China

Sakura Consulting works with you to ensure you establish a business entity that fits your needs for China. Below are the most common business entities in China:

There are different forms of entities that can be considered but the three most common options include Wholly Foreign Owned Enterprise, Joint Venture, and a Representative Office. However, establishing a business entity in China is more difficult for foreign companies. It requires the organization to follow very specific steps, which if not properly adhered to can result in delays.

Sakura Consulting can help you navigate your way in China

Wholly Foreign Owned Enterprise:

A Wholly Foreign Owned Enterprise (WFOE) has higher establishment requirements and is able to conduct a full range of business activities including signing contracts, collecting payments, and issuing special tax invoices (Fapiao) in RMB. A WFOE is a limited liability company and has separate liabilities from the parent company. The establishment process typically takes 2-4 months and the minimum registered capital requirement varies according to the business activities of the company.

Joint Venture:

A Joint Venture (JV) is a limited liability company formed between a foreign company or investor(s) with a Chinese company where the foreign company owns more than a 25% share of the business entity. It is important that the JV does not represent a merger between two companies but rather a new entity that is partly owned by foreign and Chinese partners. The JV participants share in supplying the investment, managing responsibilities, and receiving profits and losses. The liability of the shareholders is limited to the assets contributed to the new entity and does not extend to any parent companies.

Representative Office:

A Representative Office (RO) is ideal for companies first entering the Chinese markets. A RO doesn’t demand registered capital and has a relatively short establishment processing time (approximately 1 – 3 months). RO’s are not allowed to carry out substantial business operations such as entering into commercial contracts or issuing invoices in its own name in RMB. Therefore, RO’s are most commonly used for marketing, research, publicity activities, and liaison activities that do not involve direct revenue generation. In additional, a RO can employ up to 3 representatives and 1 chief representative. Since an RO is not an independent legal entity, liabilities extend to the parent company. To be eligible to establish an RO, the parent company must have been in existence for at least 2 years.

ITEMS	WFOE / JOINT VENTURE	REPRESENTATIVE OFFICE
Minimum Capital	Starts from 100K RMB	Not register capital
Business Scope	Specific Industry: Trading WFOE; Consulting WFOE, Manufacturing WFOE, etc.	Liaison; Quality Control; Factory Visits
Office	In an office building which can register business	Office building/Virtual address
Working Visa	1 year multi-entry Visa	1 year multi-entry Visa
Recruiting Staff	recruits staff directly	Through Local HR agency: FESCO, CIIC
Taxation	Turnover tax; Income tax, Dividend tax	approx. 10-15% on expenses; individual income tax
Maintenance	Monthly; Quarterly; Annually	Monthly; Quarterly; Annually
Bank Account	Access & receive money; pay bills; issue checks; withdraw cash in China; RMB account and foreign currency	Can only receive money from parent company; Can only pay for expenses; Can’t pay for products
Invoicing	Official invoice in China	Can’t issue invoice or receipt
Receiving payments	World Wide	Not allowed to receive payments from clients
Liability of equity participants	Limited to amount of registered capital	Parent Company must be established for over 2 years