships in China
The most popular choices of location to establish RO in China are Shanghai, Beijing, Guangzhou and Shenzhen. A foreign enterprise can set up more than one RO in China.
Before a foreign enterprise set up a RO in China, it should be legally registered in its country of origin for at least 12 months.
A RO is not considered to be a separate legal entity, i.e. it is attached to its parent company. It is not allowed to conduct business activities that directly generate incomes. Also, it cannot to issue invoices and receive incomes. Thus, expenses of a RO should be fully provided by its headquarters.
C) Joint Venture (JV)
Joint Venture is a form of business cooperationbetween a Chinese and a foreign company. The Chinese authorities welcome JV with foreign investors for advanced technological know-know and latest management skills.
Usually, foreign investors use JV because: A local partner is required in certain industries in China, such as restaurants, bars, building and construction, car production etc. A local partner may provide necessary understanding of the local market, distribution networks and governments relationships
Advantages of setting up a JV includes:
- Being able to enter into certain industries in which wholly-foreign ownership is not allowed
- Enjoy existing distribution networks and sales channels/li>
- Being able to utilize existing relationships in China
- Sharing of local partner’s existing facilities and human resources
- Sharing of management responsibilities, expenses and risks