So, you're ready to setup your business in China. Now you must decide what is the best legal structure to use to conduct business in China.
There are generally three choices to choose from, the Representative Office (Rep Office), Wholly Foreign Owned Enterprise (WFOE), or the Joint Venture.
The Rep office and the WFOE offer the most control and are the two most preferred choices unless there are some special circumstance that might force you to form a Joint Venture.
How do you decided between these two types of company formation? The most basic deciding factor is whether or not you will need to issue a Chinese tax receipt, called a fapiao, to your customers.
If your customers are Chinese businesses or Chinese consumers than they will most likely require a tax receipt. If your customers are multinational corporations than it might be possible to process payments outsite of China and avoid the Chinese tax receipt.
Only the WFOE is able to issue Chinese tax receipts. In addition to being able to issue tax receipts, the WFOE also allows the foreign business to have independence and to formally conduct business. The WFOE is also able to convert RMB profits to US dollars. The Rep Office is unable to issue tax receipts and is more restricted in the scope of work it is able to perform.
It usually takes 3 to 6 months to setup a WFOE. This includes registering with the various government offices.
These days, most foreign business that have a permanent presence in China are choosing the WFOE because it gives them full legal standing and indepedent control of their business within China.
If you would like to get more information about doing business in China, visit us at
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Looking forward to seeing you here in China soon.
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