Business PlanCompany Incorporation

How to Register a Business in China as a Foreigner 

Starting a business in a foreign nation might be scary because there is so much you don't know. Read this post to learn everything you need to know to set up a business in China.

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China, after America, is definitely becoming the next “country of hope.” To encourage international investment in China, the Chinese government is even granting tax incentives to foreign enterprises. If you want to explore new opportunities in China by establishing a business there, the good news is that not only are opportunities plentiful, but there are experienced business consulting firms like Vakilsearch that can help you set up your entire business with no fuss and delays.

Register a Business in China as a Foreigner

Step 1: Identify Market Opportunities

Before you start your business in China, you need to figure out what product or service has the most profit and going to impact. For a reason, China is known as “the world’s factory,” and you may already be in business selling a product and want to manufacture it on Chinese land. Alternatively, as China’s economy develops, there may be an increase in demand for particular services.

Do your homework before starting any form of business in China. Identify possible competitors and determine the market share you can capture, as well as the tactics you’ll use to do so.

Start with a marketable idea for a service or product that is in demand in China or can be made and sold in China.

Step 2: Choose a Business Location

You’ll need access to things like the local skilled workforce, resources and materials if you’re in production, factory, warehouse, or office space, and possibly transportation or ports, depending on your industry. If you have business partners, you should think about their proximity as well.

China is rapidly evolving, and new commercial hubs are growing up a lot. Established cities such as Shanghai, Beijing, and Guangzhou currently offer a cosmopolitan culture, ample and high-quality office space, and industrial spaces.

START A BUSINESS IN CHINA

Step 3: Choose a Legal Structure

As a foreigner, you can use any of these business formations for starting a company in China:

  • 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

Step 4: Create Your Business Plan

Making an effective business plan is important to your success in China. The strategy must be detailed enough to gain approval.

Your business plan should include the following information, in addition to a description of your sector and goods or services:

  • The location of your business
  • Your projected revenue
  • The expected number of employees
  • Your budget requirements
  • Your employment process
  • Operational workflow.

You might wish to speak with an expert who is familiar with Chinese company law and procedures at this time. Because you’ll be presenting this business plan as part of a government approval package, having local expertise will assist you in preparing the type of business plan you’ll need.

Step 5: Open a Bank Account

If your company is registered as a WFOE, you must create a business bank account in China. Moreover, if your company is not incorporated, you can choose from a variety of non-resident bank accounts.

As a foreigner, opening a bank account in China can be challenging. Each province and city has its own set of criteria, so do your research. All banks have the following requirements:

  • Proof of business registration such as a valid business license, enterprise code certificate, tax registration certificate, or articles of association
  • A list of the company’s directors’ names
  • Valid ID of the company’s legal representatives (officers, directors, and key shareholders)
  • Description of the business structure and ownership
  • A copy of recorded state approval for your business.

Step 6: Protect Your Intellectual Property

Any patents, trademarks, or copyrights should be registered as soon as possible because the registration you have in other countries will not protect your intellectual property in the Chinese market.

China has its own set of trademark laws. For instance, even if he or she was not the first to use a brand, the first person who registers it retains all of its rights.

Step 7: Register With the PSB (Public Security Bureau)

The PSB registration will entitle you to the company chops. In China, a contract cannot be validated in the absence of a chop.

Step 8: Register at the Tax Bureau

All companies in China should register with the Tax Bureau and comply with its regulations. Likewise,  Different kinds of taxes applicable in this country include:

  • 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%.

Conclusion

If starting a business in China appears to be difficult, remember that we are here to help you. Vakilsearch has knowledgeable experts to help you with any aspect of Chinese business establishment and transactions.

Vakilsearch can also assist you in protecting your intellectual property in China, such as trademarks, patents, and copyrights. Further, to schedule an appointment, please feel free to contact us. We’ll take care of this for you and get your company up and operating in China.

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