Starting a business in China is not as hard as it is perceived. However, it is recommended that you should hire a professional Chinese local consultant to help in ensuring that the process is easy. A local consultant plays a big role in ensuring that you make a right decision on the best business structure, organize paperwork and they act as your business representative whenever you are not in China. Basically, they are handy in ensuring that your business is smoothly registered.
While a local consultant plays a major role, it is advisable that you should carry your own research in order to settle for a business niche that you can comfortably carry out. It is also important to do a proper research before hiring a local consultant.
There are three major ways that you can set up your business in China. They are;
a) Representative Office which, despite being easy to open, it limits the company on what they can do. E.g. you cannot do manufacturing business, export or import, and accept payments from Chinese clients.
b) Joint Venture which has fewer restrictions but there are various risks brought about by the fact that the Chinese nationals will have a control in your business and if the business fails to pick up as per your expectations, you can lose the control of your brand.
c) Wholly Owned Foreign Enterprise (WOFE). As the name suggests, the foreigners have the liberty to 100% own their Chinese entity. Although it is difficult to set up a WOFE in China, it is worth it because it gives you the exact same rights as those in the Chinese-Owned businesses.
Business set up the process in China.
Below are some steps you need to undertake.
1. Carefully choose your business structure.
This involves checking the business type if it is listed in the restricted list of industries. Also, it is important to check the encouraged foreign businesses that could actually give you some incentives. In choosing your business, you should make a line between being too broad and too limited. This is because broad scopes may fail to be given permits while the limited businesses may put you in a risk if you are found doing something outside what you are permitted to do.
2. Ensure that your documents are in order.
Once you have come up with your preferred structure, the next step is to keep your documents in order. Below are some of the documents that you may need;
- Certificate of Incorporation, Articles of Formation (or the equivalent) certified by the Chinese embassy or Chinese consulate
- (2) Copies of the passports of each investor certified by the Chinese embassy or consulate overseas
- Bank references from each investor’s bank declaring good standing
- (2) Copies of the passports of the parent company’s director, the Chinese company’s legal representative and the Chinese company’s supervisor (if applicable)
- (6) 2”x2” photos of the Chinese legal representative along with a brief resume or CV
- Registered capital
- Business scope
- 8 proposed Chinese names for the company in China
- The Chinese office address, including (2) copies of leasing contracts, certificates of real estate ownership as well as landlord identification
- (4) Copies of a letter of authorization
- Purpose and estimated investment
- The enterprise’s operational structure and number of those employed
- Permission for land use
- Environment evaluation report
- Details of products
- Size of production
- Detailed list of equipment used
- Business plan
- Environmental protection measures
- The requirement for the utilities of the site such as water and electric usage
3. Apply for approval.
In China, every business is approved under commerce ministry as well as the state administration ministry. An approval application takes up to 90 days and the timeline can extend if need be.
4. Register with AIC and open a bank account.
Once your entity is approved, register with Administration for Industry and Commerce (AIC) where you will apply for a business license. Once the license goes through, you will be able to open a Chinese bank account and you can carry on with your business.