China Business, Setup Business
How to setup a business in China.
You have decided you want to setup an office in China and are wondering what are the options to setup an office. Setting up and office in China is straightforward and many companies just like you have done exactly that. The first advice is that you will definitely want to get the help of an agency to help you handle all of the legal registrations and paperwork needed to setup the office.
The agency you work with will talk to you about several different types of company formations that are available in China. There are three main ones that you should be concerned with. These are the Representative Office (Rep Office), Wholly Foreign Owned Enterprise (WFOE) and the Joint Venture (JV). How do you decide between these three?
The Representative Office and the Wholly Foreign Owned Enterprise are the two most common choices for foreign companies. The primary difference between these two is whether or not your company has a need to offer tax receipts to your customers. Wholy Foreign Owned Enterprises can issue tax receipts and Representative Office can not.
If your clients are local businesses and/or consumers than you will most likely have a need to offer a tax receipt. On the other hand, if your customers are all multinational corporations or foreignerns, than it is possible for them to pay you off shore, so there may be no need for a local tax receipt.
The Rep Office is slightly easier and faster to setup, though the majority of foreign companies still choose the WFOE because of the flexibility of offering tax receipts as well as other beneifts, as this company has almost the exact same rights and abilities as a locally owned company.
The Joint Venture is another option that companies might consider. The JV may be considered if a local company already has a market developped, or some other benefit that would be beneficial to you. The JV is a risky venture, because even though you might have 51% of the partnership, that does not mean that you have controlling interest in the relationship. JVs should only be entered after doing extensive due diligence.
Those are the three most common ways to setup a company in China, the Representative Office, Wholly Foreign Owned Corporation, and the Joint Venture.