China is Asia's major hub, followed by Japan and India. Companies desire to extend their enterprises to China since it is the world's second-largest economy, with a GDP of almost USD 14 trillion. Read on to know everything about Company Incorporation in China in 2024
When it comes to electrical and other product exports, China is the global powerhouse. It provides integrated production facilities, making it the best location in the world for product development. Multinational companies such as Apple and Microsoft have considered China’s resources for product assembly. Besides that, low-cost labour is another reason why companies want to invest in China. Hence, investors and entrepreneurs seek China company incorporation.
With a GDP of almost USD 14 trillion, China is the world’s second-largest economy. Besides that, China has the world’s largest population, with 1.34 billion people. The country is adjacent to growing economies like Indonesia and India. As a result, an entrepreneur may wish to pursue company registration in China.
Because of the low cost of labour, many companies prefer to establish local manufacturing operations in China. In addition, procuring various types of raw materials and supplies is inexpensive as compared to other countries. As a result, businesses prefer to invest in China. China’s resources, such as global infrastructure and research and development opportunities, are very competitive. Investors who want to start a business in China can take advantage of all of the aforementioned perks.
Foreigners’ Business Formation Options in China
You can register a company in China using any of the following business structures as a foreigner:
- WFOEs (wholly foreign-owned enterprises) – This is the most popular and probably the best company formation option for foreign investors, from a legal point of view
- Joint venture companies
- Representative offices
- Partnerships
- Sole proprietorships
- Private enterprises.
Procedure to Register a Company in China
Here is the step-by-step procedure to register a company in China:
Step 1: Pick an Agency to Initiate the Registration Process
It can be difficult to comprehend Chinese company laws correctly. So, you should choose a professional service like Vakilsearch to handle the entire company registration process. Our experts will assist you with audits, tax consultations, bookkeeping, and annual financial compliances, among other things.
Step 2: Select Your Preferred Business Category
To ensure speedier economic growth, the Chinese government has classified its industry sectors. You should also consult the government’s ‘Catalog for the Guidance of Foreign Investment Industries,’ which is updated on a regular basis.
Step 3: Submit an Application for the Approval of Your Company’s Name
This is a crucial step in the process of forming a business. This is also to ensure that your business name does not conflict with that of any other existing business. As a result, you must apply to the Administration of Industry and Commerce for approval of your business name. Furthermore, the entire approval procedure could take anywhere from two to fifteen days.
Step 4: Gather the Necessary Paperwork
You must prepare the following documents before beginning the process of forming a company:
- Name of the business
- Registered office address of the business
- ID of the legal representative
- ID of the company supervisor
- Shareholder and directors’ information
- Notary documents of the shareholders
- Articles of association and memorandum of association
- Registered capital of the company
- Feasibility study along with budget.
Step 5: Request a Certificate of Approval
In this phase, you should apply to the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce for an approval certificate and an operating license (MOFCOM). If you’re in the food and beverage, manufacturing, telecom, or construction industries, you’ll also need additional licenses after you get your business certificate.
Step 6: Register With the PSB (Public Security Bureau)
The PSB registration will make you eligible to get the company chops. In the absence of a chop, you cannot validate a contract in China.
Step 7: Register at the Tax Bureau
All businesses must register with the Tax Bureau and follow its rules. Similarly, other types of taxes are levied in this country, including:
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- Corporate Income Tax: This is charged @ 25% on profits. However, the rate will reduce if you operate in certain ‘encouraging sectors’
- Transaction Tax or Turnover Tax: This is usually charged in the range of 3%-5% of the total sales
- Custom Duties
- VAT (Value Added Tax): Currently these are charged in slabs of 3%, 6%, 9%, and 13%.
Eligibility Criteria for China Company Incorporation
A person who wants to start the process of China company incorporation must meet the following requirements:
- Minimum Directors: The firm must have a minimum of 3 to 13 directors.
- Chairman and Deputy Chairman: There must be 1 chairman and 1 deputy chairman for the company
- Registered Business Address: In order to conduct business, the company must have a registered address.
- Legal Representative: In order to complete the procedure of company registration in China, a legal representative must be chosen in China.
- Reserved Name: Apart from this, the company’s name must be reserved.
