Setting up a WOFE in China

Setting up a WOFE in China

Starting a business in China is an incredibly fascinating venture, with a bulging and aging population and greater demand for a better quality of life, there are new markets emerging in China across all sectors.

A WFOE is a Wholly Foreign Owned Enterprise. This is a limited liability company which is owned entirely by a foreign company or individual. There are many advantages of owning a Chinese WOFE, including:

  • Absolute control over business decisions
  • Ability to hire and fire staff
  • Can invoice Chinese clients in RMB
  • Ability to convert profits from RMB to US dollars for remittance to parent company overseas
  • Protection over intellectual property
  • Full control of human resources
  • Independence
  • You retain all profits

Depending on the type of WFOE you register it allows the company to do Trading, Wholesale, Retail, import/export or Franchise in China

When applying for a WFOE, you are actually applying for approval, not registration. This is because the local governments operate on an approval-based system, meaning they can reject your application with no further explanation or contact. This is why it is important to have all the correct documents and prepare.

The main things you need to consider and prepare for your WFOE application are as follows:

Name

You must provide us with several alternate company names both in English and Chinese. We will then prepare and submit the application documents to the Municipal Government Administration Bureau of Industry and Commerce. There are some restrictions on your company name, and we will liaise with you to create a compliant and compelling name.

Project Feasibility Report

An important aspect of your WFOE application is your project feasibility report, which includes your business scope, business development plan and details of your registered capital.  You must ensure all business activity remains within this approved business scope. Business Scope includes, but is not restricted to: WFOE’s activities, products/services provided, 5-year plan, staffing, balance sheets, job descriptions etc. It is important to operate within your business scope and the sanctions for those caught doing business outside of their scope are heavy. If the dynamic of your business changes, and so to your business scope, you must reapply for a WFOE. 

When setting up a WOFE, you must specify what type of company you would like it to be, and this must be consistent with your business scope. Three main categories are Manufacturing, Trading and Consultancy. Although the Chinese government allows for a little leniency regarding your business type, if you were to drastically change the dynamic of your company and the goods/services you provide, you would require further application and approval.

Articles of Association

A minimum of one shareholder is required, this may be an individual or a company, and the relevant documents authenticated. If they are an individual investor, then their original passport will need to be checked by Chinese government offices and authenticated. If it is a company applying, then its official businesses licenses and Article of Association must be authenticated by a Chinese consulate. Once you provide us with your ownership structure, we can request the relevant documents and send them for authentication.

The timescale for setting up a WFOE can be varied. Here at IncorpChina, we have registered a sole investor WFOE for a client in the pharmaceuticals industry in just one day! Typically, however, it can take up to 40 days. At IncorpChina, we have close relationships with government officials and a comprehensive network of experts who are experienced in applying for WFOE’s. This significantly reduces the time taken to register your business.

Registered Capital

As of 1st March 2014, according to new PRC business registration regulations, there are no regulations on how much an investor should invest in capital, or when they should inject it into the company. This is an encouraging policy; it has been introduced to encourage foreign investment into mainland China. This gives investors greater flexibility on their investment and saves them investing large sums of money early on to remain compliant. Obviously, capital should be registered, and the actual figure will depend entirely on the host companies plan and vision.

The registered capital can be paid in full all at once (or within 6 months after the date of issuance of the company’s business license) or paid in several instalments within 30 years of its operational span. Each instalment of registered capital requires a capital verification report, which includes bank confirmation of capital receipt and a CPA’s formal Capital Verification Report. This costs 4000RMB per instalment. For this reason, we advise to pay the capital in one or two instalments to minimize handling charges.

Lease Confirmation

It is a legal requirement for any WFOE to have a formal business address where correspondence from the Chinese government can be sent and business can be conducted. The lease conformation contract is a mandatory document required in the application of your business license. At IncorpChina, we assist with clients looking for offices to lease.

3 in 1 Business License

Once the approval certificate is received, an application for business license can be submitted for FICE to the Administration Bureau of Industry and Commerce. This 3 in 1 business license combines license, organization code and tax certificate.

Carving Chops

A company chop is the Chinese equivalent of a signature, only it has greater authority and validates contracts and documents. It is a legal requirement for a Chinese company to own its own company, finance and personal chops, and you can collect these from a local police station.

In addition to the required documents and items stated above, companies are required to undergo further registration and apply for further certificates. This process can get very bureaucratic and lengthy. However, at IncorpChina, we have an experienced team of specialists who have applied for over 50 WFOE’s, with a 100% success rate. We have frequent contact with government officials so we can get your Chinese entity registered quickly and effectively.

Want advice regarding your expansion into the Chinese markets? Send us a message through the livechat feature on the right of our page, or alternatively, call us on our landline!

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