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A Full Guide on Starting a Company That Can Legally Operate in China

Last Updated on 2022/08/14

Doing business in China can be an excellent opportunity for your company. However, there are many things to consider before you leap.

This guide will walk you through everything you need to know to start a company that can legally operate in China. It will cover setting up a legal entity, registering with the government, and obtaining permits and licenses. Let’s get started.

Setting Up a Legal Entity

A legal entity will allow your company to be recognized by the government and to operate legally within China. The formation of a company process can vary depending on the jurisdiction in which the business is being registered. There are many different types of legal entities that you can choose from, and each has its benefits and drawbacks. The most common types are as follows:

Limited Liability Company (LLC)

An LLC is a type of company that offers limited liability to its shareholders. The shareholders are only liable for the amount of money they have invested in the company. It is a popular choice for foreign companies doing business in China as it offers some protection from potential legal problems.

Joint Venture (JV)

A joint venture is a type of company formed when two or more companies come together to form a new entity. It can be an excellent option for foreign companies that want to do business in China, as it allows you to partner with a local company and gains access to their knowledge and resources.

Representative Office (RO)

A representative office is a company used for marketing and research purposes. It can not engage in any commercial activities, and its main function is to promote the company’s products or services in China.

When choosing a legal entity, it is crucial to consider your company’s specific needs. You should also consult with a lawyer or accounting firm to advise which entity best suits your business.

Registering With the Government

Once you have set up a legal entity, you need to register it with the relevant government agencies. It will allow your company to operate legally in China and receive any necessary permits and licenses. The registration process can be complex, so it is important to consult with a lawyer or accounting firm to ensure everything is done correctly. The most critical government agencies to register with are as follows:

China National Development and Reform Commission (NDRC) 

The NDRC is responsible for regulating economic activities in China. You need to register with them if you plan to engage in any commercial activities in China.

Industry and Commerce Administration (IAC)

The IAC is responsible for registering and regulating businesses in China. They will issue your company a business license, which is necessary to operate legally in China.

Public Security Bureau (PSB)

The PSB is responsible for issuing visas and work permits to foreigners working in China. It is essential to register with them if you plan to have any foreign employees working in your company.

Obtaining Permits and Licenses

Your company must obtain various permits and licenses to operate legally in China. The type of permits and licenses you need will vary depending on the nature of your business. Some common permits and licenses include:

Foreign Investment Industrial Guidance Catalog

This catalog lists all the industries open to foreign investment in China. Ensuring your company is registered in an industry listed in this catalog is vital.

Business License

This license allows your company to operate legally in China. It must be displayed at your place of business and can be checked by the government.

Operating License

This license is required for companies that engage in commercial activities. It must be displayed at your place of business and can be checked by the government.

Registration Certificate for Foreign-Invested Enterprise

This certificate is issued to foreign-invested companies by the IAC. It confirms that your company is registered and in good standing with the government.

Register Under Tax Authority

It is important to register your company with the local tax authority as soon as possible. It will ensure that you comply with Chinese tax laws and pay the correct taxes on your business income. The local tax authority can provide you with all the information you need on how to pay taxes in China.

You may also be required to file a tax return each year. The deadline for filing a tax return in China is May 1st to 30 June of the following year. You can find more information on the Chinese Ministry of Finance website. 

If you are unsure how to file a tax return or have any other questions about paying taxes in China, don’t hesitate to contact the local tax authority for assistance. In addition to paying taxes on your business income, you may also be required to pay social security contributions for your employees. The social security contribution rate in China is 20%. The rate varies depending on the size of the company and the number of employees.

Apply for Name Approval

Before starting your company, you need to apply for name approval. This process can be tricky, so it is important to ensure that you are doing things correctly. The first step is to make sure that your proposed company name is available. You can do this by checking the online name database. 

If your proposed company name is not available, you can apply for a variation of your company name. Once you have confirmed that your proposed company name is available, you need to apply for name approval and registration. This application must include the following information:

  • The full company name
  • The registered address of the company
  • The nationality of the company’s owners
  • The type of company (limited liability company, joint-stock company, etc.)

Set Up a Bank Account for Your Company

When you’re ready to set up a bank account for your company in China, the first step is finding the right bank. There are dozens of banks in China, both local and foreign. It is crucial to choose a bank that has experience working with businesses and offers good customer service. 

Once you have chosen a bank, you will need to open an account. It typically requires providing the bank with documentation such as your business license and Articles of Incorporation. Once your account is open, you will need to fund it. You can transfer money from your home country or set up a credit line with a Chinese bank. 

Registering your company in China can be a complex process, but with the help of a lawyer or accounting firm, it can be done quickly and easily. Following these steps will ensure that your company is registered and operating legally in China.

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