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CHINA COMPANIES FORMATION  

Wholly Foreign Owned Enterprise (WFOE) Incorporation
Representative Office (RO) Incorporation
Joint Venture (JV) Incorporation


Wholly Foreign Owned Enterprise (WFOE) Incorporation

A Wholly Foreign Owned Enterprise (WFOE) is a limited liability company wholly owned by the foreign investor(s). A WFOE can be engaged in manufacturing, trading and service sector such as consulting and management, training, software development etc.

Advantages of WFOE
The advantages of establishing a WFOE, compared with other types of enterprises, include, but not limited to:

  • Having the freedom and independence to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
  • Capable to perform business transactions rather than just providing the support functions as a representative office;
  • Able to issue invoices to their customers in RMB and receive revenues in RMB;
  • Capability of converting RMB profits to US dollars for remittance to its parent company outside of China;
  • Protection of intellectual know-how and technology;
  • Greater efficiency in operations, management and future development.

Business Scope
One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. Inevitably, there is a negotiation with the approval authorities to approve as broad a business scope as is permitted.

Document Required & Registration Procedure of WFOE

  • Condition(s):
    USD$13,000~USD$65,000 is minimum investment capital for Consulting WFOE registration.
    For both Trading and Manufacturing WFOE registration, minimum investment capital suggestion is still 140,000 USD$ (20% in advance and the rest 80% should be ready within 1 to 2 years).
  • Documents Required
    The documents needed for incorporating a WFOE for different types of business are similar. We do the paperwork for our clients and the following documents are required from the investor(s):

    • Copy of Business License of parent foreign company which was certificated by Chinese Embassy (if it's personal investor, then passport copy certificated by Chinese Embassy is enough)
    • The latest annual audit report from the parent foreign company. The audit report should be in the format as prepared by a Certified Public Accountant (CPA)
    • 2 Credit letters from foreign company banker to declare a good credit within at least current 6 month
    • The resume, copy of the passport and 3 pieces of passport size photos of the Legal Representative of the WFOE
    • The parent company's legal representative's passport copy
    • Business scope and how long the WFOE is going to do business in China
    • Brief introduction of the foreign investor(s) including name, address and telephone number
    • Total investment and registered capital and the makeup of investment
    • Options of Chinese company name (Note: only Chinese company name is to be registered with Chinese government. We help you to translate or come up with a proper Chinese company name)
    • Two copies of original office/factory rental contract and photocopy of real estate certificate with the seal or signature of the landlord.

    The above document is enough to register a Trading & Consulting WFOE. But if you want to register a Manufacture WFOE, you have to prepare following extra documents:

    • Purpose and estimated investment
    • WFOE's operational structure and number of employees
    • Permission for land use, environment evaluation report
    • Products, size of production, detailed list of equipment, and business plan
    • Environmental protection measures
    • Requirement for utilities such as power and water supply

    Note: the documents listed above are only acceptable in Chinese. Executive Solutions is able to provide translation service upon client's request.
  • Registration Procedures
    Foreign companies are not allowed to directly submit the application documents to the relevant authority. They must retain a PRC entity that is authorized or permitted by relevant authorities to act as a sponsor. The sponsor will submit all the documents to the examination and approval authority on behalf of the foreign enterprise. Generally, it will take about 2 to 3 months and the procedures to set up the Wholly Foreign Owned Enterprise are as follows:

    • Check and Register Company Name
    • Apply for Approval Certificate
    • Apply for Business License
    • Apply for Organization Code License
    • Tax Registration with Tax Bureau
    • Open a RMB bank account
    • Register Foreign Currency Certificate
    • Examine the registered capital
    • Obtain Import/Export license and VAT invoice (Optional as it applies only for Trading WFOE)
    • Register in local custom (Optional as it applies only for Trading WFOE)

    The registration time for a WFOE manufacture and consulting company is two months provided all the documents required are ready. It takes two and a half months to complete a WFOE trading company incorporation provided all the documents required are ready.
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Representative Office (RO) Incorporation

To set up a representative office in the Mainland is a quick and easy way of establishing a presence in the vast market of China. Also it is less costly. A Representative Office (RO) is established by a foreign company (parent company). Essentially a representative office is used to monitor trading, market products and/or services, source suppliers, quality control, market research and general facilitation, etc. Although no trading activities are to be conducted by a representative office, it is liable for business tax and foreign enterprise income tax. The actual business transactions with the customers in the Mainland will have to be conducted by the parent office in Hong Kong.

Once the Representative Office is officially registered, it is required to maintain properly accounting records in accordance with accounting standards in China and report taxes in both monthly and quarterly basis.

Features of a Representative Office

  • Legal Status of a Representative Office
    The Representative Office is a non-legal entity operating representing its parent company. A representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.
  • Name
    The name of the Representative office should be in the form of "Name of the Enterprise + Name of the City + Representative Office (or Office)".
  • Business Address
    At the beginning of setting up the Representative Office, it is advised to decide the place and building where office is going to be located first, as the address of the proposed office will have to be mentioned in the application for approval. Note: The business address must be located in commercial buildings approved by the government.

Documents required for application
We do the paperwork for our clients and you are responsible for the preparation of the following information and documents:

  • A set of incorporation documents of the applicant company, including Certificate of Incorporation and Business Registration Certificate, Annual Return, if any. These documents must be legalised by Chinese Embassy (we can arrange the legalisation of these document for you if needed);
  • 2 original banker reference letters issued in the name of the applicant company and addressed to the local Industry and Commerce Administrative Bureau;
  • 2 original Tenancy Agreement (lease agreement) of the office premise to be used by the Representative Office. The lease term should not be less than 12 months. The tenancy agreement should be registered with the local House Management Bureau;
  • Photocopy of the Certificate of Property Owner evidencing the landlord owning the property;
  • A brief summary of the operations and business of the applicant company, such as the principal business activities, registered address, contact phone number, name of the applicant company; the address and contact number of the managing director of the applicant company;
  • The resume, 3 passport photos, Chinese ID copy, passport copy, contact number of the Chief Representative and the address where the Chief Representative will be staying while she/he is China;
  • If there is(are) Representatives to be stationed in China in addition to the Chief Representative, the resume, 2 passport photos, Chinese ID copy, passport copy, contact number of the Representative and the address where the Representative will be staying while she/he is China.

Registration & Post-registration Procedures

  • Pre-registration
    Before commencement of registration procedures, all the documents and information listed above must be ready.
  • Registration Procedure
    The first step is to apply for registration with the local Administration for Industry and Commerce. Once the application is approval and Business Registration Licence issued, we will then perform the post-establishment registration procedures.
  • Post establishment Registration Procedures

    • Apply for the Representative Office’s Stamp (Office Seal)
    • Apply for the Enterprise Code License
    • Register in local Statistical Bureau
    • Register in Taxes Bureau
    • Obtain Health Certificate for the Chief Representative
    • Application for the Working Permit for the Chief Representative
    • Application for the Residence permit for Chief Representative
    • Register in local Custom
    • Arrange the bank account certificate and Certificate of Foreign Exchange

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Joint Venture (JV) Incorporation

A Joint Venture is cooperation between a foreign investor and a Chinese company. The equity joint venture law requires that the foreign partner to the venture contribute at least 25 percent of the registered capital.
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